Chapter 3

LOANS
AND
ADVANCES
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Updated upto
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3- 4-2021
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(Upto 17:00 Hrs. uploads)
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Compiled By:
Sanjay Gupta
Chief Faculty
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(9414062928)
Vetted By:
Rajesh Gupta
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Chief Faculty
(9987816769)
PUNJAB NATIONAL BANK

Staff Training Centre 1 (CoE)
Lucknow
Loans & Advances STC 1, Lucknow Page 1 of 236

CREDIT CULTURE
A Bank may establish a detailed and comprehensive policy, lay down procedures
and systems and provide checks and balances to manage its Credit Administration
function, but unless there is strong core credit culture, such measures will not be of
much use. If the drivers on a highway do not believe in the speed limit and do not
start respecting those limits, the task of the patrolling authority i.e. the Police, cannot
be accomplished. On the other hand, if they start believing that the speed limits are
meant for their safety and smooth traffic movement, the job of the highway patrol
becomes easier to check the rogue individuals from causing harm to others or
themselves. The Bank or the Institutions may not fail because of lack of systems,
policies or procedures, but for a credit culture which encourages making use of these
systems, policies and procedures. The credit culture has to be an integral part of a
risk culture to be facilitated by a strong and clear sense of purpose.
With this in mind and enabling the banker‘s to take an informed decision while
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processing a proposal, it is our endeavor to make the participants aware of
methodology in discharging credit administration function as per Bank‘s systems/
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procedures/ book of instructions/ circulars etc.
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GENERAL DISCLAIMER
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Though every effort has been made to incorporate latest guidelines for updation of
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the contents for ready reference of users, this chapter is not a substitute of
Bank‘s circulars/ guidelines and regulatory directives/ advisories. Also, it may
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be possible that the changed guidelines may get updated at some places in this
chapter with a time lag. If the readers find any such omission/ obsolescence, please
bear with us and bring it to our notice on guptasanjay@pnb.co.in or
gupta_rajesh69@pnb.co.in for necessary rectification.
Any suggestion for improvement of the contents is welcome.

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INDEX
The topics have been divided into various parts as under:
1. Pre Sanction Appraisal: General Guidelines -Page 4

2. Due Diligence -Page 11
3. Pre Sanction Visit -Page 14
4. Drawing of CIRs, Checking CRILC -Page 16
5. Genuineness of Balance Sheet -Page 24
6. Industry Rating -Page 25
7. Credit Risk Rating -Page 26
8. Valuation of Property and Plant and Machinery -Page 39
9. Insurance -Page 44
10. Genuineness of Title Deeds and Valid Mortgages -Page 45
11. Accepting/ obtaining of personal/ corporate
guarantee and invocation thereof -Page 57
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12. Investigation of Title and Search Report -Page 59
13. Confidential Reports -Page 61
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14. Credit Information and Opinion on Borrowers -Page 64
15. Pre Disbursement Compliance
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16. Validity of Sanction -Page 70

17. Takeover of accounts from Other Banks -Page 71
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18. Time Norms -Page 77

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19. Loaning Powers -Page 79

20. Credit Related Service Charges -Page 97
21. Credit Proposal Tracking System (CPTS) -Page 104
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22. Demand Loan/ Overdraft -Page 106

- Against Bank Deposits
- Against Life Policies
- Against Govt. Securities
23. Audit of Annual Accounts by CAs -Page 118
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24. Command Area -Page 120

25. Financial Appraisal -Page121
a) Understanding Financial Statements
b) Reclassification/ Rearrangement of B/ Sheet
c) Ratio Analysis
d) Working Capital Assessment
26. Bank Guarantees (BG) -Page152
27. Letter of Credit (LC) -Page164
28. Consortium and Joint Lending Arrangement -Page 168
29. Post Sanction Follow-up & Monitoring -Page 180
30. Loan System for Delivery of Bank Credit -Page 220
31. Miscellaneous -Page 223
32. Covid-19 Related issues -Page 224
Changes during the week -Page 235

1. PRE SANCTION APPRAISAL
Some general guidelines:
1. Guidelines contained in LA Cir 157/2020 dated 17.08.2020 on pre

sanction appraisal to be complied with.
2. It is advised to make use of the appropriate formats of loan application. Every
Loan application is to be entered in Register for Receipt of Credit Proposals
(PNB 587).
3. Credit proposal is also to be entered in ‗Online Credit Proposal Tracking
System‘ at the home page of Finacle on CBS enabled PCs (internet browser-
by using IP address http://210.212.92.35/proposal). Guidelines in respect of
Monitoring and Tracking of Credit Proposals have been conveyed vide LA
157/2020
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4. Framework for Rejection of Credit proposals, Authority for rejection of
proposal in case of SC/ST, MSE, Education Loan, various Government
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sponsored schemes, and Export borrowers have been conveyed Vide LA
circular 50/2021. Format in respect of Proposal of rejection of credit proposal
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has also been annexed with the circular No 157/20 at Appendix I. Sanction of
reduced limits to specified sector as mentioned here in above should
also be reported to the next higher authority immediately with full details for
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review and confirmation.

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5. Loan application would form a part of the loan proposal and should invariably
accompany the proposal being sent to the sanctioning authority.
6. It is desirable to advise the Loan Applicants, in each case, the reasons for
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rejection of their applications.

7. All favourable and adverse features with comments and justification be part of
Proposal.
8. Use Credit Appraisal formats as per L&A circular 59/2020 dated 31.03.2020
for limits above Rs 10 Lac to 1 Cr, above Rs 1Cr to 5 Cr and above Rs 5 Cr
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to 25 Cr. Further vide L&A circular 168/2020 dated 05.09.2020 Credit

Appraisal format for limits above Rs 25 Cr. has been conveyed. Word formats
of these formats have also been uploaded under Special links-IRMD, in
Knowledge Centre. No column of the format should be left blank/ deleted and
all pages/ Appendices should be duly authenticated.
9. Guidelines/formats for green renewal/review of credit facilities, has been given
in L&A circular No 55/2021 dated26.03.2021 and Guidelines on authority for
extension of validity of sanction in CBS has been conveyed vide LA circular
34/21 dated 16.02.21
10. Obtain latest audited Balance Sheets.
11. Credit Risk Rating -On latest ABS with latest financial data.
12. The proposed terms and conditions being stipulated in the proposals be
thoroughly discussed with the concerned borrowers before sanction/
forwarding the credit proposals to higher authorities so as to avoid any
amendments at a later stage

13. Ensure that the particulars furnished by the borrower in the Loan Application
Form have been duly verified and discrepancies, if any, observed have been
indicated in a separate sheet (s) attached to the loan proposal.
14. If field functionaries have to exceed, allowed in emergent circumstances,
their vested loaning powers, then even in telephonic/oral sanctions obtained
from the higher authority for exceeding the powers), it should be reported
immediately to the Controlling Offices, for confirmation of action by the
Competent Authority through submission of a proposal on Bank‘s prescribed
format as per L&A Circular No. 154 dated 13.08.2020, giving the
details/justification and explaining the circumstances necessitating
accommodation beyond their powers and the reason why it was not possible
to have prior approval from the Competent Authority. Proposals for
confirmation are not to be linked with the renewal/ review/ sanction of
facilities. Reporting of transgression after 7 days shall be considered as staff
side lapse.(L&A circular 100/2020 & 157/2020)
15. Cases of diversion of funds, if any, could be brought to light at the earliest
opportunity for taking corrective action.
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16. The present activities/interests of the borrower even in other concern need to
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be looked into thoroughly.
17. Wherever applicable, CRs from the bankers where the group concerns have
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their banking arrangements should invariably be called.
18. While granting credit facilities to associate/allied concerns, the quantum and
the need for credit of the sister concerns in conjunction with the facilities
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availed of by the parent company or the borrower group as a whole should be

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ascertained.
19. In case of trading finances, it should be ensured that it does not lead to
hoarding/speculation.
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20. Total Bank Credit for working capital purpose for borrower requiring Fund
Based and Non Fund based (LC-DA and BG for financing Current assets)
total limit up to Rs ₹ 5.00 Crore from banking system, the working capital
requirement of the borrower is computed at 25% of the projected annual
turnover of which at least four-fifth i.e. 20% of the projected turnover should
be provided by the Bank as working capital finance and balance one-fifth i.e.
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5%of the projected turnover shall be brought in by the promoters/borrowers as

their own contribution. These guidelines are on the premise that an operating/
business cycle will be of 3 months. However if in case the operating cycle is
longer than 90 days, the assessment of working capital shall be undertaken
as per Traditional method wherein working capital finance can be provided in
excess of 20% of the projected annual turnover with proportionate increase in
borrower‘s contribution (margin). In case the operating cycle is shorter than 90
days, he limits be fixed on the basis of average stock, receivables and
creditors held by the borrower. The operating cycle be computed in number of
days and thus number of operating cycles in a year. the Bank may apply
traditional method of lending (based on holding levels of Inventory,
Receivables and Creditors) (L&A circular 227/2020)
21. In respect of Working capital Assessment for Micro & Small Enterprises (1) in
case of MSE Borrowers having GSTN - Non-Digital: The WC requirement
shall be assessed based on 31.25% of realistic projected non-digital sales

