EASE 2.

0
REFORMS FOR
PUBLIC SECTOR BANKS
 CLEAN Banking

C lean credit

L everaging data

E nsuring accountability

A ction against defaulters

SMART Banking
N PA recovery

S peedy

M ulti-channel reach

A ccessible & affordable

R esponsive

T echnologically enhanced
Reforms Agenda for
Responsible & Responsive PSBs

PSB Reforms EASE Agenda is a common reforms agenda for PSBs aimed at
institutionalising CLEAN and SMART banking. EASE 2.0 builds on the foundation
of EASE 1.0 and introduces new reform Action Points across six themes to make
reforms journey irreversible, strengthening processes and systems, and driving
outcomes.

Six Themes of EASE Reforms Agenda

Responsible Banking: Financial stability, governance for ensuring
outcomes, and EASE for clean & commercially prudent business

Customer Responsiveness: EASE for customer comfort

Credit Off-take: EASE for the borrower and proactive delivery of credit

PSBs as UdyamiMitra: EASE of financing and for MSMEs

Deepening Financial Inclusion & Digitalisation: EASE through near-

home banking, microinsurance and digitalization

Governance and HR: Capability building, linkage to individual

responsibilities and objective evaluation

Continuing from last year, progress made by PSBs will be tracked quarterly through
a published EASE Reforms Index leading up to annual review. In addition to
inclusion of EASE Reforms Index in evaluation of Whole Time Directors of PSBs, it
has now been made part of annual appraisal of PSB leadership up to two levels
below the Whole Time Directors.
 ACTION POINTS FOR BANKING REFORMS

RESPONSIBLE CUSTOMER
BANKING RESPONSIVENESS
ENSURING FINANCIAL STABILITY, CLEAN & IMPROVING CUSTOMER
COMMERCIALLY PRUDENT BUSINESS COMFORT

Credit risk underwriting Promote banking from 'Home & Mobile'

Comprehensive data-driven risk-scoring of loan proposals through improved digital channels

Back-testing of internal credit rating system and its recalibration High availability and uptime of self-service
machines
Industry-wise benchmark ranges for key financial covenants
Enhanced customer experience in banking
Strengthened underwriting using Credit Information Company reports outlets

Credit risk monitoring Improved timeliness in customer service

IT-based EWS system with 80+ indicators for proactive detection of stress
Suite of financial services for one-stop
Monitoring of key financial ratios of listed entities based on published access to customers
quarterly results
E cient management of customer
Dynamic review of internal credit risk rating for strengthened monitoring complaints

Continued clean and effective post-sanction follow-up through ASM tie-ups Centralised door-step banking services for
senior citizens and differently abled
customers
Resolution and recovery
Prompt recovery action in SAMV and non-SAMV accounts

