From Ref No: MASTER/ 12 / 2021-22 Indian Overseas Bank Date : 30.06.2021 Central Office Issuing Department: Chennai - 600 002. Risk Management Department To ALL BRANCHES / REGIONAL OFFICES / OTHER OFFICES MASTER CIRCULAR CAPITAL ADEQUACY FRAMEWORK (BASEL - III) OPERATIONAL INSTRUCTIONS.FOR CREDIT RISK CAPITAL COMPUTATION UNDER STANDARDISED APPROACH AS ON 30" June 2021 Preamble: Credit Risk Capital Computation (CRCC) under Capital Adequacy Framework (under Basel Ill) of RBI is a regulatory requirement. Bank has to maintain its CRAR on an ongoing basis based on these guidelines and submit to RBI. RMD Circular No. MISC/299/2017-18 dated 08.03.2018 lists down for various steps to be taken for conservation of capital and optimum use of available capital. Though the entire process of CRCC is system driven, it is essential that Branch is aware about the mechanism and the process. To facilitate their understanding, we issue this comprehensive Master Circular, which covers all the facets of Credit Risk Capital Computation. 1, Operational Instructions: 1.1 ITD, CO shall pick up the required CRCC data from Finacle and run the CRCC program on behalf of all the branches for every quarter. Branches have to generate the CRCC reports from the Finacle Report server for every quarter. 12 (Uiheged oid Coney xpos (UFCE Ey Attention is invited to the Circular MASTER/11/2021-22 dated 30.06.2021 issued by Risk Management Department on the above subject. UFCE Data entry is independent of CRCC, hence all branches can complete the UFCE Data entry immediately after the quarter end. The system will show the probable list of customers who may be having the Foreign currency exposure. For all the borrowers appearing in the list, Branch has to obtain declaration from the borrower as per Annexure | duly signed by the Borrower's Statutory Auditor. For any Borrower exposed to foreign currency, irrespective of the fact that the export/import limits are with our Bank or not, the Borrower has to give UFCE Page 1 of 22declaration as per Annexure |. It is, therefore, advised that information on UFCE may be obtained from entities on a quarterly basis on self-certification basis, and preferably should be internally audited by the entity concemed. However, at least on an annual basis, UFCE information should be audited and certified by the statutory auditors of the entity for its authenticity. In case the borrower is not exposed to any foreign currency exposure, the borrower has to give a "NIL" foreign currency exposure declaration, as per Annexure I. Ii is re-iterated that Branches have to obtain UFCE declaration for all Borrowers listed in the system, even if itis a NIL declaration, duly signed by the concemed Authorized Signatory in the Borrower's letter pad. If any customer names are not appearing in the list, branches can add any new customer and obtain the declaration from them. Please note that the Unhedged Foreign currency reporting is applicable only for performing credit facilities. Branches can inform all the borrowers (whose names are appearing in the list) well in advance to submit the declaration immediately after the quarter end as per regulatory guidelines. Please advise the borrowers that non-submission of UFCE declaration within the prescribed time will entcifBehalVOnMminimUM SOBp3 GEMMENIMIERESINGISNENGGED 10. the borower as per CSSD. ciculor MISC/409/2014-15 dated 06.06.2014, as the Bank will be required to provide higher Provision and capital on the unhedged exposure of the borrower. UFCE Data Entry Branch has to enter the details of Unhedged Foreign Currency exposure of the customer in the OB Online portal. (IOB Online - Branch Products - Branch MIS Menu - Advances - Declaration of Unhedged Exposure). If there are no such borrowers in the Branch, Branch can enter a NIL statement in the same portal. For all borrowers whose names are appearing in the list and others, if any, branch has to obtain declaration as per Annexure I. The correctness of the data (especially denominations) as given in the declaration by the borrower should be verified. Based on the figures as mentioned in the declaration (in the Annexure |), branch should enter the details in the portal. Please refer to Annexure B explaining the steps for uploading Unhedged data. Once the data entry is done, branches shall take report directly from the system Annexure ~ Ill (IOB Online - Branch Products - Branch MIS Menu ~ Advances ~ Unhedged Exposure Report). ¥ Annexure - II - Facility-wise total exposure in foreign currency of the branch at a RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 2 of 22a To be manually prepared by branches and signed by Branch Head and Auditor and the signed copy should be scanned and uploaded in