with minimum margin of 6.25% of non-digital sales and whereas Digital: The
WC requirement shall be assessed based on 37.50% of realistic projected
digital sales with minimum margin of 7.50% of non-digital sale. (2) MSE
Borrowers without GSTN: Non-Digital: The WC requirement shall be
assessed based on 25% of realistic projected non-digital sales with minimum
margin of 5% of non-digital sales. Digital: The WC requirement shall be
assessed based on 31.25% of realistic projected digital sales with minimum
margin of 6.25% of non-digital sales (L&A circular 227/2020)
22. Traditional (second) Method of Lending generally being utilized in respect of
borrowers with aggregate fund based working capital limit above ₹ 5.00 Crore
from the entire banking system. For calculating MPBF, the DA (LC) should be
considered as a part of MPBF. The buyer‘s credit being availed by the
borrower should be factored while assessing working capital limits (FB/NFB).
As regards BG, the same should be included in MPBF calculation if BG is
issued for working capital purpose only. The borrower is required to contribute
a minimum of 25% of the total current assets from the long term sources (Net
Working Capital) irrespective of the working capital gap. The maximum
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permissible bank finance will, therefore, be working capital gap less the
amount to be so contributed by the borrower. (L&A circular 227/2020)
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23. The sanctioning authority based on nature of activity of the borrower,
wherever deemed fit, may apply the cash budget system where they feel this
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system is more appropriate as in case of seasonal industries, construction
contractor, Tea, Sugar, IT software, BPO, service sector tec. Cash Flow
based lending is popular in developed countries. Under this method, the
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peak level deficit will be the level of total working capital finance to be
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provided to the borrower by the bank. The peak level cash deficit will be
ascertained form the Proj. Cash Budget Statement submitted by the borrower.
Deficit is worked out and financed subject availability of chargeable assets.
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The required contribution (NWC), which should be at least 25% of peak

deficit, is also worked out based on the current assets and liabilities as at the
peak period. Drawings are allowed to the extent of monthly deficit. Net cash
gap from business operations is to be made good by Bank finance. (L&A
circular 227/2020)
24. In case of project finance, the promoter/borrower may bring in his upfront
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contribution (other than funds to be provided through internal generation) and

the branches should commence its disbursement after the stipulated funds
are brought in by the promoter/borrower. A condition to this effect should be
stipulated by the sanctioning authority in case of project finance, on case to
case basis depending upon the resourcefulness and capacity of the promoter
to contribute the same.
It is further advised that the promoter‘s/borrower‘s funding sequence i.e.
upfront contribution/contribution on pro-rata basis should be clearly stipulated
in the terms of sanction and should be fully complied with. Also, at the same
time, quality of equity should also be assessed and be made part of credit
appraisal to ascertain its loss absorption capacity. It should be ensured that at
any point of time, the promoter‘s contribution should not be less than the
proportionate share.

25. At the time of considering proposals of Subsidiaries of Foreign Companies,
the possibility of obtaining Foreign Bank Guarantee/Corporate Guarantee be
explored.
26. While extending credit to Multi-National Companies (MNCs) or where NRIs
are promoters/guarantors, efforts be made to obtain collaterals situated in
India and/or guarantee of parent Company to guard against situations like
non-availability of non residents for recovery of bank dues.
27. Exercising due diligence in takeover accounts.-FRMD Internal-36/2011
28. Assessment of credit worthiness of borrowers. FRMD Internal -36/2011
29. Penetrative discussion with prospective borrower and discreet enquiries
from other reliable sources regarding his credentials were not done. FRMD
Internal -36/2011(FPIS Internal Cir No. 36/2011 dt 03.10.2011)
30. Independent spot verification of the property and address of the borrower
not done. FRMD Internal -36/2011
31. Laxity in obtaining/ establishing chain of title deeds. FRMDInternal-36/2011
32. Scrutiny of title deeds, obtaining NEC & valuation reports and certified copy of title
deed from Sub-Registrar for ensuring genuineness of the title deed held in bank
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records. FRMD Internal-36/2011
33. Verification of salary/ income certificate. FRMDInternal-36/2011
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34. Take special care to avoid financing on the basis of multiple title deeds / coloured
photocopies of title deeds / scanned copies of title deeds as primary security as well
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as collateral security. FRMDInternal-36/2011
35. Search be made in CERSAI Portal on the lines of CIR. LA-60/2017 dt 19.07.2017.
36. Branches to ensure that CIN/LLPIN is mandatorily filled in field ―Registration No.‖ in #
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detail of CUMM in all new as well as existing Cust IDs of Companies/LLPs. (LA
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81/2017 dated 25.09.2017)

37. It is also advised that the genuineness/credentials of the supplier/dealer must be
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ascertained before disbursing the loan amount by visiting the supplier/dealer‘s

place/by reference to the website of supplier/dealer or by adopting other means such
as search the internet, making telephone call etc, besides ensuring correctness of
cost/price of asset being financed by the bank. (LA 157/2020)
38. For proposals coming under the power of HOCAC-I & above (at present
exceeding ₹50 cr), the report sought from Central Economic Intelligence
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Bureau (CEIB) on the prospective borrower be properly analyzed and if any

adverse/significant feature in the report is noted with regard to the prospective
borrower/entity etc., the same be taken cognizance of and be mentioned in
the proposal.
39. RBI has make it mandatory for corporate borrowers having aggregate fund-
based and non-fund based exposure of Rs. 5 crore and above ( to be
introduced in a phased manner) from any bank to obtain Legal Entity Identifier
(LEI) registration and capture the same in the Central Repository of
Information on Large Credits (CRILC). Road map to obtain The Legal Entity
Identifier (LEI) registration and feeding in CBS has been conveyed vide LA Cir
34/2020 dated 26.03.2020.
40. It is mandatory to compare the Balance Sheet, P&L account filed with
application with the Balance Sheet, P&L filed with the MCA (Corporate Affairs)
website and officer concerned should certify that aspect at the pre sanction
stage. (LA 157/2020)

41. The balance sheet submitted by the borrower should be verified with the one filed
with Government Departments i.e. ROC, IT Deptt. etc.
42. Covenant regarding dealing with our bank/ consortium banks exclusively as advised
vide L&A Cir No. 102 dated 19.12.2016, 33/21 dated 16.2.21, should be duly
incorporated in the terms & conditions along with permission to deal with other
banks, if any and should be got accepted and complied with by the borrower before
disbursement of facilities. In case of non-compliance penal interest should be
charged as per extant guidelines.
43. In terms of extant guidelines, analysis of group accounts should be
undertaken while sanctioning credit limit to a borrower. The details of financial
position and conduct with us/ other banks etc. are captured in credit appraisal
format to enable the sanctioning authority to reach at an informed decision. If
a company is found to be engaged in transactions with allied/ associate
concerns (intra group dealings) such transactions should be closely monitored
and if needed, the same be restricted by stipulating a suitable condition in the
terms of sanction.
44. The certified copy of passport should be obtained in all existing borrowal
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accounts as well as from prospective borrowers irrespective of the loan
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amount. In cases where the concerned person does not have passport, a
declaration to this effect along with an undertaking that he/she shall submit
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the passport details as and when obtained by him/her in future should be
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held. The undertaking, as per Appendix IV, to also state that whenever there
is any change in passport details such as number, validity etc. borrower shall
submit the fresh details to the bank immediately for updation of record.
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Further, it is advised that in small accounts, say upto ₹ 50 lac the capturing of
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passport details may not be insisted upon in routine manner and the
sanctioning authority may decide the same on merits of the case. Also,
obtaining of certified copy of passport from nominee director of Government of
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India is exempted and may not be insisted upon. However, exemption/

relaxation is to be extended only in case of loan accounts of Central/ State/
UT Public Sector enterprises, where the nominee directors are appointed by
regulatory bodies and/ or Central/ State/ UT Government as ex-officio
members. No exemption/relaxation in obtaining passport details is to be
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provided to Independent Directors(LA 157/2020 and LA 229/ 2020).

45. There are transactions which require close scrutiny and analysis to detect
instances relating to diversion of funds:
I. Transactions with business units of family members/relatives of promoter
of borrowing entity.
II. Transactions with business units promoted by employee/staff of
borrowing entity.
III. Units which are shown as debtors/creditors but whose line of business is
not related to the borrowing unit.
IV. Dealings with companies who do not file returns/balance sheet with RoC.
(LA 157/2020)
46. In respect of borrowers having aggregate fund based working capital limit of
₹150 crore and above from the banking system, a minimum level of ‗loan
component‘ (in the form of WCDL) shall be 60 percent. (LA 23/2020
dated 26.03.2020)

47. In all fresh cases as well as in case of renewals/review, an authority letter to
be obtained from Borrower/ Guarantor to access/ obtain/ verify information
from Income Tax Department/ as also any other Governmental Department/
Authority/ Agency Authorization letter is to be obtained on the format (as per
Appendix VII) given in LA Cir 157/20020 dated 17.08.2020).
48. While considering credit facility to a company on the basis of brand name as security,
which does not form any tangible security for the purpose of recovery, the
advance/credit facility should be secured by taking tangible security as far as
possible and atleast two different valuation reports preferably from Govt. Approved
valuer should be obtained and the lower of the two valuations should be accepted.
(LA157/2020)
49. In case of Performance cum Mobilization Advance Guarantees, Escrow
Account should be opened at the time of sanction of such limits to monitor the
cash flows and amount received as mobilization advance should be credited
in the escrow account.
(LA 157/2020)
50. In Jewellery sector advances, it is advised to obtain details of all
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transactions/financial agreement/contract entered into by its subsidiaries with
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their business associates every month. Suitable condition in this regard
should be incorporated in terms of sanction.
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157/2020)
51. Bank has entered into an agreement with the information utility (IU) National
eGovernance Services Ltd. (NeSL) for submission of financial information of
borrowers as part of obligation under IBC, 2016. Information in respect of all
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borrowers to be submitted to NeSL. Agreements/ letter of undertakings as per LA

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41/2018 to be obtained as applicable and undertaking for debiting charges on

annual basis to be obtained. The submission of financial information of
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borrower shall be accompanied by a fee to be paid to NeSL which is

elaborated in L&A circular 50/2019(LA 157/2020)
52. Cash credit facility against hypothecation of book debts should be granted
only after a careful assessment of the credit worthiness of the debtor. It is
always advisable to get additional collateral security by way of immovable
properties and obtain personal guarantees to safeguard bank‘s interest
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besides the principal security of book debts. Prescribed minimum margin for such
facility is 40%.
In terms of RBI guidelines, in all borrowal accounts enjoying working capital
limits (fund based) of Rs.5 crore & above from the banking system, banks are
required to finance a minimum of 25% of the credit sales by way of bills. In
other words, the limits sanctioned to such borrowers against book debts
should not be more than 75% of the aggregate limit sanctioned for financing
his credit sales.(LA 45/2020 dated 27.03.2020)
53. For new borrower as well as existing borrower seeking
fresh/enhancement/renewal of credit facilities, the field functionaries at the
time of appraisal shall ensure the following: -
a). As part of due diligence, the status of borrower entity need to be verified
with the MCA /ROC records. The data base of the Income Tax Department
and GST shall be accessed to analyze the status of the company. The facility
to view Company and Limited Liability Partnership (LLP) master data link is
available on http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do

and there is also a view public documents facility on link
http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do which may
also be checked at Pre-sanction stage.
b). Bank officials shall also check the status of GSTIN and GST return filing of
all borrowing concerns on GST web-site to ensure that GSTIN is active and
upto date return has been filed. The facility to view the GSTIN status is
available on https://services.gst.gov.in/services/searchtp.
c) The field functionaries need to verify the status of group concern of the
borrower so as to ascertain that none of the group companies has been
identified as Shell Company (LA 157/2020)
54. In case of Project Finance, since there is no additional income to service