Timely and better realization in OTS cases

Time-bound examination of NPA accounts for fraud and willful default

Risk management
Cyber-security measures for enhanced customer protection

Balance risk and return in treasury operations

Capital management
Focussed capital mobilization efforts

Time-bound rationalisation in overseas operations

STRENGTHENING PSBs - BUILDING INDIA
CREDIT
OFF-TAKE
ENHANCING EASE FOR THE BORROWER
AND PROACTIVE DELIVERY OF CREDIT
Dedicated sales channels for proactive reach-out to
borrowers
Automated and time-bound processing of personal
loan proposals
Time-bound credit decisions in consortium lending
Set up IT-based centralised processing centres for
agricultural loans
DEEPENING
FINANCIAL INCLUSION
& DIGITALISATION
IMPROVING INCLUSION THROUGH
NEAR-HOME BANKING, MICRO
INSURANCE AND DIGITALISATION
Expand near-home banking through increased Bank
Mitra services
Scale-up coverage of microinsurance among
banking customers
Increase utilisation of overdraft facility
Universalise mobile seeding of accounts
PSBs AS
UDYAMIMITRA for MSMEs
ENHANCING EASE OF FINANCING
FOR MSMEs
Faster MSME loan processing through
comprehensive Loan Management System (LMS)
Leverage Relationship Managers in business
generation
Use TReDs platform for inland bills discounting
Promote MUDRA loan disbursal
GOVERNANCE and HR
CAPABILITY BUILDING, LINKAGE TO
INDIVIDUAL RESPONSIBILITIES AND
OBJECTIVE EVALUATION
Reward select top-performers identified through a
digitalised performance management system
Incorporate EASE reforms agenda in performance
appraisal of employees up to two levels below WTD
Manage development needs of senior employees by
creating individual plans
Appropriately identify and allocate personnel to job
families
Implement IT-based HR Deployment Decision
Support system
E-learning programmes for all o cers and
fellowship programme for senior executives
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Responsible
AP -1 Building of resilient credit risk control systems for robust underwriting
1. Institute comprehensive data-driven, codified and audited scorecard and
categorisation of risk in high-value corporate and MSME loans*,
independent of the credit side, with following features:
(i) Factoring in-
(a) all group entities with ≥ 26% holding and entities owned/managed by
related parties, and
(b) both bank and third-party datasets;
(ii) Where the overall risk is categorised as high, ensure scrutiny at a
higher level before sanction,-
(a) after each concern of the risk side has been responded to by the credit
side specifying that the risk (a) does not exist, or (b) exists and is
proposed to be mitigated, or (c) exists but lending is proposed without
mitigation
(b) While ensuring that the risk side has either given observations on credit
side's response or is represented in the higher-level scrutiny;
(iii) Larger banks** to deploy dedicated, industry-specific risk-scoring teams for
industry segments covering at least 60% of the corporate and MSME loan
books.
2. Ensure back-testing of internal credit rating system and its recalibration
for robust underwriting
3. Adopt industry-wise benchmark ranges for key financial ratios
(i) Define benchmark ranges for interest coverage ratio / debt service coverage
ratio, liquidity ratio, security coverage and gearing ratio for appraisal
purposes, covering industries which constitute at least 60% of the corporate
and MSME loan books
(ii) Incorporate key ratios in covenants for high-value loans*
4. Check Credit Information Company reports for borrowing entities in appraisal
of all corporate and MSME loans
5. Periodically monitor probability of default, including at the time of origination,
in personal segment and MSME loan books based on credit scores
6. Minimise deviation from risk-based pricing policy for fund based and non-fund
based credit
* Corporate ≥ ` 50 crore, MSME loans ≥ `10 crore for larger banks and ≥ `5 crore for other banks
**Top 6 PSBs in terms of business
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AP -2 Proactive detection of stress for (a) dynamic review of internal risk-
rating and invoking risk mitigating covenants (b) time-bound remedial
action* for reducing slippage into NPAs
7. Institute comprehensive and automated Early Warning Signal (EWS)
system with following features for continuously monitoring over 80 identified
indicators:
(i) Leveraging data of both bank and third-party entities such as Registrar
of Companies, SEBI and stock exchange filings, CRILC, credit rating
agencies, financial news aggregators, equity research reports
(ii) Tracking and acting upon previously insufficiently tracked indicators,
including default reports available from CRILC / Credit Information
Companies / rating agencies, fall in net cash accrual vis-a-vis net sales,
increase in holding levels of stocks vis-a-vis estimates, frequent changes in
key managerial personnel, statutory auditors or rating agencies, and business
expansion into unrelated areas
(iii) Automatic alerts based on system-computed composite risk score or
breach of EWS thresholds, and IT-based workflow for time-bound
action to address potential slippage and to review internal risk rating where
appropriate
8. For listed companies, ensure tracking of business projections from the loan
proposal and declared financial results, for assessing financial health, detecting
stress and initiating remedial action, and reviewing internal risk-rating where
appropriate
* E.g., asking for additional collateral / equity infusion, interest rate reset, loan
facility adjustment