the 108 Online Portal {in the same menu for UFCE). Annexure - Ill (System Generated) - Consolidated Unhedged Exposure entry Details: To be generated from the IOB online system after the branch has completed alll the customer's data entry and which is to be signed by Branch Head and Auditor (Concurrent/Statutory/Intemal), the signed copy should be scanned and uploaded in the IOB Online Portal {in the same menu for UFCE). Branches should note that no physical (hard copy) of the Annexures to be sent either to Regional Office or Central Office. RMD, CO shall download the Annexures uploaded by Branch directly at CO. Also, please note that UFCE entry forthe Branch is complete only after completion of Annexure Il and Annexure Ill upload. As wrong reporting of data entails additional provision and additional capital requirement for UFCE, branches should exercise utmost caution while reporting the data related to UFCE. The Risk Managers attached fo Regional Offices shall be responsible for the correct and prompt reporting of UFCE data by Branches. They can guide the branches and ensure submission of data within the stipulated time limit. 1.3 External Rating The Risk weight of various segments of borrowers (explained subsequently) is based on their extemal rating. The external rating database is maintained at RMD, CO. RMD updates the rating data on a regular basis and before the quarterly RCC calculation, the data is pushed to the system for application of Risk Weight r thesentities rated. The rating data of the borrower can be obtained from any following approved rating agencies- CARE, CRISIL, India Ratings, ICRA, Acuite and Infomerics. The rating is valid for 12- 15 months and the wer has to submit a fresh rating on expiry of the previous ratings from any ‘on@@f the above listed agencies. 1.4 Eligible Guarantor Central/State Goverment, ECGC, CGTMSE are the eligible guarantees under BASEL Ill Calculation. RMD maintains the list of accounts which are guaranteed by State Government and Central government. RMD provides the list of accounts with central and state government guarantee to ITD and the same is accounted uf RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 3 of 22while running the CRCC program. ECGC guarantee will be picked up based on the GL Code and CGTMSE guarantee will be picked up based on the CGPAN number available in the account master. 1.5 Tallying of GL The total fund based outstanding as per CRCC workings will not match exactly with GL. The credit balances in various loan accounts are getting netted with Fund Based outstanding in the CRCC. There can be various combinations of accounts of a customer; hence, even after taking credit balance, it is not easy to match exactly with GL. However, the FB outstanding figure will be close to the GL figure. The non-fund based exposure is arrived after multiplying the Credit Conversion Factor (LC & A and E - 100%, LG(P) - 50% , LG(F) - 100%) . So the NFB outstanding in the CRCC report will also not match with the GL heads. In a single GL head, there may be a combination of different types of NFB exposure. 2. MIS Reports: Branches shall generate the CRCC reports from Finacle Report Server after getting message from the concemed Regional Offices. Branch should check the following reports and ensure the correctness of the data. a) CRSA 2, (the details of segment wise exposure) for Non Fund based facilities b) CRSA 5 (Details of eligible securities - Cash Margin, Deposit, Gold, NSC, KVP, vp) c) CRSA 6 (eligible guarantees) to verify that all eligible accounts covered under CGIMSE, ECGC, Central Govt. and State Govt. guarantees etc. are reflected. d) CRSA 7 (consolidated Segment wise report} to check the correctness of NPA figure, Housing Loan, Restructured, NBFC-NDSI, CRE/CRE-RH, Capital Market & PSE segments: The CRSA 7 statement shall be certified by the Statutory / concurrent Auditor. Non- Audit branches should also generate the report and must be signed by Branch Manager and preserved for records. of RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 4 of 223. MOC Reports: MOC has to be done manually as there is no automated system for the same. A copy of MOC should be sent to RMD, CO also. The format of MOC is as per Annexure A. a~ ‘Gea SAR (SURESH R) Tel yaw aul wy vies efter GENERAL MANAGER & CHIEF RISK OFFICER RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page § of 22of Important Aspects of Credit Risk Capital Computation which forms Integral part of thi ‘ular Credit Risk Capital computation takes place based on borrower segmentation (which is based on type of borrower, nature of loan etc.). These classifications are as per RBI guidelines and to be used mainly only for CRCC. The below are the