Interest during construction period (IDC), IDC shall be considered as part of
Cost of project. ( LA circular 49/2020 dated30.03.2020)
55. Consolidated/ updated Guidelines for lending on the basis of projects
appraised by other institutions, have been conveyed vide Credit Division
Circular no. 03 dt 27.03.2020.
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56. Revised/updated loan agreements to be used/got executed as conveyed vide
Loan and advance circular 85/2020 dated 08.05.2020
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2. Due Diligence
(LA 157/2020 dated 17.08.2020, 187/2020 dated 12.10.2020)
Need based credit requirement of the borrowers shall be assessed properly

keeping in view the laid down systems/ procedures. Margin and security
stipulation shall not be used as a substitute for due diligence on credit worthiness
of the borrowers.
KYC guidelines aimed at identification of the customer, opening an account with

the Bank are applicable to borrowal accounts as well. Borrowers and guarantors
must be identified as per KYC norms. The documents should be verified through
online measures by field functionaries wherever possible. Guidelines for account
opening and e-KYC verification, issued by KYC/AML Cell, PSFID, RBD, from
time to time should be followed while opening any loan account. The guidelines
issued by IAD/Compliance should also be taken care of
Where frequent changes in management structure are observed, officials should be
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more vigilant and complete the process of due diligence while dealing with such
companies while taking credit decision.
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Whether all formalities/requirements under various Acts relating to organization of
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the borrowing concern have been complied with viz. compliance of provisions under
the Companies Act, 1956, provisions contained in Memorandum and Association of
the Co., Listing Agreement, if any and provisions of various statutes etc.
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Please ensure Borrower/ Partners/ Company Directors are not figuring in defaulters‘
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list (RBI/ECGC)/ willful defaulters‘ list etc.

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The list of companies struck off from Register of Companies is available on

knowledge centre website (Knowledge Repository > Strike off companies) and
The RoC-wise list of struck off companies are also available on the website of the
Ministry of Corporate Affairs at the following link:
http://www.mca.gov.in/MinistryV2/companies_stuckoff_248.html
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It is also advised to have an enhanced diligence while dealing with Companies in

general. While maintaining due diligence when dealing with companies, officials shall
also check the status of companies on the web-site of MCA as the status gets
updated with each filing.
It is advised to ensure that the status of all loan accounts under standard
category including SMA accounts (having constitution as Company / LLP) is
checked on MCA website under Company / LLP master data. The information
regarding accounts, if any identified as struck off in MCA records along with
action taken should be submitted by branches to respective ZOs within one
week. The printout of each search shall also be kept on record. In case of struck
off Companies / LLPs, operations in the loan account shall be frozen and the
borrower be conveyed about the freezing of operations in the account and the
reason thereof. In case of any outstanding dues, efforts should be taken for
immediate realisation of the same. vi. It is also advised to have an enhanced due

diligence while dealing with companies in general. While maintaining due
diligence when dealing with companies, officials shall also check the status of
companies on the web-site of MCA as the status gets updated with each filing.
As part of due diligence, the status of borrower entity need to be verified with the
MCA/ROC records. The data base of the Income Tax Department and GST shall
be accessed to analyze the status of the company. The facility to view Company
and Limited Liability Partnership (LLP) master data link is available on
http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do
and there is also a view public documents facility on link
http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do
which may also be checked at Pre-sanction stage.
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Bank officials shall also check the status of GSTIN and GST return filing of all
borrowing concerns on GST web-site to ensure that GSTIN is active and upto
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date return has been filed. The facility to view the GSTIN status is available on
https://services.gst.gov.in/services/searchtp
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CONTROL MEASURES: PRE-SANCTION CREDIT APPRAISAL AND

POSTSANCTION FOLLOW-UP OF LOAN ACCOUNTS (LA 187/2020 dated
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12.10.2020)
 While appraising credit proposals, search on the website www.mca.gov.in
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should be conducted through the DIN of the respective director to verify

the name of directors of borrowing company as well as the names of
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group/ allied concerns. While appraising a credit proposal, information of

DIN of all the directors is required to be captured in the appraisal note and
its correctness needs to be ensured.
 While accepting projection, the appraising authority should conduct
thorough analysis based on past experience / past performance and justify
the accepted projection in the appraisal note. The accepted growth rate
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should be in conformity with the past trend of sales and our earlier
experience with the party, if any. The accepted projections should be
thoroughly analyzed and substantiated with adequate justification.
 The sanction of facility to finance debtors of allied / associate concern
implies higher risk and requires vigorous credit appraisal. Financing of
Book Debts arising out of the sales to allied and associate concerns may
be considered on merits by the sanctioning authority, subject to the
following conditions:
a) The facility should be allowed only to corporate borrowers engaged in
manufacturing activities and be restricted to 25% of Book Debt limits.
b) Borrower is financially sound and his past dealings are satisfactory.
c) Such debtors have arisen out of genuine trade transactions and shall
not result in double financing.
d) Allied / associate concern should also be financially sound and enjoying
good market reputation.

e) Such book debts are those where bank‘s charge can be created
 It should be noted that it is the endeavor of the Bank to obtain maximum
collateral coverage for credit facilities to secure Bank‘s exposure.
Branches are advised to encourage borrowers to provide collateral
coverage by offering collateral linked concessions and by promoting
schemes where collateral coverage is specified.
UNIQUE DOCUMENT INDENTIFICATION NUMBER (UDIN) :
From 1st February 2019, it is mandatory to obtain UDIN by all practicing

Chartered Accountants for all certificates issued by them hence it is advised to
ensure UDIN in all certificates/ documents/ reports etc. certified by CAs. It would
help in tracing forged/wrong documents prepared by any third person
misrepresenting himself as a Chartered Accountant as any person other than
Chartered Accountant will not be able to upload the documents on UDIN portal.
Similarly, UDIN should also be ascertained in all GST returns, Tax Audit Reports
and all other issues involving attest functions.
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The authenticity of the attested documents can be verified by visiting on the UDIN
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Portal at
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https://udin.icai.org
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1. Pre sanction Visit
(L&A circular No 157/2020 dated 17.08.2020)
The visit by bank officials to borrower‘s/guarantor‘s office/business

premises/residence constitutes an important part of pre-sanction appraisal. Branches
are advised to cover issues of Organizational Structure, Board Governance, Internal
Control & Internal Audit Systems, Stocks & Debtors verification, Internal
Performance Monitoring & Management Information Systems, Budgetary Control
System etc. in the pre sanction inspection. In order to have a uniform approach, the
format for pre-sanction inspection inter-alia covering the above aspects for the use of
field-functionaries as per Appendix V of L&A circular 157/2020. It is advised that the
following system for conducting pre-sanction visit and submission of report should be
followed: -
 The appraising office should conduct pre-sanction visit of borrower‘s
factory/business premises/IP offered as security in the loan
account/borrower‘s place of work/residence as part of appraisal and annex
the copy of visit report with the proposal.
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 Comment in brief regarding pre sanction visit should be invariably mentioned
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in the appraisal note at appropriate place. The report should contain date of
visit, name of official who visited the site, important nearby landmarks, name
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of the neighbours or any relevant information regarding the IP.
 The Branches while submitting the limit sanctioned statements to the
controlling office should confirm that pre sanction visit has been conducted for
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the proposals sanctioned under BM powers and report in this regard has been
placed in the record.
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 In order to keep a record, a register for unit inspection as per Appendix-VIof

L&A circular 157/2020 may be maintained at the appraising office where
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details of visits made to the borrower‘s premises may be captured in

chronological order.
 The Concurrent Auditors/Inspectors should scrutinize the Unit Inspection
Register to ensure that the pre-sanction visit is conducted and report in this
regard is available for all the loan accounts. Further necessary remarks
should be given in IR in this regard.
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 In case of any pre-sanction visit by Senior Official, the officer accompanying

the Senior Official shall prepare a brief visit report and the same shall be held
on record at Branch/CO/ZO
 It has been observed that borrowers/guarantors are not traceable at the
addresses provided at the time of appraisal. In case, intention of the borrower
is not good, due diligence, though conducted in line with guidelines may turn
the bank finance into jeopardy. As such, Special Committee of Board has
desired that if, whereabouts of the borrower are not traceable due to shifting
of residence or place of work, the onus for providing information about
changed address be put on the borrower. Accordingly, it is made obligatory on
the part of borrower/guarantor to inform any change in their office/residential
address to bank at the earliest possible. This information of changed
office/residential address with telephone no. (landline/mobile) be provided to
the bank within 30 days along with residential proof as required under KYC
norms.

