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BCC: BR: 104:305 27


th
Aug. 2012.

ISSUED BY
WHOLESALE BANKING DEPARTMENT
BARODA CORPORATE CENTRE, MUMBAI

Subject File No: Adv 3
CIRCULAR TO ALL BRANCHES IN INDIA

Dear Sir,

Re: Takeover of Borrowal accounts from other banks.

Reserve Bank of India (RBI), vide its circular no DBOD.No.BP.BC-
104/21.04.048/2011-12 dated 10.05.2012, has expressed concern over takeover of
loans by banks including on non-sharing of the critical information on the health of the
borrowal account by the transferor bank with transferee bank, resulting in inadequate
due diligence etc. at the time of taking over.

As expected by RBI in said circular, the Banks Domestic Loan Policy 2012, provides
norms in respect of take-over of accounts from other banks including nature of
accounts eligible for take-over; financial and non-financial parameters; powers for
takeover with or without deviation. The Policy also provides guidelines for credit audit
in general, applicable also to takeover accounts. The Bank also has extant guidelines
in respect of examination of Staff Accountability in all NPA Accounts (must in case of
quick mortality i.e. account becoming NPA within one year of sanction) under
Scheme for Examination of staff accountability in Non Performing Accounts
/Operational Areas approved by the EMC on 17.06.2009.

Further, based on experience and issues raised & deliberated with Statutory Auditors
and RBIs Inspection Team, guidelines have been issued from time to time through
circulars i.e.

BCC:BR:103:132 dated 20.05.2011
BCC:BR:103:158 dated 09.06.2011
BCC:BR:103:159 dated 09.06.2011
BCC:BR:103:281 dated 29.09.2011


RBI has advised that henceforth, in order to make transferee bank fully aware of the
irregularities if any, existed in the borrowers accounts with the transferor bank, before
taking over an account, the transferee bank shall obtain necessary credit information
from the transferor bank as per attached format (annex -1) (i.e. the format prescribed
for sharing of information in case of Lending under Consortium /Multiple Banking
Arrangements). The transferor bank, on receipt of request from the transferee bank
shall share the necessary credit information as per prescribed format at the earliest.



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RBI has also advised the banks to have proper reporting system in respect of
takeover decisions and put in place proper periodical review and monitoring
mechanism at Board Level Committee, Top Management level etc in respect of all the
take-over accounts.

In the light of guidelines received from RBI, it has been decided to introduce the
reporting and monitoring mechanism with immediate effect (i.e. starting from
30.09.2012 onwards) in respect of takeover accounts as under:

a) All taken over accounts shall be under the scope of quarterly reporting and
monitoring for a period of 12 months from the date of take over i.e. the period for
considering an NPA account a case of quick mortality.

b) The branches shall submit a report on quarterly basis to Regional Offices in
respect of taken over accounts as per format enclosed (Annex-2). The
information should reach from Branches to RO within 7 days from the close of
quarter.

c) The Regional Office shall consolidate the information for Branches and submit
the same to Zonal Office within 10 days from the close of quarter.

d) In respect of accounts taken over during preceding 12 months under Branches
powers, Regional Office shall place the report (with analysis) to the RMCC for
carrying out quarterly review.

e) The Zonal Office shall consolidate the information for Regions and submit the
same to Credit Monitoring Deptt at BCC within 12 days from the close of quarter.

f) In respect of accounts taken over during preceding 12 months under Regions
powers, Zonal Office shall place the report (with analysis) to the ZOCC for
carrying out quarterly review.

g) The Credit Monitoring Deptt., BCC Mumbai shall consolidate the information for
Zones and shall place the report in respect of accounts taken over during
preceding 12 months under Zones /BCCs powers with analysis & comments
before respective COCC-ED for carrying out quarterly review, within 15 days
from the close of quarter.

The guidelines come into force with immediate effect.

Branches, Regional and Zonal offices are advised to take necessary care and ensure
compliance.

Yours faithfully,



(R.K.SHARMA)
DYPUTY GENERAL MANAGER
WHOLESALE BANKING.
Annex -1

Format for sharing credit information
at the time of transfer of borrowal accounts
Part - I
Bio Data of the Company
I. Borrowing party's name and
address

II. Constitution
III. Names of Directors / Partners
Business activity
* Main
IV.
* Allied
V. Names of other financing Banks
VI. Net worth of Directors / Partners
VII. Group affiliation, if any
VIII. Date on associate concerns, if
banking with the same bank

IX. Changes in shareholding and
management from the previous
report, if any

Part II
Major Credit Quality Indicators
I. IRAC Classification
II. Internal Credit rating with narration
III. External Credit rating, if any
IV. Latest available Annual Report of
the borrower
As on ---------------
Part III
Exposure Details other than Derivatives
(Rs. in crore)
I. Type of credit facilities, e.g. working
capital loan / demand loan / term
loan / short term loan / foreign
currency loan, corporate loan / line
of credit / Channel financing,

contingent facilities like LC, BG &
DPG (I & F) etc. Also, state L/C bills
discounting / project wise finance
availed).
II. Purpose of loan
III. Date of loan facilities (including
temporary facilities)