Classification of the borrowers: 1. Claims on domestic sovereigns: a. Both fund based and non-fund based claims on the CSitaIGSveniment will attract AiZSFOTRSKIWEIGH Central Government guaranteed claims will attract a zero risk weight. b. The Direct loan / credit / overdraft exposure, if any, of banks to the State ts cnc! he ee State Government guaranteed claims wil a’ PAE cent risk welg c. The above risk weights for both direct claims and guarantee claims will be ‘applicable as long as they are classified as ‘standard’ / performing assets, Where these sovereign exposures are classified as non-performing, they would atiract risk weights as applicable to NPAs, which are detailed subsequently. . Claims on FOFeIGHSOVErSIGHS( shall be classified at CO) Claims on foreign sovereigns will attract risk weights as per the rating assigned to those sovereigns / sovereign claims by international rating agencies. » 3. Claims on MDBs, BIS and IMF: (shall be classified at CO) Claims on the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and the following eligible Multilateral Development Banks (MDBs) evaluated by the BCBS will be treated similar to claims on scheduled bank: i inimum capital adequacy requirements and assigned a Claims on Banks : The sk weight for exposure to Schedule Banks shall be 20%, 5. Claims on Primary Dealers = Claims on Primary Dealers shall be risk weighted in a manner similar to claims on corporate. Vf RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 6 of 226. Claims on Foreign Banks * The claims on foreign banks will be risk weighted as under as per the ratings assigned by international rating agencies. 7. Claims secured by Residential Property (Housing Loan) a. RBI vide its circular - RBI/2020-21/58 DOR.No.BP.BC.24/08.12.015/2020-21 Dated: 16.10.2020 has advised the change in the risk weight of loans Classified under Housing Loan portfolio, the Risk weight has been rationalised as below irrespective of the amount of loan. The tisk weight is applicable for the housing loan sanctioned from October 16, 2020 and up to March 31, 2022. The loan sanctioned before October 16, 2020 will attract the older Risk weights as applicable before 16.10.2020. Below Risk weights applicable from GSFODSEISN2020 to MGTERISINZOZ2) ~ LVRatio(%) | _Risk weight % =80 & | >e0ands90 Risk weights applicable for housing loan sanctioned before October 16, 2020 | Category of loan LTV ratio (%) | Risk Weight (%) Up to R5.30 Lakh | s80 a 35" | _ _ ___>80. and < 90! 50" Above Rs.30 Lakh & Up fo Rs.75 Lakh | <75 GD 3s I | >75and<80| GRP | 50" (Above Rs.75 Lakh 5 @p 7s" * Applicable if sanctioned before 06/06/2017. b. The LTV ratio should not exceed the prescribed ceiling in all cases of sanction. In case the LTV ratio is currently above the ceiling prescribed for any reasons, efforts shall be made to bring it within limits 8. NPA Housing Loans: NPA housing loan accounts are to be brought under this category. Claims secured by residential property, which are NPA will be risk weighted net of specific provisions. i. If the specific provisi((SIGREISOUDEMEEHEOr more, the applicable risk weight wilfB§SOIBB cent. of de RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 7 of 22ii. If the specific provisions in such loans are at le@SM20BePcent but less than GE. cent of the outstanding amount, the risk weight applicable to the loan net of specific provisions will b&lZSIBB? cent. iil, For others where the specific provision is less than @gglthe risk weight Claims secured by Commercial Property (CRE & CRE- RH): a. Commercial Real Estate has been classified into 1) Commercial Real Estate-Residential Housing (CRE - RH) and The Risk Weight ‘oughta Banks’ exposure to third dwelling unit onwards to. an Individual wil be treated as CRE Exposure. 2) Commercial Real Estate (CRE): The primary source of cash flow (i more thi generally be ets b. It follows that if the repayment primarily depends on other factors such as operating profit from business operations, quality of services, tourist arrivals aalr ‘exposure would not be counted as CRE. The Risk Weight for CRE is 2 c. In case of Liquirent loans, if the Lease agreement has a lock in period which is not less than the tenor of the loan and there is no downward revision in the rental during the loan period, then it will not come under CRE. d. Loans for cinema hall, amusement park, hotels, hospitals, cold storage, educational institutions, restaurants, saloons, parlours, gymnasium, industrial units, credit facilities extended to construction. companies working as contractors, financing of renovation of self-owned company premises, exposures towards acquisition of units in SEZ, loans to Housing Finance Companies mostly for on-lending purpose etc. shall not