 This condition should be made part of terms and conditions at the time of
sanction of loan documentation and periodic confirmation of the same should
also be obtained as part of ongoing KYC updation by the concerned
branches.
 In respect of borrower who is relative of any staff member of the Bank, the
unit visit, stock verification, property inspection etc. shall be done by the staff
members other than the staff who is relative of the borrower. (LA 177/ 2020).
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2. Drawing of Confidential Information Reports (CIRs)
(L&A 15 /21; L&A 26/21 and MISD 02/21; L&A 157/2020)
Credit Information Companies (CICs) have been set up for creating a database to be
used by the member banks for extraction of Credit Information Reports (CIRs) on the
borrowers for considering their request for credit facilities. After the operationalization
of Credit Information Company (Regulation) Act 2005, banks/FIs can submit data to
Credit Information Companies without obtaining consent of the
borrowers/coobligants/guarantors
Credit Information Reports (CIRs) on the Borrowers/Guarantors/Co-obligants drawn

from the data base of credit Information Companies (CICs) indicate their past credit
history, overdues, loan accounts written off or settled by way of OTS, enquiries made
by Banks/FIs reflecting that how many times the borrower has approached a Bank/FI
for raising any loan etc. It helps the lending institutions to measure the ability of
obligant to pay back the loan and taking credit decisions. It has been observed that
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in most of the fraud cases, the appraisal guidelines are not followed and drawing of
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CIR from CICs is ignored. Our bank is presently member of all the four CICs viz
CIBIL, EQUIFAX, EXPERIAN & CRIF HIGHMARK.22
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Since CIRs give vital information about the prospective clients, drawing of CIR from
CICs is mandatory for Borrowers, Guarantors & Co-obligants (both Consumer &
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Commercial Category Accounts), requiring fresh credit facilities before sanction of

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facilities as well as at the time of Renewal/ Review/ Enhancement of such facilities

except in certain exempted categories of advances.
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The field functionaries must invariably check CIC Report before considering any type
of credit facilities including Fund Based and non-fund based facilities before
considering facilities by way of
*Fresh sanctions
* Enhancement of existing credit facilities
* Review/ Renewal of credit facilities
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* Any type of Adhoc/additional credit facilities
Exemptions from drawing CIRs:
(a)Advance against Bank‘s own Deposits, Govt. Securities/Bonds, PSU Bonds,

Postal Securities, LIC Policies, Shares, Debentures& Mutual Funds.
(b) Advances against 100% Cash Margin.
(c) All Staff Loans.
(d) Advance against gold jewellery/ornaments
Drawing of CIRs in certain cases, will be as under :

Sr Category of Consumer Commercial
account
1 Proprietorship For Prop (Individual) For Firm
accounts and Guarantor
2 Partnership For each (all) For Firm
accounts Partners (Individual)
and Guarantor
3. Company For each individual For company
accounts director/ guarantor
4. Trust account For those trustees For Trust
authorized to act on
behalf of the Trust
5. Corporate For company standing as guarantor
guarantees
6. Allied / Associate It is prudent to draw the CIR of the
concerns of the allied/associate concerns
Borrowing Entity Except in the following cases where it is
optional: a. Directors on the Board of PSU
(Public Sector Undertaking) borrowers who
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are generally public servants. b. Nominee /
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Professional Directors on the board of the
companies on behalf of the
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Government Nominee Directors
Consumer Category:
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Loan Amount CIRs

Less than Rs.10 Lac One CIR with Credit Vision (CV) Score from TU
CIBIL
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₹10.00 Lakh and above / In Two CIRs as under:

case of customers having i) Primary: One CIR with Credit Vision (CV)
credit risk rating of B2 and score from TU CIBIL, and
below or having Risk Score ii) Secondary: One CIR with score from
>46 to<=52 and below Experian or CRIF Highmark or Equifax
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Note:
i. In case credit score from TU CIBIL comes to -1 (Insufficient History/Data),
report (with score) from second bureau i.e. from Experian or CRIF
Highmark or Equifax to be extracted and analyzed for any default/overdue.
ii. In case of No Hit in TU CIBIL, report (with score) from other bureau(s) i.e.
Experian or CRIF Highmark or Equifax to be extracted and analyzed as
per the Score mapping matrix.
iii. Mapping Matrix of CICs Scores:
CIBIL CRIF Experian Equifax
732-900 767-900 826-900 784-900
690-731 719-767 776-825 720-783
650-689 677-719 701-775 608-719
602-649 631-677 651-700 561-607
300-601 300-631 300-650 300-560

iv. Acceptable Score
The acceptable CV Score for Consumer CIR that can be considered
safe/less risk prone with respect to the sanction of credit facilities is as
under :-
TU CIBIL Score Range Acceptable CV Score
300-900 650 & above
In case CV score is less than 650:

For considering loans to individuals (including Proprietorship Accounts)
whose CV score is less than 650, the sanctioning authority at field level
(i.e. Branch /PLP/MCC) may consider the credit facility
(fresh/enhancement/additional) subject to fulfilment of all the conditions
mentioned below:
o The aggregate amount of default except credit card default in
regard to all the credit facilities provided by the other banks/NBFCs
should be less than ₹25,000/-.
o Default/irregularity should be atleast 1 year prior to the date of
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current application for fresh credit facilities.
o Current CIBIL CV score of the borrower shall not be below 550.
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However ZOCAC-I & above may consider the proposals in their vested
loaning powers having CV score below 650 on merits of the case.
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Commercial Category:
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Loan amount Commercial CIRs

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Less thanRs 50 Lac One CIR from TU CIBIL Note: In case no report
found from this bureau, report from second
bureau to be extracted and analyzed for any
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default/overdue
₹50.00 Lakh and above/ In case Two CIRs as under:
of customers having credit risk 1. Primary: TU CIBIL
rating of B2 and below or having 2. Secondary: One CIR with score from CRIF
Score >46 to<=52 and below Highmark or Experian or Equifax
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Charges for CIR:

Charges for drawing CIRs have been conveyed vide L&A Circular No.41 dated
26.03.2020. For ready reference of the branches, these are reproduced below:-
SEGMENT CHARGES
Consumer Rs 50 per CIC +GST
Commercial Rs 500 per CIC+GST
Priority Sector Loans up to ₹25000/-: No Charges shall be recovered.
The charges so recovered as above shall not be refunded even if the proposal is
declined. In case of the existing borrowers, these charges should be debited to their
accounts

Enhanced utilization of credit information reports (CIRs):
While scrutinizing the Credit Information Reports (CIRs), the following dimensions
should also be investigated by the field functionaries besides cross checking the
details provided by the borrower pertaining to dealings with other banks/institutions,
repayment track record, asset classification of loan accounts with other banks etc in
the loan proposal:
(i) Too many enquiries made by other lenders which can indicate that other lenders
may have rejected credit request.
(ii) Credit facilities availed by the borrower from other lenders which can indicate the
leverage.
(iii) Credit facilities guaranteed by the customer which indicate his / her commitment
level.
(iv) Suit filed against the borrower.
(v) Additional matches, if any.
Scrutiny of commercial credit information report (CIR)
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The field functionaries shall carry out an in-depth scrutinization of the Commercial
Credit Information Report (CIR) of the borrower /guarantor carrying out enquires
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along the following dimensions with the borrower
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a) Number of Lenders (Credit Grantors) : How many lenders are there? *Are we
the sole lender of the borrower? *Does the number of lenders provided by the
borrower tally with the Credit Information Report (CIR) *Are the number of
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lenders provided by the borrower is less /more than that are appearing in
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Credit Information Report (CIR)

b) Details of Credit facilities AVAILED by borrower / guarantor : *Enquiry about
all the credit facilities appearing in the Credit Information Report(CIR) *Nature
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of credit facilities and purpose thereof *Asset classification of each credit

facility *Number of accounts which are overdue. Why overdue? *Total
overdue amount and what is the plan to regularize it? *Credit facilities which
are other than standard (mentioned
c) Detail of Credit facilities GUARANTEED by borrower : Total number of credit
facilities guaranteed by borrower *To whom the credit facilities guaranteed
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*Commitment level of borrower with respect to its Net worth

d) Number of enquiries made : *Number of enquiries made by other lenders
*Justification for too many enquiries *Reason for rejection of credit facilities by
other lenders
e) Default status : *Number of accounts where Default reflects *Amount of
default and nature of facilities in which default occurs *Reason for default.
Interpretation of Credit Vision Score:
Value Interpretation
-1  Individual has no trade & is not reported on the
bureau
 Individual has no trade & has only been enquired
upon
 Individual has trades on bureau, but all have been

closed 36 months prior to enquiry
(Though bank is not restricting any sanction to such
borrowers but expects branches to conduct thorough due
diligence in such cases)
300-900  Presence of at least one trade on the bureau in last 36
months
 Higher the score, lower the risk.
Validity of credit information report (CIR)

Credit Information Report should not be older than 90 days at the time of Fresh
Sanction/ Enhancement/ Renewal/ Review/ Adhoc/Additional credit facility.
Other Misc. Guidelines
a) The CIRs on Borrowers/Guarantors/Co-obligants (Consumer & Commercial

category of borrowers) requesting/availing credit facilities, (including
renewal/review/enhancement) should form part of the proposal and a copy
1
thereof should also be kept in the file along with other documents
b) In case no Information/Data/Report (NO MATCH FOUND STATUS) is
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obtained under either Consumer or Commercial Segment, the Report/ Web
Page showing such Status shall be printed & kept as record along with
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proposal after being duly countersigned by the concerned officer that correct
details are fed in the system for extraction of CIR.
c) The Branch Heads while sanctioning/recommending credit facility to
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Controlling Offices, shall certify in the proposal that CIRs on

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Borrowers/Guarantors/Co-obligants have been drawn from database of CICs

and their past history/dealings with other banks/FIs have been verified from
the details available in the CIRs and no irregular/adverse feature, which may
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jeopardize bank‘s interest, have been observed.

d) In case no adverse features are noticed in the CIR but his availing credit
facilities from other banks/FIs is observed, the reasons of borrower‘s
approaching our bank may be ascertained. Before considering borrower‘s
request for credit facilities in such cases, the branches must take existing
banker‘s opinion on the borrower and other precautionary steps in terms of
05
extant guidelines besides ascertaining the security aspects so as to

safeguard bank‘s interest.
e) It has been observed that sometimes details of credit facilities which are
being enjoyed by the Borrower/Guarantors/Co-obligants/other related
entities/individuals from our Bank/other banks/FIs and which are known to
the dealing officials of the Bank through Balance sheet, application form, etc.
are not reflected in the CIR. To ensure that all the information is duly
reflected in the CIR in future, the matter should be immediately taken up with
MISD, HO for its resolution.
f) It is to be ensured that all the communications to obligants on delay in
payment of dues/instalments, invariably indicate that status reporting to CIC
is mandatory and any adverse remark could adversely impact their credit
score, which could affect their ability to raise loans on beneficial terms in
future.
g)

