Credit Policy & Risk Management Department
Head Office: 2, Netaji Subhas Road, Kolkata 700001
Instruction Circular No: 9164 /CP RMD/2006-2007/ 03

Date: 12.05.2006

To All the Offices & Branches
Bank’s Policy on Short Term Loan
In a competitive environment, the bank has been launching various credit products in order
to meet the diverse needs of various types of clients. With the same in view, it has been felt
necessary that there should be a well defined guidelines to meet the short term funds requirement
of existing as well new borrowers, having good track record of profitability and repayment.
Accordingly, the Board of Directors of the Bank in their meeting held on 24.04.2006 has
approved policy regarding sanction of Short Term Loans.
Broad Objectives of the Policy:
To deploy the short term /surplus funds of the Bank to good corporate and other top rated
clients at rates which are better than deploying in call market.
To meet genuine & diverse needs of customers to enable them to meet market competition.
To tap reputed corporates who are not our clients & strengthen our ties with existing good
clients by meeting their new requirements like R&D expenditure etc
Coverage of the new Guidelines:
The policy is meant for meeting the short term funds requirement of existing as well new
borrowers, having good track record of profitability and repayment, like working capital
requirement to execute large work orders within short time ,to meet temporary working capital
shortage and development /expansion of new markets/products and short fall in margin
requirements etc,
Detailed Guidelines on Short Term Loan Policy are as per Annexure I, for perusal and guidance
by the functionaries at all levels.
(S. Raychaudhuri)
General Manager

iv) 3.1. These would include term loans for: − To meet their working capital requirement − Shoring up the net working capital (NWC) − Ongoing expenditure such as replacement of parts of machineries.50.Detailed Guidelines 1. iii) The borrowers having sound past track record & performing asset. Existing Customers: i) PSUs & Other Listed Companies which are earning net profit. Facility: Short Term Loan for a period up to 6 (six) months. Eligibility: 2. The targeted company should have sound past track record & performing asset with their existing banker.2 New Customers: i) PSUs with the track record of net profit for last 3 years ii) iii) Navratna Companies Requests from other non-customers (Listed Public Limited companies only) having tangible net-worth not less than Rs.ANNEXURE I Bank’s Short Term Loan Policy. Purpose: The loans can be considered for any genuine commercial purpose in line with the regular business activity of the customer. etc.00 Cr as per last audited Balance-sheet can also be considered on a selective basis with rating of account AB-1 to AB-4. . 2. ii) The Rating of the accounts should be within AB-1 to AB-4. − Repayment of high cost debt − Research and Development expenditure − Implementing Voluntary Retirement Scheme in the company − Acquisition of trade marks/ patents/ brand equity (in exceptional cases only) − Any other commercial purpose other than speculative activities. 2.

or limit from Consortium may be considered. Security: i) First charge/ parri-passu charge on assets acceptable to the Bank. 9.00 Crores. However in case of bullet repayment. Repayment : i) Repayment period will not exceed 6 months ii) Mode of repayment may be fixed as equal monthly installments or bullet payment or balloon repayment of interest and principal. and in his absence the Executive Director may reduce the rate of interest up to the cost of fund on business considerations. 5.00 Crores 7. Margin: Nil 6. 8. ii) In case where bank intends to take exposure on high rated / good companies (new / existing customers). iii) No processing fee to be realized.4. monthly interest to be serviced. Pricing including Service Charge: i) Minimum PLR-2% (Floating) ii) The Chairman & Managing Director. Discretionary Authority: The Chairman & Managing Director. 5.50 Crores Rs 5.HO Full Rs 30 Crores Rs 22. Quantum of Finance: i) Minimum loan which may be sanctioned will be Rs. The Executive Director and the General Manager (Credit) at Head Office are authorized to sanction the loan proposals under the scheme within the existing per borrower delegated authority for secured term loan. The existing per borrower delegated authority is as underMCBOD The C& MD The ED GM(Credit). ii) Loan to the extent of 50% of Working Capital enjoying from our bank/other banks. where charge on assets is not feasible/available an unsecured loan . However actual expenses for the documentation will be borne by the borrower.

on account of business exigencies on case to case basis.may also be considered on case to case basis. All Other Guidelines as per Bank’s Lending Policy and other operational instructions issued from time to time shall be followed. However. Current Ratio: Normally Minimum 1. stricter monitoring of end use of funds should have to be ensured to guard against diversion of funds for speculative unauthorized purposes. iii) Post dated cheques for interest as well as principal repayment will be obtained. promoter directors’ guarantee etc be explored in such cases. ii. The deviation / exemption from the norms / bench-mark levels laid down in the Policy may be permitted by Chairman & Managing Director/the Executive Director (in absence of CMD) only in genuine and exceptional cases. The acceptable financial ratios as per the latest audited financial statements will be as under: a.30:1 11. The policy requires a degree of flexibility to the decision-makers to cope with the competitive business environment. as the purpose of the loan covers large number of activities. ----------------------------------------------------- . however the assessment should be supported with the cash flow statement. Branches/ offices are advised to be guided with the above guidelines.33. DSCR: Minimum 1. However. and in case of finance for improving the NWC 1. Monitoring: As per the existing guidelines on monitoring of loan assets. Corporate Guarantee. 10 Assessment & Financial Benchmark: The assessment to be done as per policy applicable to Working capital / term loans. Other Guidelines & deviation: i. 12.00 b.