be treated as CRE. 10. Exposure tofCGpitellMGrKet Loans given agains! shares or loan given to share brokers or others, for investing in Capital market shall be classified under this segment. It may be noted that if the prime security is sufficient to cover the advance and the branch is holding the share as collateral such accounts need not be Classified as Capital Market exposure. The risk weight for this classification is Y 4 RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 8 of 2211. Exposure to Consumer Credit: RBI vide its circular - DBR.No.BP.BC.17/21.06,001/2019-20 Dated: 12.09.2019 has advised the change in the risk weight of loans classified under Consumer Credit from 128% to @lWO%MBexcept for the Credit cord receivables. a. Under this segment @IIYPESIOfpeBOnalOan ike Pushpaka, Home Decor, Personal Loan, Sahayika, Pensioners’ Loan etc) and credit card receivables shall be included. In other words, all types of loans given to individuals, which are not for business / production purpose shall be segmented under Consumer Credit Howe, GSE IEEE STZEND) shall be excluded from this segment and has to be segmented under RRP. b. It may be noted that GUNEGGinsHaepOsH/LIC/NSENGAGIINCIREN® for individual will be treated as Consumer Loan with a risk weight of@007D Though, the qSBNGIWEGUREMENEMOUGRDENZRTOR this cose cue 10 availability of eligible Liquid security. c. Credit card receivables will continue to have a risk weight 02D 12. Staff loans: a. All types of Staff loans excluding Subha Gruha should be segmented under this category. Branches should ensure that Ex- staff and Retired Staff accounts are not classified under this category. The Risk weight for staff advances where it is secured by superannuation benefifs and/or morigage of flat/ house shall b&{20%D loans and advances to bank's own staff which are fully covered by superannuation benefits and/or mortgage of flat/ house will attract a 20 per cent risk weight. Though the fiat / house is not an eligible collateral and since the dues are recovered by adjusting the superannuation benefits at the time of cessation from service, the concessional risk weight shail be applied without any adjustment of the outstanding amount. In casé a bank is holding eligible collateral in respect of amounts due from a staff member, the outstanding amount in respect of that staff member may be adjusted to the extent permissible. Other loans and advances to bank's own staff will be eligible for inclusion under regulatory retail portfolio and will therefore attract @isipe’ cent risk weight. 13. Public Sector Enterprises (PSE): a. Claims on domestic public sector entities will be risk weighted in a manner similar to claim on corporate. Claims on foreign PSEs will be risk weighted as Per the rating assigned by the international rating agencies as under u ¢ RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 9 of 22|(S&P) /India Ratings | AAA to AA BBB io BB | Below BB | Unrated (Moody's Ratings Aaa to Aa Baa to Ba | Below Ba_| Unrated A A Risk Weight (%) ep @ @ am ww 14. Corporate: a. “Corporate” shall include all fund based and non-fund based exposures other than those which qualify of inclusion under Sovereign, Bank, RRP, Residential Mortgage (Housing Loan), NPA assets and other specified category addressed separately. Under this segment, branches have to classify the exposures to any individual person(s}, proprietary concern, partnership firm, trust, private limited companies, public limited companies, co-operative societies etc, which do not qualify under any of the four qualifying criteria for RRP (discussed below). In other words, if the borrower cannot be segmented under any specific classification and the exposure is , the borrower shall be classified under “CORPORATE” segment. Risk weight for this categor unrated accounts and it will vary according to the ‘external rating as given below. b. Claims on corporates, NBFCs shall be tisk weighted as per the ratings ‘assigned by the rating agencies registered with the SEBI and accredited by the Reserve Bank of india. The following table indicates the risk weight ‘applicable to Long term claims on Corporates and all NBFCs. |. Rating Agencies: There@ei@ralinglag encies identified by RBI iting purpose and they are namely, CARE, CRISIL, India Rating, ICRA, rk, Acuite, Infomerics ll. Use of Unsolicited Ratings A rating would be treated as solicited only if the issuer of the instrument has requested the credit rating agency for the rating and has accepted the rating assigned by the agency. As a general rule, banks should use only solicited rating from the chosen credit rating agencies. No ratings issued by the credit rating agencies on an unsolicited basis should be considered for