Default(s) in CIC report
1) For Credit Card Defaults :- In case CIC reports reflect defaults (excluding
Wilfull default) / written off / settled/ Post WO Settled on account of credit card
transactions only, the sanctioning authority shall take their credit decisions
within their Delegated Loaning Powers after due diligence and on merits of
the case after verifying the reasons for default and subject to compliance of
the other policy guidelines of the Bank. Process notes should mention the
justifications for approval of such proposals
2) For Defaults Other than Credit Card :-
i. Fresh/Additional/Enhancement :
a. Facility may be considered by the respective sanctioning authorities after
ensuring that the irregularity/default (if any) is removed from CIC report or the
applicant submits the sufficient proof (i.e. No-dues certificate/Statement of
account/ Deposit receipts etc) for having removed such irregularity/ default.
b. Where ever applicant is not able to fulfil the above conditions, the facility
may be considered by the sanctioning authority not below the level of
1
ZOCAC-I and above. In such cases, the reasons for default/irregularity during
past 12 months should be critically examined and based on justification/
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mitigations provided, a view may be taken on a case to case basis.
ii. Restrictions mentioned at S.N. (i) above, shall not be applicable subject to
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fulfilment of all the conditions mentioned below: Such instance of
default/irregularity should be at least 5 years prior to the date of current
application for fresh credit facilities. The aggregate amount of default in
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regard to all the credit facilities provided by the other banks/NBFCs was less
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than ₹1.00 lakh. Current CIBIL CV score of the borrower must be 700 or
above (wherever applicable)
iii. The restrictions mentioned at S.No.(i) shall not be applicable in case of
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debt waiver by Central Government/ State Government.

iv. Renewal/Review Renewal / review shall be considered by the respective
sanctioning authorities based on proper Justification/ further course of action
as deemed appropriate.
Note: While considering such credit proposal(s), proper justification should be

05
mentioned in appraisal note. While considering credit proposal where amount

of default is not available in CIC report, sanctioning authority may consider
‗high credit‖ amount reflected in CIC report for the purpose of quantifying the
default/irregular amount. In case the loan account(s) of the borrower
was/were previously with our Bank (i.e. PNB 1.0, e-OBC and e-UNI), the
borrower should pay upfront the irregular/default amount and regularize the
account before
Access to Own Credit Report:
1) Sec. 21(1) of Credit Information Companies (Regulation) Act, 2005: ―Any

person, who applies for grant or sanction of credit facility, from any credit
institution, may request such institution to furnish him a copy of the credit
information obtained by such institution from Credit Information Company”.
Sec. 21(2): ―Every credit institution shall on receipt of request as indicated in

sub section (1) shall furnish to such person a copy of the Credit Information
subject to payment of charges specified by the Reserve Bank under the
regulations.”
Sec. 12(3): On receipt request and fee of Rs.50/-, provide copy of CIR to the
person concerned.
2) Field functionaries are advised to furnish a copy of credit information obtained
by the bank to the Borrowers, Guarantors & Co-obligants on receipt of written
request in this regard
3) A maximum fee of ₹50/- may be recovered for the purpose as per regulation
12 (3) of Credit Information Companies (Regulation) 2006, framed under the
Act by RBI
It has been observed that sometimes details of credit facilities which are being
enjoyed by the Borrower/ Guarantors/ Co-obligants/ other related entities/individuals
from our Bank/other banks/FIs and which are known to the dealing officials of the
Bank through Balance sheet, application form, etc. are not reflected in the CIR. To
ensure that all the information is duly reflected in the CIR in future, the matter should
1
be immediately taken up with MISD, HO for its resolution.
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INCLUSION OF ―CIBIL MSME RANK‖ (CMR) IN COMMERCIAL CIBIL REPORT
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FOR MSME BORROWER : (L&A CIR NO 26 dated 01.02.2021)
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TransUnion CIBIL has launched CIBIL MSME Rank (CMR), a credit risk rank for
MSMEs borrowers, and Bank has subscribed the inclusion of CMR in Commercial
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CIBIL Report as a risk mitigating tool.

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CMR is a statistically-built credit behavioural scorecard that risk discriminates Micro,

Small and Medium Enterprises (MSMEs) on a scale of CMR-1 to CMR-10 (their
3
meaning and description is annexed as Appendix) and predicts probability of default

over a one year horizon. Where, CMR-1 is the best rank and CMR-10 is the worst rank.
CIBIL presently provides CMR for borrowers availing credit facilities upto ₹50 Crore
from the Banking system. The CMR shall be delivered in the commercial CIBIL report of
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applicable borrowers only.
To begin with, the CIBIL MSME Rank shall be used as indicative measure only and has
not been linked as threshold for entry level or as determining factor for delegated
power/ sanctioning authority of a credit proposal. However, in case of CMR7 to CMR-10
(i.e. High Probability of Default), the Sanctioning Authority shall endeavour to obtain
sufficient collateral security and Personal Guarantee for such credit proposals

VERIFICATION OF CRILC RECORD OF BORROWER AND GROUP ACCOUNTS
(LA 157/2020)
1.Central Repository of Information on Large Credits (CRILC) collect, store and
disseminate credit data of borrowers having aggregate exposure of Rs.5 crore
and above with the SMA status of the accounts and/or parties having current
account balance (debit/credit) of Rs.1 crore.
2. A column in Board Note format has been incorporated such that the CRILC
record of borrower & group accounts has been checked and no
adverse/negative/irregularity found.
3. Confirmation that group accounts are not appearing as non-cooperative
borrower and/or SMA 0/ SMA 1/ SMA 2/NPA/Restructured in CRILC database
has been incorporated in applicable appraisal formats.
4. However, obtaining of CRILC report of group entities and verification thereof
is exempted for corporate customers of good standing, having credit risk rating of
A4 and above. In such cases, an undertaking be obtained from the borrower that
the accounts of all group concerns are in the standard category and are running
regular with the existing bankers and held on record.
1
5. CRILC report of group entities shall be invariably obtained in all other cases.
Wherever obtaining of CRILC Report and verification for group entities is not
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complied with, branches should clearly state these facts in the proposal itself
along with the reasons / views/comments so that the Sanctioning Authority may
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take cognizance of the same while considering the proposal and take a final view
in the matter.
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RBI has made it mandatory for corporate borrowers having aggregate fund-based
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and non-fund based exposure of Rs.5 crore and above (introduced in a phased
manner) from any bank to obtain Legal Entity Identifier (LEI) registration and
capture the same in the Central Repository of Information on Large Credits
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(CRILC). This will facilitate assessment of aggregate borrowing by corporate

groups, and monitoring of the financial profile of an entity/group.
Accordingly Bank has now facilitated CRILC user IDs to all Business Divisions at
HO, all Zonal Offices, all LCBs, all Circle offices and all Back Offices for easy
access to CRILC database for checking any default status of a borrower. Bank
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also uploads the RFA & Fraud status of borrowers with other banks in our
Knowledge Centre portal, which is accessible to all employees of the Bank for
proactive steps while sanctioning loans to borrowers

3. Genuineness of Balance Sheet
(Loans and Advance circular 157/2020 dated 17.08.2020)
1. Authenticity of specific documents relating to a company such as status of

charges, Balance Sheet etc. can be ensured on the website www.mca.gov.in.
To get the CIN and the address of the company a link may have to be
established with MCA site
2. While dealing with the reports submitted by CAs, the genuineness of the
signatures of CAs/firm should be verified from the Regional Office of the ICAI
under whose jurisdiction the CAs/firm in question falls to avoid any serious
implications for the Bank due to such fake reports. Further in case false
documents as aforesaid have been noticed, suitable action may be initiated
against the parties involved such as filing of FIR etc. under intimation to
concerned CAs/firm of CAs.
3. Directors Identification Number (DIN) is a unique identification number allotted
to an individual who is appointed as director of a company. While appraising a
credit proposal, information of DIN of all the directors is required to be
1
captured in the appraisal note and its correctness needs to be ensured.
4. Accordingly, as part of due diligence exercise, branches are advised to make
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search on the website www.mca.gov.in.through the DIN no. of the respective
director to verify the name of directors of borrowing company as well as the
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names of group/allied concerns. The report(s) so obtained should be
scrutinized carefully to ensure that the details regarding associate/allied
concerns are duly captured and reported in the appraisal note.
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Drawing Balance Sheet of companies from MoCA (Ministry of Corporate

Affairs) portal
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The Audited Financial Statements for further processing/records, it is mandatory to

compare the Balance Sheet, P&L account submitted by the Company/LLP with
Balance Sheet, P&L account filed in MCA portal and confirm the authenticity of the
documents submitted as per procedure given below:
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P&L account in all existing as well as in fresh accounts, the officer concerned should
certify that copy of Balance Sheet and P&L of the Company/LLP have been
downloaded from MCA website, checked with the documents received from the
Company/LLP and found to be in order. The copy of the financials downloaded from
MCA website shall also be held on record.