AP-3 Agencies for Specialized Monitoring for large-value loans

9. Appoint Specialised Monitoring Agencies for monitoring both financial and
non-financial aspects in all loan accounts where bank exposure is ≥ Rs. 250
crore
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Responsible
AP-4 Improved effectiveness of the Stressed Asset Management Vertical
(SAMV) for arresting slippages and focussed recovery in high-value
accounts, while also stepping up recovery in other accounts
10. Effective action for resolution/recovery of NPA and SMA-1/2 (31-90 days past
due) accounts under SAMV, reflected in-
(i) Enhanced cash recovery rate in NPA accounts outside the Insolvency and
Bankruptcy Code (IBC) process
(ii) Making early headway* in securing significant recovery (≥ 10%) or
resolution in a high proportion of NPA accounts
(iii) Arresting slippage into NPA in a rising proportion of SMA-1/2 accounts
(iv) Exploring alternative avenues of NPA resolution in a time-bound manner
and thereafter initiating Corporate Insolvency Resolution Process (CIRP)
11. Improving recovery arrangements in non-SAMV NPA accounts to achieve-
(i) Enhanced overall cash recovery rate in such accounts
(ii) On-schedule repayment in high proportion of One-Time Settlement (OTS)
cases
(iii) Better realisation in OTS cases
* Within 12 months in non-CIRP cases and 18 months in CIRP cases

AP -5 Proactive examination of NPA accounts greater than Rs. 50 crore for

fraud and wilful default in a time-bound manner
12. Proactive and time-bound examination of all NPA accounts greater than Rs. 50
crore for
(i) detection and reporting of fraud and
(ii) detection and declaration of wilful defaulter

AP-6 Improved operational and governance aspects for better management of

operational and technological risks
13. Reconcile NOSTRO debit and credit transactions within T+1 and T+5 days
respectively, for time-bound detection of unsettled transactions
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14. Effective Information Security (IS) governance arrangements in the form of a
top executive grade official as Chief Information Security Officer (CISO)
reporting to Executive Director overseeing risk management, and supported by
a dedicated IS team having clear accountability for IS
15. Regular quality assurance on the IS Audit function to validate their approach
and practices

AP-7 Optimisation of returns from treasury operations consistent with prudent

risk management
16. Have in place internal Value at Risk (VaR) thresholds that trigger well-
documented portfolio management actions and minimise continuing breach of
thresholds
17. Benchmark treasury performance on the basis of return on risk weighted assets
in the tradeable treasury portfolio
18. Ensure high degree of adherence to stop loss limits in debt and forex trading
deals

AP-8 Focussed capital mobilisation efforts, and enhanced quality of investor

relations
19. Raise capital as per Board-approved plan
20. Monetise realisable value from sale of Board-identified non-core assets
21. Enhance investor relations through-
(i) Due disclosures supported by adequate data and easily accessible investor
information
(ii) Engagement with investors and analysts on a continuing basis

AP-9 Rationalisation of overseas operations for better viability

22. Complete rationalisation of identified overseas branches, subsidiaries and joint
ventures
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Customer
Responsiveness

AP-10 Enabling of 'Banking from home and mobile' through expanded

bouquet of services, including in regional languages, and improved
service functionality
23. Make accessible over 30 services using mobile phones, Internet and call centres
24. Ensure service availability in regional languages of areas having sizeable bank
presence
25. Comprehensively raise service standards through benchmarked improvement
against 200+ industry-best service functionalities

AP-11 Improved customer service delivery and experience

26. Improve timeliness of delivery of identified customer services such as new
account activation, issuance of Form 16A and death claim settlement
27. Improve availability with high uptime of self-service facilities for passbook
printing, cash deposit and cash withdrawal
28. Ensure availability of clean toilets in branches, and pleasing and clean customer
service areas in branches and ATMs
29. Priority at branch counter to and doorstep banking for senior citizens and
differently abled customers
30. Enhanced availability of non-banking financial products such as insurance and
investments through the bank
31. Systematic reduction in customer complaints and processing time through a
robust system-driven grievance portal
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Credit Off-take