risk weight calculation as per the Standardised Approach. lil Use of Multiple Rating Assessments Banks shall be guided by the following in respect of exposures / obligors having multiple ratings from the chosen credit rating agencies chosen by the bank for the purpose of risk weight calculation: x L RMD Circular / BASEL III Copital Adequacy Framework / June 2021 Page 10 of 22i {i) If here is only one rating by a chosen credit rating agency for a particular claim, that rating would be used to determine the risk weight of the claim. (i) If there are two ratings accorded by chosen credit rating agencies that map into different risk weights, the higher risk weight should be applied. (iil) If there are three or more ratings accorded by chosen credit rating agencies with different risk weights, the ratings corresponding to the two lowest risk weights should be referred to and the higher of those two risk weights should be applied. i.e., the second lowest risk weight IV. Long term Claims on corporate - Risk weights Vv. AAA | AA | A | BBB &below | Unrated | | @e ep as ap Short term Claims on corporate ~ Risk weights External Rating | Risk Weight (%) "CARE | CRISIL India | ICRA | Brickwork | SMERA | Infomerics | (7%) Rating | : Aly Alt Alt | Alt | Alt | Al | Al+ | 20 Al Al_ Al Al | Al Al Al 30 A2 A2 AQ | Az | AZ| CAD A2 50 AZ A3 AZ | AB | AD AZ A3 100 | A4&D | A4&D | A4&D | A48D | AMBD | A4BD | A4BD | 150 Unrated | Unrated | Unrated | Unrated | Unrated | Unrated | Unrated | 100 vi. Vil. Exposure for accounts with banking exposure ofEeRP. bove which were rated earlier and subsequently became ED" due to expiry of the external rating or withdrawal of the rating by the borrower will be uniformly Risk weighted at 150%. Exposure for accounts which remains “UNRATED” and having a banking exposure of Rs.200 Cr and above wil be uniformly Risk WEIGhteqiail 50720 'S.Regulatory Rell oroio (RRP): RBI vide its circular - RBI/2020-21/53 DOR.No.BP.BC.23/21.06.201/2020-21 Dated: 12.10.2020 has advised the change the threshold limit of loans classified under The Retail Regulatory Portfolio segment. The threshold limit of Rs.5 Crore for aggregated retail exposure to a counterparty has been increased 10 RS7.5 Crore ‘tom October 12, 2020 and the tumover of the counterparty remains sarne@ERSISOISFORS) Risk weight of the all the exposures under the retail regulatory portfolio will remain aiiZ5gllhe risk weight of 75% af RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 11 of 22will apply to all fresh exposures and also existing exposures where incremental exposure may be taken by bank up to revised limit of Rs.7.5 crore. Qualifying Criteria @) Orientation Criterion - The exposure (both fund-based and non-fund based) is to an individual person or persons or to a small business; Person under this clause would mean any legal person capable of entering into contracts and would include individual, HUF, partnership firm, trust, private limited companies, public limited companies, co-operative societies etc. Small business is one where the total average annual tuo VERISUSSSTNGMIRSISUICITEMTNe tumover criterion will be linked to the average of the last three years in the case of existing entities: projected tumover in the case of new entities; and both actual and projected tumover for entities which are yet to complete three years. b) Product Criterion - The exposure (both fund-based and non-fund-based) takes the form of any of the following: revolving credits and lines of credit {including overdrafts), term loans and leases (¢.g. installment loans and leases, student and educational loans} and small business facilities and commitments. c) GFGRUIGHty Criterion — This criterion ensures that the regulatory retail portfolio is sufficiently diversified. One way of achieving this is that the aggregate exposure @RMisSeUiTe st sHOURINGHeCeee OBESE of the overall regulatory retail portfolio. ‘Aggregate exposure’ means gross amount {i.e. not taking any benefit for credit risk mitigation into account) of all forms of debt exposures (e.g. loans or commitments) that individually satisfy the three other criteria. In addition, ‘one counterpart’ means one or several entities that may be considered as a single beneficiary (e.g. in the case of a small business that is affiliated to ‘another small business, the limit would apply to the bank's aggregated exposure on both businesses). NPAs under retail loans are to be excluded from the overall regulatory retail portfolio when assessing the granularity criterion for risk-weighting purposes. d) Low value of individual exposures - The maximum aggregated retail ion cages °°°" should not exceed the absolute threshold limit @. For the purpose of ascertaining compliance with the absolute threshold, exposure would mean sanctioned limit or the actual outstanding, whichever is higher, for all fund based and non-fund based facilities, including all forms of off-balance sheet exposures. In the case of term loans and EMI based facilities, where there is no scope for redrawing any portion of the sanctioned amounts, exposure shall mean the actual outstanding. 