4. Industry Rating
(Loan and Advance circular 49/2021 dated 24.03.2021, 157/2020 dated 17.08.2020)
Industry Ratings are being used as one of the inputs in Internal Credit Risk Rating
models for carrying out credit risk rating of borrower accounts as also in credit
decision making as per extant guidelines. The industry reports are available on our
e-circular site for ready reference of our field functionaries engaged in
appraising/sanctioning credit proposals. Bank has tied up with CRISIL for Industry
Ratings.
The updated Industry Outlook list in respect of Industries as provided by CRISIL has
been circulated vide L&A circular 49/2021 dated 24.03.2021 for reference. In case of
industries not figuring in the annexed list, the Industry Outlook is to be considered as
‗Neutral‘ while carrying out credit risk rating of the borrowal accounts.
As per Credit Management and Risk Policy for the year 2020-21, circulated vide LA
Cir 40/2020 dated 26.03.2020, there are certain restrictions imposed in exercising
1
loaning powers in respect of Fresh/ additional exposure to Unfavourable/specific
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Industries. Also, in terms of Loaning Powers guidelines (LA 100/2020 - Item 2.3,
Page -11), the loaning powers have been linked to credit Risk Rating of the
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borrower, but subject to ‗Industry Rating‘ of the borrower. It is reiterated that no
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fresh exposure should be taken upto field level (i.e GBB/ MCC/ RAM) in case of
industries having ‗Unfavourable‘ outlook
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(LOANS AND ADVANCES CIRCULAR NO 56 dated 26.3.2021 : REVIEW OF COVID-

19 IMPACT ON INDIAN INDUSTRIES :-
Attention is invited to IRMD L&A Cir. No. 212, 217 & 224 dated 01.12.2020,
10.12.2020 & 17.12.2020 respectively inter-alia conveying the future impact of Covid-
05
19 on various industries/sectors and also guidelines relating to loaning powers based

on industry / sector wise future impact.
In view of revival of Indian Economy, its GDP and many other incentive schemes
announced by GoI under ―Atmnirbhar Bharat‖, the Board has approved lifting of the
restrictions made on various industries and approved as under:
―Discontinuation of L&A circular no 212/2020 about Future Impact of Covid on

Industries and subsequent clarification‖).

5. Credit Risk Rating
(IRMD-Risk circulars 37/2019, 03/2020, 21/2020 and LA circulars 40/2020, 100/2020 and
157/ 2020)
The Bank has in place a multi-tier credit approving system. In order to enable the
field functionaries for taking expeditious decisions and also to attract quality
accounts, the CACs/officials shall exercise loaning powers linked to risk rating of
borrower/rating of the industry, as enumerated in loaning powers & guidelines for
exercising such powers at various levels
On adopting new Organizational structure for credit delivery, there is
comprehensive rating and scoring framework. Rating and scoring tools which are to
be utilized for credit delivery are as under:-
 Retail Score - 5 scoring models
 MSME Score - 5 scoring models
 Farm Score - 4 scoring models
 Rating Models - 11 rating models
1
Under new organizational structure, Zonal Risk Management Cell (ZRMC) has
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been created at Zonal level. There shall be a two-tier Risk Management structure of
which one part will be Zonal Risk Management Cell (ZRMC) & other shall be HO:
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IRMD.ZRMC will work as an extended arm of HO: IRMD which will help in
percolating Risk Culture in bank down the line.
Ratings for loans above Rs.1 Crore & upto Rs.10 crore will be vetted at ZRMC. For
21
loans above Rs.10 crore, ratings will be initiated at ZRMC & vetted at IRMD HO.
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ZRMC will act as 2nd line of defence after ZO (1st line of defence) & ZAO (3rd line
of defence)
(IRMD-Risk circular 21/2020 dated 01.04.2020)
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THRESHOLD EXPOSURE
Internal Risk Rating
Rating Threshold Exposure
PNB Score (For Retail Loans) As per RBD guidelines 31/2020 Dt.31.03.2020
PNB Farm Score As per PSFID guidelines 55/2020
05
Dt.27.03.2020
PNB Score SME As per MSME guidelines 55/2020
Dt.27.03.2020
PNB Trac Above Rs 50.00 Lakh
Credit Risk Rating – Models, Applicability of Rating Models, Authority for

Rating and Approval of Rating/ Vetting and other Guidelines (IRMD-Risk
circular 37/ 2019 dated 31.12.2019, 03/2020 dated 23.02.2020)
All borrowers having (FB+NFB) limits of above Rs.50 Lacs excluding Retail
borrowers for Housing Loan, Education Loan and Vehicle Loan (loans to individuals),
wherein scoring is done under PNB Score irrespective of amount, should invariably
be rated on these models. Seven Default Rating models, two Transaction Rating

Models, one Dynamic Review Rating model & one NPA Marking Model have been
devised and implemented, as detailed below :-
S. Credit Risk Rating Applicability

No Model
Total Exposure Turnover
1. Large Corporate Above Rs. 15 Crore (OR) Above Rs.100 Crore,
except Trading concerns
2. Mid Corporate Above Rs.5 Cr and up to Rs.15 Above Rs.25 Cr and up
Cr. (OR) to Rs.100 Cr.
All Trading concerns falling in the Large Corporate category
shall also be rated under this model
3. New Projects Rating Above Rs. 5 Cr. (OR) Cost of Project above
Model Rs.15 Cr
4. Small Loans Above Rs.50 Lac & up to Rs.5 Cr Up to Rs.25 Cr.
(AND)
5. NBFC All Non-banking Financial Companies (NBFC), Financial
Institutions (FIs), State Financial Companies (SFCs),
Housing finance Companies (HFCs) and Power Finance
1
Corporations (PFCs) irrespective of the limits or turnover
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except new NBFC/ and MFIs
6. Entrepreneur New Borrower setting up new Cost of Project upto
Business Model business and requiring finance Rs.15 Cr .
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above Rs. 50 lac upto Rs. 5 Cr
(AND)
New Non-Banking Financial Companies (NBFCs)/New Micro
21
Finance Institutions (MFIs)

New borrower entities, setting up new business requiring only
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working capital/NFB limits of above Rs.5 crore but not

involving setting up of any project as such .
Projects already completed with own finance, audited results
3
for first year of operations are not yet available and proposal
is only for sanction of WC/NFB/TL facilities and total
exposure is upto Rs 5.00 Crores & project cost upto Rs 15.00
crores .
However, all new trading business irrespective of limits shall
be rated under this mode .
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7. Counterparty Model All banks and Financial Institutions
S.No. Transaction Rating Model Applicability

1. Facility(Expected Loss) Rating Assigning rating to facility sanctioned to the
Framework borrower based on default rating and securities
available
2. Future Lease Rental Model Advances to property owners against future
lease rentals
DYNAMIC REVIEW RATING MODEL

S.No. Dynamic review rating Applicability
Model
1. Dynamic review of credit 1-Mandatory Review: Borrowers having exposure
risk rating more than Rs 50.00 crores and all listed borrowers,
irrespective of limits, rating shall mandatorily be
reviewed on expiry of 5 months from date of last rating
except :

- Borrower already rated as PNB-C1/C2/C3.
-All facilities to the borrower entity are guaranteed by
Centre/State Govt.
2- Optional Review: For other borrowers, as and
when branch feels that rating needs to be reviewed,
keeping in view of any recent adverse developments
DYNAMIC REVIEW RATING MODEL – LOAN RELATED ACTIONS (LA 100/2020)

Loan related actions in cases of downgrade in Dynamic Review Rating are as under:
No Change in notches/category Loan related actions

1. Downgrade up to 2 rating  Revision in pricing
grades (Within Investment  Withdrawal of all existing concessions.
grade) eg. PNB A1 to PNB A2;
PNB A3 To PNB B2
2. Downgrade more than 2 rating In addition to (1),
grades (within Investment  Option of cancelling un-availed limits
grade) eg. PNB A1 to PNB A4 may be examined.
1
3. Downgrade from Investment  Risk Mitigants such as additional
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grade to non-investment grade collaterals/ guarantees/increase in
eg. PNB B2 to PNB B3 22 margins may be prescribed.
 Loan facility adjustment/ possibility be
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explored for exit.
Note:
21
1. The reason for decline in the rating grade under dynamic review rating model has
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to be analysed on the basis of the parameters rated and suitable remedial measures
are to be taken by the branch.
3
2. The above measures are illustrative only. Branches may also consider additional
suitable measures, if any in this regard to secure bank‘s interest. These precautions
act as risk mitigating measures and at the same time inculcate a sense of credit
discipline among borrowers.
3. The above-mentioned measures are to be complied with before the next due date
for dynamic review rating or regular risk rating, whichever is earlier unless waiver for
05
the same has been obtained from the competent authority.

4. Competent Authority to waive specific loan related actions discussed in table
above is here under:
 For facilities sanctioned by GBB/RAM/MCC/ZOCAC-I: The next higher
authority not below the level of ZOCAC-II shall have the power to waive
specific loan related actions.
 For facilities sanctioned by ZOCAC-II and above: Full powers within their
vested loaning powers.
 For LCB/E-LCB /Overseas Branch/Office: HOCAC-I and above shall have full
powers within their vested loaning powers.
 While permitting waiver of specific loan related action(s), it shall be ensured
that proper justification is recorded in writing while permitting waiver specific
loan related action.
For detailed guidelines IRMD l&A circular no. 144/2019 dated 31.12.2019 and
circulars issued thereafter on the subject matter may be referred to.

DYNAMIC REVIEW RATING MODEL – Deferment of LOAN RELATED ACTIONS
(L&A circular 28/2021 dated 11.02.2021)
a) In view of the ongoing stress and adverse impact of COVID-19 pandemic deferment
of loan related actions in accounts having exposure above ₹50.00 crore due to
decline in Dynamic Review Rating by one notch below existing rating till 30.06.2021 is
allowed.
b) It may be noted that the above benefit of deferment is available only in case if the
downgrade in rating is due to adverse impact of COVID-19 on the borrowers. As such,
the reasons for downgrade should be carefully analyzed before the passing the benefit
of deferment of loan related actions. The factors like availment of Moratorium and
GECL facilities etc. by the borrowers be also considered for allowing aforesaid benefit.
c) The benefit of deferment of loan related action in case of downgrade by one notch
shall be allowed as per criteria and standard operating procedure: I . In case of
decline in rating, the reasons for downgrade should be analyzed to ensure reason for
downgrade. Some basic indicators (as detailed in the circular) which shall be
examined to ascertain that the downgrade in rating is due to COVID related stress. ii.
1
In case the decline is by one notch below existing rating, the Branch Head may waive
the loan related actions, after recording the reason in the format as per Annexure-I.
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The benefit of aforesaid deferment should not be passed in cases where the
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downgrade in rating is two or more notches below the existing rating. However, the
competent authority as defined in L&A Cir. No. 100/2020 for waiver of specific loans
related actions in case of downgrade in dynamic rating may waive the actions on
21
merits of the case.