IV. Amount sanctioned (facility wise)
V. Balance outstanding (facility wise)
VI. Repayment terms
Security offered
* Primary
* Collateral
*
Personal / Corporate
Guarantees

VII.
* Extent of control over cash flow
VIII. Defaults in term commitments /
lease rentals / others

IX. Any other special information like
court cases, statutory dues, major
defaults, adverse internal / external
audit observations

Part - IV
Exposure Details - Derivatives Transactions
(Rs. in crore)
Sr.
No
.
Nature of the
Derivatives
Transactions
Notional
Amount of
Contracts
Weighted
- Average
Maturity
of
Contracts
Amount of
Positive
MTM for the
Bank (Not
due for
settle-
ment)
Amount of
Contracts
classified
as NPA
Notional
Amount of
Out-
standing
Contracts
which have
been
restru-
ctured
Major
Reasons
for
restru-
cturing
(in brief)
Plain Vanilla
Contracts

1. Forex Forward
contracts

2. Interest rate
Swaps

3. Foreign
Currency
Options

A.
4. Any other
contracts
(Please specify)

Complex
derivatives
including various
types of option
combinations
designed as cost
reduction / zero
cost structures

1. Contracts
involving only
interest rate
derivatives

2. Other contracts
including those
involving foreign
currency
derivatives

B.
3. Any other
contracts
(Please specify)

Part - V
Un-hedged Foreign Currency Exposures of
the Borrower with Currency-wise Details
(Rs. in crore)
Short term exposures (less than one
year)

(a) Long positions
(b) Short positions
I
(c) Net short- term exposure (a-b)
Long term exposures (one year and
beyond)

(a) Long positions
(b) Short positions
II
(c) Net long-term exposure (a-b)
III Overall Net Position (I -II) for each
currency
(Please give Overall Net Position in this
format for each currency)

IV Overall Net Position across all
currencies

Part - VI
Experience with the Borrower
I. Conduct of funded facilities (based on
cash management / tendency to
overdraw)

II. Conduct of contingent facilities (based on
payment history)

III. Compliance with financial covenants
IV. Company's internal systems & procedures
V. Quality of management
VI. Overall Assessment
(The above to be rated as good, satisfactory or below par only)
(*) Broad guidelines for incorporating comments under this head is furnished in the
next page
Broad Guidelines for Incorporating Comments under Part - VI
(Experience) of the Credit Information Report
Good Satisfactory Below Par
Conduct of funded facilities
* Over-drawings (No. of times) Upto 4 times 5 to 6 times Above 6 times
* Average period of adjustment Within 1
month
Within 2
months
Beyond 2
months
I.
* Extent of overdrawings (% of
limit)
Upto 10% 10 to 20% Above 20%
Conduct of contingent facilities (Other than Derivatives)
* No. of Defaults Upto 2 times 3 to 4 times Above 4 times
II.
* Average period of adjustment Within 1 week Within 2
weeks
Beyond 2
weeks
Conduct of Derivatives Transactions
* No. of contracts where the
positive MTM value due to the
bank remained overdue for more
than 30 days
<25% of total
number of
contracts
25-50% of
total number
of contracts
> 50% of total
number of
contracts
* No. of contracts where the
positive MTM value due to the
bank remained overdue for more
than 90 days and the account
had to be classified as NPA (but
later on regularized and is not
NPA as on the date of exchange
of information)
Note : All cases where any of the
contracts has been classified as
NPA and continues to be NPA
as on the date of the exchange
of information should be shown
as Below Par)
<1% of total
number of
contracts
1-5% of total
number of
contracts
> 5% of total
number of
contracts
III.
* No. of contracts restructured
during the relevant period
<25% of total
number of
contracts
25-50% of
total number
of contracts
> 50% of total
number of
contracts
IV. Compliance with financial covenants
* Stock statement / Financial data Timely Delay upto 15
days
Delay over 15
days
* Creation of charge Prompt Delay upto 2
months
Delay over 2
months
Company's internal systems and procedures
* Inventory Management Adequate
systems are in
place
Adequate
systems are
in place but
not adhered
Adequate
systems are
not in place
* Receivables Management - do - - do - - do -
* Resource Allocation - do - - do - - do -
V.
* Control over Information - do - - do - - do -
Quality of management
* Integrity Reliable Nothing
adverse
Cannot be
categorized in
previous
columns
* Expertise Competence /
Commitments
Professional &
visionary
Have
necessary
experience
-do-
VI.
* Tract Record Timely Executions -do-


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