1 \ RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 12 of 22b. The following claims, both fund based and non-fund based, shall be excluded from the regulatory retail portfolio: |. Exposures by way of investments in securities (such as bonds and equities), whether listed or not; ll Mortgage Loans to the extent that they qualify for treatment as claims secured by residential property or claims secured by commercial real estate: ll Loans and Advances to bank's own staff which are fully covered by superannuation benefits and / or mortgage of flat/ house; \V. Consumer Credit, including Personal Loans and credit card receivables; V. Capital Market Exposure VL Venture Capital Funds. 16.Restructured / Rescheduled loans: * Accounts which have been subjected to re-structuring / re-scheduling, the unrated standard / performing claims on these entities shall be assigned a cam": higher risk weight shall continue until satisfactory performance under the revised payment schedule has been established date when the firs! payment of interest / principal falls due under the revised schedule. 17.NBFC-ND SI: * Advances given to Non Deposit taking Non-Banking Financing Company (NBFC) which is systemically important as defined by RBI (presently with minimum asset size of at least Rs.500 Crore) shall be classified under this category. NBFC NDS! shalll be tisk weighted as per the extemal ratings assigned to them by the External rating agencies. 18.NPA other than Housing Loans: a. Where the borrowal accounts are classified as NPA (other than housing loans in NPA category}, it should be taken under this category, irrespective of the original borrower class. For example, any exposures to State Government or corporate etc. classified as NPA are to be taken in this segment instead of State Govt or corporate segments. Branches should tally this data with their ACF data. b. The unSSeUre@POHIOM! NPA (other than a qualifying residential mortgage loan which is addressed below), net of specific provisions (including partial write-offs), will be risk-weighted as follows; dere RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 13 of 22+ GRGBEMEERTREEMZIGN when specific provisions are less than per cent of the outstanding amount of the NPA . eae weight when specific provisions are at le@SZ0> per cent of the outstanding amount of the NPA © @QBEHEERE risk weight when specific provisions are cf{SSSOBED cent of the outstanding amount of the NPA. c. For the purpose of defining the secured portion of the NPA, eligible collateral will be the same as recognised for credit risk mitigation purposes. Hence, other forms of collateral like land, buildings, plant, machinery, current assets, etc. will not be reckoned while computing the secured portion of NPAs for capital adequacy purposes. d. In addition to the above, whe @ISINEAISIUNSSEUIEEIBP the following forms of collateral that are not recognised for creait risk mitigation purposes, either ndependenily oolong wilh other eloibie colRSTGVGNOO BERS) GEUISEEEEIEBEID ne! of spectic provisons, wnen provisions reach 15 per cent of the outstanding amount: e. Land and building which are valued by an expert valuer and where the valuation is not more than three years old, and f. Plant and machinery in good working condition at a value not higher than the depreciated value as reflected in the audited balance sheet of the borrower, which is not older than eighteen months. g. The above collaterals will be recognized only where the bank is having Clear title to realize the sale proceeds thereof and can appropriate the same towards the amounts due to the bank. The. bank's fifle to the collateral should be well documented. These forms of collaterals are not recognised anywhere else under the standardized approach: 1._GABGiRCORVErsIOn Factors (CCF) ifor Non fund Based exposure: SINo | Nature of Asset _CCFs [1 | XG ifinncial) including Buyers’ Credit and Standby LC | a) - 100,00% ) Forward Exchange Contract [Up to 14 days =F 0.00% | | 14 days to 1 year _ 2.00% 1 year'& less than 5 years _ 10.00% —___|Syearsandabove __ | 15.00% (5 Interest Rate Swaps [Thess than 1 year 0.50% va ¢ RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 14 of 22Lyear & less than 5 years _ 1.00% | |S years and-above 3.00% é Currency swaps | ‘Less than] year — 0.50% | 1 year & less than 5 years - _ 1.00% | [Syearsandabove _ - [3.00% | 7 Undrawn exposure with an original maturity of | [Up to one year — _ 20.00% I [Over one year _ 50.00% | | borrower's credit worthiness Similar commitments that are unconditionally cancellable | 0.00% | any time by the bank without prior notice or that effectively provide for automatic cancellation due to deterioration in a 2. Eligible Securities a he followin oth primary and collateral) are considered for or for reducing the capital requirement by netting the exposure. The eligible securities are: (a} Cash/ Fixed Deposits (b) gold (c) KVP/IVP (d) LIC policies Branches should ensure that all the financial collaterals like Cash / Deposit held as margin for non-fund based exposures are properly attached as security in the master. This will reduce the exposure to the extent of the securily present. Other Collateral securities like i.) Land & Building (i) Plant & Machinery must also be correctly attached in order for calculating the proper LTV for loans and also for the provision calculation for the NPA accounts. 3. Eligible Guarantees a. of RMD Ci As per Standardised Approach under Basel Ill, the following Guarantors are eligible for mitigation purposes. The borrowers exposures risk weights is substituted by the Guarantors risk weight. |SiNe.__| Guarantor Guarantors Ri Le —— [5 20m 6 Foreton Banks GosecroniRating ircular / BASEL III Capital Adequacy Framework / June 2021 Page 15 of 224. Undrawn Amount / Stage Release Branches should refer to circular No: MISC/167/2017-18 dated: 29.08.2017 for obtaining of the revised format of Sanction letter (F-568) for compiling with the terms and conditions for the undrawn clause. For Undrawn in Cash Credit/OD accounts where the borrower is havid@StGNSSRREGIEXSSSUSIOMREMSOICKarES and above in Cash credit will necessarily need to be risk weighted according to the borrower risk weight dffSHGNSCEOn20uslfor the undrawn amount. Pledse refer to the circular issued by Credit Support Services Department on "Guidelines on Loan System for Delivery of Bank credit” dated: 14.12.2018. 5.Gredit Balance Customer having credit balances in their Saving account/Current account or in any other account will act as @ifmitigiinifend the exposure will be reduced to that exlent 6. How is CRAR calculated for the bank? Tne computation of Tier 1 CRAR and Total CRAR is done in the following manner: Eligible Tier 1 capital funds Tier 1 CRAR = a eevee ao - Credit Risk RWA* + Market Risk RWA + Operational Risk RWA “RWA = Risk weighted Assets Eligible total capital funds Total CRAR = a — isk RWA + Market Risk RWA + Operational Risk RWA Credit Operational Risk RWA and Market Risk RWA calculation is being done at CO. Credit Risk capital is computed as under: Total Exposure (TE) = FB O/S+ NFB O/S*CCF+ FB UD#* CCF + NFB UD *CCF Net Exposure (NE) (ESIGTSGiiBGlGneSICR) Exposure After Mitigation (EAM) = NESGISGiNRIRMINGGHISIGRM) Covered Portion (CP) = Guaranteed Portion Uncovered Portion (UCP)= Non Guaranteed Portion CL L RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 16 of 22db Guarantor Risk Weighted Assets ( GRWA}SXGEISUSTSRHS RERWEIGAINGRIDD Borrower Rsk Weighted Assels (GRWA)=ISUCRNBOHOWEPSIRIKIVEISIIERWID Total Risk Weighted Assets ((RWAJEIGRWALNERWD # FB UD —Is made Zero at the CO level. CRSA Repo CRSA 07 report is the consolidated CRCC report for the branch and the terminology used in the report are explained below, Fund Based Outstanding-Fund based outstanding of the borrowers. b. NFB After CCF- It is the non-fund based outstanding after multiplying c. 2 with the Credit conversion factor (CCF). Credit Exposure- The total credit Exposure (Credit Exposure= FB + NFB after CCF) is the total exposure of the borrower. Cre-Equiv(UD) - It is the undrawn portion of the borrower. e. Credit balance - Credit balance available for the borrower in their Advances account. Provision- Provision held for the NPA borrowers. g. Net Exposure- Exposure arrive after reducing Credit balance (Net Exposure= Credit Exposure + Cre-Equi{Undrawn) - Credit Balance). . CRM-Credit Risk Mitigation is the mitigants available for the borrower as Liquid assets(Gold, LIC, KVP, Deposits , Cash margin). EAM- Exposure After Mitigation is the exposure after deduction of CRM present (EAM= Net Exposure - CRM) Effective Guarantee- Any Guarantee provided in full or Part by ECGC, CGIMSE ,ECLGS, Scheduled Bank, Foreign Bank , State govt, Central Government. k. GRWA- Guarantor Risk Weighted Assets is the Risk Weight applied for the Guaranteed portion of the exposure. BRWA- Borrower Risk Weighted Assets is the Risk Weight applied for the Borrower portion of the exposure (balance portion uncovered after GRWA). m. TRWA- Total risk weighted assets is the total of BRWA+GRWA .. Capital- Capital to be maintained for the Total Risk weighted assets @9%, of RMD Circular / BASEL Ill Capital Adequacy Framework / June 2021 Page 17 of 22su Parep0UD Jo @IN} rc [anp x0} Sujpnjou! si8jj0Ws JayIO Jo UOYO: @jogL e60g ‘payop 19449 39 ‘einsodxe ay} 2ouIs UoUIsod poBpeun sno ul PapN|DU! 