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NPA Model
3
S.N. NPA Model Applicability

1. NPA Model For marking NPA accounts in on-line PNB-Trac Credit Risk
Rating System
All these credit risk rating models applicable to borrowers are available in the on-line Central
Server based system PNB Trac for conducting ratings
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CREDIT SCORING MODELS:
PNB SUPER SCORER: To strengthen the credit risk assessment for all fresh/
enhancement/ additional limit proposals in standard accounts falling within HO power and to
capture changes in risk dynamics post regular rating, a new quantified scoring model ‗PNB
Super Scorer‘ has been developed. The Model will be used by the Raters/Vetters at
IRMD, Head Office.
PNB Super Scorer shall serve as an additional tool on top of regular rating in PNB Trac in
the account to capture fine-tuned riskiness/change in riskiness in borrower since the
previous recent rating.
The Model will be applicable to all fresh/ enhancement/ additional limit proposals in standard
accounts falling within HO power.

‗PNB Super Scorer‘ is quantified majorly on Objective criteria. The Risk parameters have
been classified under five sub- categories i.e.
i) Borrower entity,
ii) ii) Security Coverage,
iii) iii) Conduct of Account,
iv) iv) Promoter & Group entities
v) v) Industry/Sector.
Based on the total score obtained above identified parameters, the PNB Super Scorer will
classify the account into four categories as under:
S.No Total Score (Out of Risk Categories Go/No-Go

400) Classification
1 Above 260 Low Risk Go
2 Above 160 & upto 260 Medium Risk Go with additional
Stipulations
3 Above 120 & upto 160 High Risk Go only if certain
critical conditions
1
fulfilled
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4 120 & below No- Go No- Go
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PNB SCORE :To evaluate risk in retail segment, 8 Scoring models for all the retail schemes
except i) PNB Baghban Scheme (Scheme for Reverse Mortgage) and ii) Loan against Gold
Jewellery & Gold Coins have been developed under the name PNB SCORE. This is
21
applicable to all Retail Loan applications (except exempted categories) for loan upto
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Rs.50.00 Lac, however, for retail loan schemes namely Housing Loan, Education Loan and
Vehicle Loan (loans to individuals), the same is applicable irrespective of amount.
3
The models are as under: 1) Housing Loan/ Loan against IP to Individual 2) Conveyance
Loan 3) Education Loan 4) Personal Loan (Pensioner) 5) Personal Loan (Others) 6) Doctors‟
Loan @ 7) Traders‟ Loan (New)@ 8) Traders‟ loan (renewal)@.
@ These credit scoring models are still part of PNB Score, though some of the schemes
covered under these scoring models are now being looked after by MSME Division. For link
on Finacle Home Page as Non CBS applications PNB IRMDPNB Score.
05
PNB SME SCORE:For SME, following models have been developed, which can cater to the
requirements of the schemes under SME sector:
1. SME Manufacturing (New Cases including takeover) - Above Rs.10 Lacs up to Rs.50
Lacs.
2. SME Service (New Cases including takeover) - Above Rs.10 Lacs up to Rs.50 Lacs.
3. SME Manufacturing and Service (New Cases including takeover) - Rs.10 Lacs and
below.
4. SME Manufacturing and Service (Renewal / Enhancement) - Above Rs.10 Lacs up to
Rs.50 Lacs.
5. SME Manufacturing and Service (Renewal / Enhancement) - Rs.10 Lacs and below.
SME scoring models are collectively known as PNB Score-SME and a link on Finacle home
page is available as ―Non CBS applicationsPNB IRMD PNB Score SME‖.
Scoring Model for Credit Card: For scoring of fresh applications for issue of the credit card
to individuals and to assess the credit card limit for Classic, Gold and Platinum Cards.

PNB FARM SECTOR: In its endeavour to develop credit scoring models for all eligible small
loan accounts under various segments up to Rs. 50.00 Lacs, bank has developed following
models for lending to agricultural (direct and allied) activities under various schemes of
PS&LB Division:
 Direct Agriculture with limit above Rs. 1 Lac and up to Rs. 50 Lacs
 Allied Agriculture with limit above Rs. 1 Lac and up to Rs. 50 Lacs
 Direct Agriculture with limit above Rs. 1 Lac and up to Rs. 50 Lacs (Renewal/
Enhancement)
 Allied Agriculture with limit above Rs. 1 Lac and up to Rs. 50 Lacs (Renewal/
Enhancement)
In addition, the following 3 models are also in force:

S.No. Credit Risk Rating Model Applicability
1 Exposure to undertakings of All states within Union of India
State
2 Exposure Ceiling Model for All industries, where the bank has substantial
various industries exposure
1
3 Segment Rating Pool-wise default and ratings approach for loans
:0
Methodology upto Rs.5 Crores and loan under exempted
category of rating.
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Grading of Borrowers under the Rating system:

21
The credit risk rating model provides for evaluating the borrower on a 10 point
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scale from ‗PNBA1‘ to ‗PNB-C3‘, with PNB-A1 indicating ―Minimum Risk‖ and
PNB-C3 indicating ―Exceptionally High Risk‖. Default rating grades with their
risk description, risk profile and Investment grades as detailed below :-
3
S.N Score Rating Risk Risk Description Risk

. band Grades Significance Profile
1. Above PNB- Minimum Risk Excellent business credit, asset quality
80 A1 and excellent track record of debt
repayment capacity and coverage.
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2. Above PNB- Marginal Risk Very good business credit, asset quality
70.00 A2 and liquidity, debt repayment capacity
up to and coverage.
80.00 Low
3. Above PNB- Modest Risk Good business credit, asset quality, debt Risk
64.00 A3 paying capacity and coverage
up to
70.00
4. Above PNB- Lower Risk Satisfactory business credit, asset
58.00 A4 quality, liquidity, good debt repayment
up to capacity and coverage
64.00
5. Above PNB- Average Risk Acceptable business credit with average
52.00 B1 risk, acceptable asset quality, modest
up to debt capacity. However, adverse
58.0 economic conditions or changing
circumstances are more likely to lead to
a weakened capacity of the obligor to

meet its financial commitments Average
6. Above PNB- Marginally An obligor is less vulnerable in the near Risk
46.00 B2 Acceptable term. However, it faces major ongoing
up to Risk uncertainties and exposure to adverse
52.00 business, financial, or economic
conditions which could lead to the
obligor's inadequate capacity to meet its
financial commitments
7. Above PNB- Cautiously An obligor is more vulnerable than the Borderl
40.00 B3 Acceptable obligors rated 'B2', and currently the ine
up to Risk obligor has the capacity to meet its Risk
46. financial commitments. Adverse
business, financial, or economic
conditions will likely impair the obligor's
capacity or willingness to meet its
financial commitments
8. Above PNB- High Risk Not creditworthy, generally acceptable
35.00 C1 on case-to-case basis, currently
up to vulnerable and dependent on favourable
40.00 business, financial and economic
conditions to meet financial
1
commitments
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9. Above PNB- Very high Risk Not creditworthy. An obligor has minimal
25.00 C2 margin of principal and interest payment High
up to 22 protections, currently highly vulnerable, Risk
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35.00 and is totally dependent upon favourable
business, financial and economic
conditions to meet its financial
commitments
21
10. 25.00 PNB- Exceptionally Unacceptable business credit, Currently

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and C3 high Risk highly vulnerable obligations, normal

below repayment in jeopardy, inadequate
projected net worth and paying capacity.
3
Default of some kind appears imminent
The NPA rating categories are as follows:
Score Obtained Rating Grade Description

Defaulted Accounts PNB-NS NPA - Sub-Standard
05
(Accounts that have

PNB-ND NPA - Doubtful (I,II and III)
slipped to NPA
PNB-NL NPA - Loss
category)
Rating and vetting authority for credit risk rating in PNB Trac/PNB Score/SME
Score/ Farm Score
There is separate credit risk management structure in the organization functioning

completely independent from credit section doing appraisal and sanction of credit
proposals. Rating assignment and periodical rating reviews is done by personnel
distinct from personnel involved in loan appraisal system.
The Rating and Vetting/Confirming Authority in respect of loans sanctioned by
different Authorities is conveyed vide circulars issued from time to time.
Following structure shall be applicable for rating/vetting approval of ratings/scores:

Loan amount Credit Risk Vetting / Confirming Authority@
Rating Authority
For Loans upto Officer/Manager at An official designated by the Incumbent not
Rs.10 Lakh: GBB connected with processing/ recommending
of the concerned loanproposal at GBB
AboveRs.10 Lac Risk Rating officer, An officer independent ofappraisal

uptoRs.1crore RAM especially designated for all
rating/scoring
AboveRs.1Crore Risk Rating officer, Head ZRMC
upto Rs 10Crore# RAM*/MCC
AboveRs10 ZRMC DGM, Industry Desk IRMD, HO
croreuptoRs. 30
Crore
Above 30 crore ZRMC GM, Industry Desk/CreditRisk/IRMD,
HO
Irrespective of Overseas GM, Industry Desk/CreditRisk/IRMD,
Loan amount branches HO
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# All scoring done in PNB Score, SME score and PNB Farm score shall be
vetted at RAM/MCC level only. For example scoring applicable in housing, car
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loan, farm score etc. by an officer independent of appraisal especially
designated for all rating/scoring
21
- Applicability of models & Categories of Advances exempted from credit risk

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rating/Scoring is to be dealt with accordingly

- For Loans (irrespective of amount) falling under vested powers of HO committees
(including MC) vetting will be done at HO:IRMD.
3
@The vetting authority for review ratings carried out in Dynamic Review Rating
Model, in applicable cases shall be as per extant bank guidelines except
 For loans sanctioned by HO level committees: Vetting shall be done

05
by vetting authority at concerned ZRMC.

 For Overseas Branch/Office (all ratings irrespective of sanctioning
authority): Vetting shall be done by vetting authority at concerned
Branch/ Office.
*For branches that are not linked with MCCs, RAMs shall exercise their loaning
powers as defined in the Loaning Powers guidelines for Agriculture and MSME
also in addition to Retail loans.
Validity of Credit Risk Rating: The credit risk rating become due after the expiry of
12 months from the month of confirmation of rating or 18 months from the date of
balance sheet on the basis of which credit risk rating was assigned, whichever is
earlier. The rating shall be treated as „overdue‟ after the expiry of 15 months from
the month of confirmation of rating or 21 months from the date of Balance Sheet on
the basis of which the credit risk rating was assigned, whichever is earlier.

