Concept of large loan & Single Borrower Exposure Limit.

Concept & operation of Loan Syndication

ANM Reazul Haque

AGM, Rupali Bank Limited
Purana Paltan Corporate Branch
 Concept of large loan & Single Borrower
Exposure Limit.
Industrial Policy -2022
Large Industry –
(1) Production Industry: Replacement fixed cost 50 Crore + ( Cost
without Land and Building) ;
or
Worker 300+, in garments worker 1000+

(2) Service Industry : Replacement fixed cost 30 Crore + ( Cost

without Land and Building) ;
or
Worker 120+,
Medium Industry –
(1) Production Industry: Replacement fixed cost 15-50 Crore + ( Cost without Land and
Building) ; or Worker 121-300+, in garments workers <1000

(2) Service Industry : Replacement fixed cost 2-30 Crore + ( Cost without Land and Building) ;
or
Worker 51-120)

Small Industry –
(2) Production Industry: Replacement fixed cost 10-15 Crore + ( Cost without Land and
Building) ; or Worker 26-100,

(2) Service Industry : Replacement fixed cost .10-2.00Crore + ( Cost without Land and Building)
; or Worker 16-50)

Micro Industry, Cottage Industry, Handicraft,

Hi-tech Industry, Heavy Industry, Creative Industry
Single Borrower and Large Loan Exposure Limit

BRPD Circular No. 01/2022

BRPD Circular No. 02 /2014
BRPD Circular No. 05/2005
Bank Company Act 1991
BB MOU with RBL
 Large Loan
“Large Loan” – refers to any exposure to a single
person/counterparty or a group which
is equal to or greater than 10% of the capital
as mentioned in Paragraph 1(A) of this
circular.
RBL Regulatory Capital
Capital Fig in Crore
Tier-1
Paid Up Capital 464.70
Statutory Reserve 382.11
Retained Earnings 24.31
Share Money Deposit 680.00
Total 1551.11
Adjustment:
Goodwill (10.32)
Deferred Tax (39.71)
Total Tier-1 Capital 1501.08
Tier-2 Capital
General Provision 540.70
Subordinate bond 240.00
Total Tier-2 Capital 780.70
Total Capital 2281.42
Bank Company Act- BRPD Circular No. 01/2022 MOU with RBL 2022
1991
The aggregate (a) The aggregate principal a. The aggregate principal
principal amount of amount of funded and amount of funded and
funded exposure to a non-funded exposure to non-funded exposure to a
single person/ a single single
counterparty or a person/counterparty or person/counterparty or a
group shall not a group shall not exceed group shall not exceed
exceed 25% of the 25% of the capital at any 15% of the capital at any
capital at any point of point of time. point of time.
time. (b) The aggregate principal b. The aggregate principal
amount of funded amount of funded
exposure to a single exposure to a single
person/counterparty or person/counterparty or a
a group shall not exceed group shall not exceed 10
15% of the capital at any % of the capital at any
point of time. point of time.
Bank Company Act- BRPD Circular No. 01/2022 MOU with RBL 2022
1991
The aggregate (a) The aggregate principal a. The aggregate principal
principal amount of amount of funded and amount of funded and
funded exposure to a non-funded exposure to non-funded exposure to a
single person/ a single single
counterparty or a person/counterparty or person/counterparty or a
group shall not a group shall not exceed group shall not exceed
exceed 25% of the 25% of of the capital 15% of of the capital
capital 2281.42 i.e. 2281.42 i.e 570.35 2281.42 i.e. 342.21
570.35 (b) The aggregate principal b. The aggregate principal
amount of funded amount of funded
exposure to a single exposure to a single
person/counterparty or person/counterparty or a
a group shall not exceed group shall not exceed 10
15% of the of the capital % of thof the capital
2281.42 i.e. 342.21 2281.42, i.e. 228.14
 Single Borrower Exposure
“Exposure” – means credit exposure (funded and non-funded) and
refers to all claims, commitments and contingent liabilities arising
from on and off-balance sheet transactions. i.e. principal amount and
accrued interest/profit

FDR of the same bank under lien, exposure can be calculated after
deducting the secured/covered amount from the outstanding balance
of the associated loans.
Single Person/Counterparty or Group: As per BB

(a) The aggregate principal amount of funded and non-funded

exposure to a single person/counterparty or a group shall not
exceed 25% of the capital at any point of time.
(b) The aggregate principal amount of funded exposure to a single
person/counterparty or a group shall not exceed 15% of the
capital at any point of time.
 Aggregate Exposure:
Percentage of Classified Loan to Total Outstanding Large Loan
Portfolio Ceiling
Less than or equal to 3% 50%