AP-12 Augmentation of personal segment lending through proactive reach-out

and faster automated processing
32. Leverage dedicated sales channels including Bank Mitras / business
correspondents, bank's own digital channels, co-origination of loans, and digital
and external offline partnerships for customer reach-out
33. Fully automated processing of all personal category loans
34. Loan processing through comprehensive Loan Management System (LMS)
35. Time-bound credit decisions for better turn-around time

AP-13 Time-bound credit decisions in consortium lending

36. Convey sanction/rejection of consortium lending proposal within 45 calendar
days from circulation of appraisal note by lead bank

AP-14 EASE of financing for agriculture

37. Set up IT-based rural centralised processing centres for agricultural loans
38. Promote utilisation of KCC by eligible farmers
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PSBs as UdyamiMitra

AP-15 Augmentation of MSME through proactive reach-out and faster end to

end automated processing
39. Loan processing through comprehensive Loan Management System (LMS) and
dedicated MSME processing hubs
40. Provide proactive status updates and facility for online status tracking of loan
applications
41. Reduce turnaround time for MSME loan processing
42. Increase contribution of relationship managers in generating MSME business
from existing and new customers
43. Leverage co-origination of loans for customer reach-out

AP-16 Increase penetration of MUDRA loans

44. Promote MUDRA loan disbursal across branches, especially in districts
identified as high potential

AP-17 EASE of bill realisation for MSMEs

45. Leverage TReDs platform for inland bills discounting

AP-18 Leveraging datasets of third-party entities and roll out of new products
46. Including third party datasets for faster, augmented MSME loan appraisal
47. Introducing new specialised products for cash flow based lending and
MSEs in service sector

AP-19 EASE of availing export credit facility

48. Leverage internet banking and mobile banking channels to apply for export
credit facility
49. Setting up centralised processing centres for processing export credit proposals
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Deepening Financial
Inclusion & Digitalisation

AP-20 Enhanced financial inclusion efforts

50. Make available over 30 services through Bank Mitras to enable near-home
banking
51. Substantially scale-up personal accident micro insurance and life micro
insurance cover among bank account holders
52. Increase penetration of overdraft facility among eligible BSBD account holders,
and enhance overdraft amount

AP-21 EASE through digitalisation

53. Universalise mobile seeding of accounts
54. RuPay debit card issuance to all Pradhan Mantri Jan Dhan Yojna account
holders

AP-22 Customer protection against cyber-frauds

55. Ensure credit-back against unauthorised debit in electronic transaction,
within 10 working days, of notification by customer, as per mandated norms.

AP-23 Implement identified cyber security and data protection measures

56. Including Security Information and Event Management tool, segregation of
development and operational duties for all critical IT systems,
encrypted/secured communication links among all offices, and micro-level
forensic analysis tools
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Governance and HR

AP-24 Implementation of a holistic HR framework

57. Deploy IT-based Performance Management System (PMS) with at least 50%
measurable component in performance appraisal with auto-population of most
measurable parameters, and recognition/reward for top performers
58. Incorporate EASE Index reforms as part of the annual performance appraisal
related goal-setting exercise for FY20 for employees up to two levels below the
whole-time director level
59. To create a leadership pipeline for senior positions, banks to-
(i) Prepare and review Individual Development Plans for each executive that
take into account areas of strength, development and training
(ii) Identify for each executive, typically three (at least two) roles for
grooming
(iii) Identify for each position, typically three (at least two) potential
successors
60. Allocate personnel to job families for enabling specialisation till mid-level, based
on an objective and Board-approved process, post obtaining preference order
from officersg preference order from officers
61. Strengthen share of dedicated marketing personnel
62. Minimise transfers beyond Q1 in the financial year cycle to ensure performance
accountability for APAR goals
63. Implement robust IT-based HR Deployment Decision Support System on the
basis of policy approved by the Board or its HR Committee
64. Annual role-based e-learning programme with dynamic testing for all officers
and training programs with reputed institutions for senior executives
Governance and HR