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S10|SP 3M, uy sjuojunosoy _papnpun ou ase (s]uondo pasan09 oF0NN TeIOL sdems sn 03 UNIT SUEOT ADA 28430 S8Om S2TpaxD Sper, ~~ s3i0diir setaeked Kod s23030 SOM/AP 07 SUeOT sqz0dxa _ seTqeazeoed ADT zeek zeek reek zeex week | 1s/> Te30%, Ls 1e/> TeI04 ts Ts/> (#) eaTaeatzep 26peH x0 P qesnaen preazos yBnory3 pebper oSpoqua ge2025 UNI UI seansodxg Aouezmn ubtexog wo e7eq ATIEqTENO ea | ainxeuuy 8102 ADW wl P2IDP BL0Z/#UOS 3D4N/DA'SO-1dS 10INDHD Ivaad O4 BiNxoUUY qouerg jueg seasiang veIpul saBeuew suL OLAnnexure-II (to be manually prepared by branches and signed by Auditor) INDIAN OVERSEAS BANK, BRANCH | Details of Foreign Currency exposures of the Branch _ Facility | Currency | (USD/EUR/GB P etc) a [2 Foreign Currency | Loan/Borrowings_ WC/TL in cutfenc foreign | Code No Report figures in INR Lakhs liabilities |Hedged Exposure |Balance | unhedged portion, if | a | 5=(3-4 5 External Commercial Borrowings Foreign Letter Undertaking (LoU)/Letter of | Comfort (LoC) [Import credit Foreign Letter of Guarantee/Standby | Letter of Credit/Detered | Payment I of letters of Guarantees. | Others Specify) _ [Total (A) (Branch Manager) RMD Circular / BASEL III Capital Adequacy Framework / June 2021 (Statutory/Concurrent Branch Auditors) Page 19 of 22Annexure-lil (Will be generated by the system) INDIAN OVERSEAS BANK, BRANCH --------» Code No SYSTEM SUBMITTED THROUGH IOB ONLINE. DETAILS OF UNHEDGED FOREIGN CURRENCY EXPOSURES OF WHOLE | (Rs in Lakhs) Br |Branch | Above | Customer | Customer | EBID* | UNHEDGED code | Name 25Cr/ ID Name EXPOSURE" | Less thon 25 Cr | - 1 - - *~ In case the latest quarter data is not available, provide the previous year audited figures. ** - Non Fund Based Unhedged exposures include buyer's credit if any We certify that the above figures are correct. (Branch Manager) (Statutory Branch Auditors) RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 20 of 22NEW CAPITAL ADEQUACY FRAMEWORK (BASEL - II OPERATIONAL INSTRUCTIONS FOR CREDIT RISK CAPITAL COMPUTATION UNDER STANDARDISED APPROACH AS ON 30! June 2021 Annexure-A INDIAN OVERSEAS BANK MOC - CRCC - 21 Branch code: ROCode: Date: 1. Borrower Classification MOC: CIFID| Customer System Actual Classification | Provision Name classification Amount [if Classification is NPA) 2. Mitigant MOC : CIF | Customer | Add/Delete/| Mitigants Tyoe* | Amount as Revised ID | Name Modify persystem | Mitigant ‘Amount *LIC, FD, GOLD, NSC/KVP/OTHERS. 3. Guarantee MOC: CIFID| Customer | Add/Delete/ Typeof | Guarantee | Actual _ Name Modify. | Guarantee ** Amount as | Guarantee _ perSystem | “** ECGC, CENTRAL GOVERNMENT, STATE GOVERNMENT, CGTMSE, BANKS. 4, LG MOC: CIF Customer LG Classification- system Name (Performance/Financial) Branch Manager Statutory Auditor RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 21 of 22CAPITAL ADEQUACY FRAMEWORK (BASEL - Ill OPERATIONAL INSTRUCTIONS FOR CREDIT RISK CAPITAL COMPUTATION UNDER STANDARDISED APPROACH AS ON 30!" June 2021 Enclosure: INDIAN OVERSEAS BANK In the Borrower classification, any change in the classification has to be entered . For Example: If a customer is wrongly classified under “Corporate”, instead of "RRP", then the same has to be entered as System classification: ‘Corporate’ and Actual Classification: “RRP'. Under Provision column, “Not Applicable” fo be entered as the accounts is standard. If the classification is to ‘NPA’, then the provision Amount is to be entered. 2.) Mitigant MOC: in the mitigant MOC, any liquid securities are to be Added/ Modified/ Deleted has to be entered. The types of Mitigants have to be provided as LIC/GOLD/NSC/KVIP or any other underlying Liquid assets. For example: If any account has securities/margin and it is not attached then ADD the security or wrong value of the secutity attached then Modify or a wrong secutily is attached then delete the security, and the revised mitigants amount is to be given. 3.) Guarantee MOC: If the Guarantee details of accounts is not proper or wrong guarantee or guarantee not entered at all, then MOC details for the same is to be given. . For Example: If the accounts are covered in CGTMSE Scheme or ECGC then the same has to Added, Modified or Deleted. 5. LG MOC: If @ Letter of Guarantee(LG) is wrongly classified ie Financial LG as Performance or Vice Versa then the same should be modified in the MOC. RMD Circular / BASEL III Capital Adequacy Framework / June 2021 Page 22 of 22