Greater than 3% but less than or equal to 5% 46%

Greater than 5% but less than or equal to 10% 42%

Greater than 10% but less than or equal to 15% 38%

Greater than 15% but less than or equal to 20% 34%

Greater than 20% 30%

However, the aggregate amount of large loan exposure shall not

exceed 400% of bank’s capital at any point of time.
RBL Large Loan Dec 31-12-2020

‘000’ in Crore

Total Loan 38.08

Large Loan (20) 10.84

Classified Large Loan 0.63

% 5.81%
 Single Borrower Exposure Limit not
Applicable

• In Power Sector : BPDB, REB, PGCB, EGCB, DPDC, DESCO, APSCL,

WZPDCO,

• In case of credit facilities provided to the government or against

government guarantees and AAA rated Multilateral Development
Banks‟ (MDBs) guarantee, the aforementioned restrictions set forth
in Paragraph 2 shall not be applicable.
 Prudential Norms

• Credit Information Bureau (CIB)

• Internal Credit Risk Rating System (ICRRS)
• Assess borrower's overall debt repayment capacity
• examine their borrower's Audited Financial Statements
• large loans shall be approved (Sanctioning, renewing or rescheduling) by
the Board of Directors
• Know Your Customer (KYC)
 “Non-conforming Exposure”

If an exposure is within the limit [limit set forth in Paragraph 2] when made but
subsequently exceeds the limit, the exposure will be treated as „non-conforming‟
which may arise from any of the following circumstances

i) The bank‟s capital declines;

ii) Capital rules or the lending limits undergo changes;
iii) Non-funded exposure (under approved limit) turns into funded exposure;
iv) The borrower‟s exposure increases due to applied interest;
v) The borrower merges or forms a common enterprise with another borrower;
vi) The bank merges with another bank which also holds exposures to the borrower;
vii) Percentage of classified loan increases;
viii) The bank‟s total exposure decreases .
 “Person”

• “Person” – means a natural person or a legal person i.e., company,

corporation, associate, trust, joint venture, partnership or other
business enterprise etc.

“Group” – includes any borrower and any other person,

organization, or company involved directly or indirectly with that
person.

Note : A public limited company, which has 50% or more public

shareholdings, shall not be considered as an enterprise/organization
of any group; thus shall be treated as a single person/counterparty.
 “Group”
Connectedness on the basis of Control:
Two or more persons shall be deemed to be a group if one person has the ability, directly or
indirectly, to control the other person(s)
(a) ownership or voting rights falls between 20% to 50%
(b) Less than 20%
- Ability to appoint or dismiss an entity‟s administrative, management or supervisory body
- Ability to exert a dominant influence on management,
- Participation in policy-making processes
- same person representing as Chairman or Director of Board

ii) Connectedness on the basis of Economic Interdependence:

- Economic dependence of one
party on another
- 50% of one counterparty‟s production/output is sold to one single counterparty
- - One counterparty has fully or partly guaranteed the exposure of the other counterparty
 Syndicated loan
• When two or more banks collectively provide credit
facility to a borrower under common
arrangement.
 Benefits of Syndication Loan
• Less time and effort involved
• Diversification of loan
• Large Amount
• Positive Reputation
• Risk Sharing /Risk Mitigation
• Collective Decision
• Joint Appraisal
• Security Sharing
 Syndicated loan Parties
• Borrower
• Arranger/Lead Bank/Lead Arrenger
• Agency Bank/Co-ordinator Bank
• Participatory Bank
 Types of Syndication Loan
• Term Loan
• Revolving Limit
• L/C
 Security Sharing/Pari-passu

• Security Sharing/Pari-passu is a financing arrangement that gives

multiple lenders equal claim to the assets used to secure a loan.

• If the borrower is unable to fulfill the payment terms, the assets can
be sold, and each lender receives an equal share of the proceeds at
the same time.
 Loan Agreements
• Facility Agreement
• Pari-passu Agreement
• Power of Attorney
• Personal and Group Guarantee
• Other required Agreements
 Process
-Borrower
- Appraise –IM
Application
- Decision
- Feasibility - Joint Appraise
Report - Propose to - Decision
participatory
Bank

Borrower Lead Bank Participatory Banks

Loan
Documentation
Loan
Disbursement
(Escrow Account)
Thank You