Dynamic Review Rating Model – Treatment of Overdue Credit Risk Ratings
If rating is not renewed within the validity /extended validity period and rating falls
overdue, then rating shall be downgraded and treated as PNB-B3 and re-priced
accordingly, from the day on which rating falls overdue, till rating is renewed in
regular rating model. However, if the rating is already ‗PNB-B3‘ or below, the rating
shall be treated one notch down for pricing. (IRMD 03/19)
The operational guidelines on treatment of overdue credit risk ratings was circulated
vide IRMD Circular No. 02/2019 & 03/2019 dated 02.01.2019 and 07.01.2019
respectively.
However, keeping in the view that amalgamation of PNB with UBI & OBC w.e.f.
01.04.2020 & the ongoing difficulties faced due to COVID-19 pandemic, the
treatment specified for overdue risk ratings has been deferred for a further period of
3 months (i.e. upto 30.06.2021). From 01/07/2021 all overdue credit risk ratings shall
1
be treated as PNB-B3 or one notch down in case rating is already PNB-B3 or below.
All other guidelines in the matter shall remain unchanged (IRMD LA circular 03/21
:0
dated 30.03.2021)
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However, till such time existing guidelines will prevail and penal interest @ 2% shall
be charged over and above the applicable interest rate for the default period as
specified for overdue credit risk ratings in existing guidelines issued vide IRMD
21
Circular No. 23/2017 dated 13.12.2017 and 25/2018 dated 14.09.2018 (IRMD
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33/2019)
In case of downgrade in Dynamic Review rating, various loan related actions (to be
3
taken), have been advised. Competent Authority to waive specific loan related
actions are also advised (L&A circular 144/2019 dated 31/12/2019).
CRR is aimed at measuring the Probability of Default of the borrower.
The pricing (ROI and other charges) is linked with credit risk rating. Interest rate is
05
charged depending upon the quality of asset. In normal course of business, better-
rated accounts are priced at lower rate of interest as compared to low rated
accounts. However, in the larger business interest of the bank, the competent
authority can permit lower than card rates on case to case basis strictly on merits by
recording the reasons/justification for making the exception. In respect of borrowal
accounts availing limits over Rs. 20 Lac, interest rates have been linked with the
credit risk rating with certain exceptions.
Situations may arise, where the borrowers would like to know about the rationale of
their rating. Borrowers may be informed about their weak areas such as Financial,
Business/Industry, Management or Conduct of Account. The rating report/individual
parameters in detail are not to be disclosed to them.
No fresh exposure should be taken upto field level for borrowers under
unfavourable industries irrespective of their credit risk rating.

Hurdle Rate for External RiskRating
The Hurdle Rate for External Risk Rating is as under:

External Rating Investment
Grades Categories
BBB & Above Investment Grade
BB & below Non-Investment
Grade
It should be noted that the counterparty shall invariably be internally rated & should
achieve Investment grade. For consideration as ‗Investment Grade‘, both the
conditions w.r.t. Internal & External Risk Rating shall be fulfilled.
The bank shall undertake new relationships in externally rated BBB & above
accounts, & on conduct of their Internal Rating should achieve B1 or B2. In such
cases where the account is Internally Rated B2, it shall be sanctioned at an
appropriate level as per vested loaning powers in terms of extant guidelines.
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(Loan and advance circular 04/2020 dated 10.01.2020& 100/2020 dated 02.06.2020)
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Categories of ―Advances‖ exempted from Credit Risk Rating/ Scoring: (LA

40/2020 dt. 26.3.2020):
21
i. All accounts with sanctioned limits of ₹2 Lac and below.

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ii. All loans against shares and debentures, units of mutual funds, life insurance
policies.
3
iii. Advances to Central/ State Govt. Departments/ Undertaking/ Establishments,

which are not running on commercial basis (e.g. Industrial/ Agricultural/ Rural
Development Boards of various State Govts.). An organization may be treated as not
running on commercial basis if the borrower is not required to draw Profit & Loss A/c
(including income & expenditure) and Balance sheet (statement of affairs) under the
law.
05
iv. Loans to individuals, against mortgage of IPs where market value of IP is at least
150% of the loan amount, who are not engaged in any activity for which annual
accounts are required to be prepared.
v. Advances to individuals under Agriculture (Direct), Agriculture (Indirect), Other
Priority Sectors including Transporters, Artisan and Handicrafts.
vi. Loans under LUCC and advances against warehouse receipts of CWC.
vii. Borrowers who are availing only those loans/limits where full powers have been
granted as per loaning power chart e.g. purchase of cheque drawn by Central &
State Govts. and drafts of public sector banks, ILCs/FLCs where full cover is held by
way of deposits till maturity etc.
viii. Advances against clearing instruments/ bills/ clean overdrafts permitted within
the vested loaning powers at various levels where the client is not availing any other
loan/limit for which risk rating is applicable as per guidelines.
Note: The exemption from credit risk rating under (vii) and (viii) shall be
subject to the condition that the loan/limit allowed is for a short period and is
for a specific transaction. The exemption from rating should be exercised only

in exceptional circumstances and wherever possible, credit risk rating in
appropriate rating model be conducted. In case the borrower is availing any
other limit, risk rating as per guidelines shall be applicable.
ix. Borrowers setting up new business where requirement of credit facilities is up to
₹50.00 Lac.
x. Borrowers dealing with our bank and availing only Bill Purchasing/ Discounting/
Negotiating Limit, against LC of approved Banks as permitted by extant Bank
guidelines. Exemption shall not be available to borrowers who are availing Bill
Purchasing/ Discounting/ Negotiating limit alongwith other credit facilities from our
Bank.
xi. Further in addition to above Exempted categories of Credit, exemption can be
sought in respect of following.
The overseas branches handling proposals having following characteristics:
i. The borrower company, normally incorporated outside India, is wholly owned
subsidiary (WOS) of major Indian Corporate.
ii. These subsidiaries work as an investment arm of the Indian Corporate and do not
have their own operations or revenue flows.
1
iii. Their balance sheets mostly reflect funds raised towards margin requirement
(from parent company; by way of debentures/ unsecured loan/ investment etc) and
:0
debt raised from international banks.
iv. These funds are in turn invested in acquiring companies, capital expenditure and
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other projects; through their WOS / group companies; by way of onward lending.
v. The loan is backed by the guarantee of parent company.
Exemption may be granted on case to case basis by GM (IBD) from internal credit
21
risk rating subject to following conditions:

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a. The borrower entity is an overseas investment arm of major Indian Corporate /

holding company, not having its own operations.
b. Repayment of loan is proposed from the sources of holding company.
3
c. The loan is backed by the guarantee of holding company having adequate

Tangible Net Worth and
d. Internal credit risk rating of the Indian corporate / holding company is not below
investment grade.
B. Exempted categories of PNB Score

05
a. Advances under Retail Banking Schemes, where scoring models are not available
(Loan against Gold & Jewellery and PNB Baghban)
b. Loan against Sovereign Gold Bonds
C. Exempted categories of PNB Score SME

a. All accounts with sanctioned limits of ₹2 Lac and below.
b. Advances to Transport sector and Documentary Films (on themes like family
planning, social forestry, energy conservation and commercial advertising).
D. Exempted categories of PNB Farm Score

a. Cash Credit/Production Credit loan upto ₹3.00 Lacs and investment Credit / Term
Loan upto ₹1.00 Lac.
b. Schemes which are being classified in Agriculture, but to be evaluated through
other scoring models.

E. Following Advances are exempt from the purview of both Credit Risk rating
and scoring models:
a. All advances against security of Bank‘s own deposits.
b. All advances against Govt. securities including NSCs/KVPs/IVPs etc.
c. All staff Loans
INDUSTRY RATING – CRISIL RESEARCH SITE ACCESS
1. Attention of Incumbents is invited to L&A Circular No. 07 dated 14.01.2019

advising the ‗Industry Ratings‘ conducted by CRISIL of 140 Industries.
2. As Industry risk score and detailed Industry Reports are being subscribed from
CRISIL, it has been decided to provide access to the CRISIL Research site for
having real time analysis of all industries through internet.
3. The process to get registered is as under:
3.1 Click on the link https://www.crisilresearch.com/CuttingEdge. First time users
can receive password by registering once by clicking Register icon on top right
side of www.crisilresearch.com.
1
3.2 CRISIL has issued a unique License Key for our bank. Put this License Key
:0
CRRW/NHH/SDRT40C3C65316 along with your Email id and personal
details and click Submit button.
3.3 Any existing users who forget their password – Click Sign in, put your registered
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email id and click Forgot Password icon to receive a new password via mail.
3.4 For queries you may contact CRISIL Helpdesk at productsupport@crisil.com or

21
+91 22 3342 8001 (LA 117/2013)

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Vetting authority shall be one step higher, wherever internal ratings are having
variance of more than one notch with the ratings assigned by approved external
3
rating agency. In case external rating is assigned after the approval of internal rating
then the rating shall be reviewed and vetted on the basis of variation in the rating
(refer IRMD Cir.No.05/2017dt 17.03.2017)
CONCESSION IN INTEREST RATE AND SERVICE CHARGES ON THE BASIS OF

05
CRR
In terms of guidelines contained in LA Cir 100/2020dated 02.06.2020 competent
authority empowered to permit/continuation of relaxations in rate of interest and
service charges have been conveyed. (LA circular 100/ 2020 dated 02.06.2020)
External Risk Rating
Kindly refer IRMD Consolidated Circular No. 13 /2018 dated 21.04.2018 vide which
consolidated guidelines on external risk rating has been circulated wherein NCAF
guidelines for insisting External Risk Rating for Borrowers with aggregate exposure
(both Fund Based &Non-Fund Based) above Rs. 5 Crore or total average annual
turnover of more than Rs.50 crore have been advised.
Increase of Threshold Exposure (IRMD-Risk 26/ 2020 dated 13.08.2020)

Now, eligibility criteria for external risk rating has been revised as under

1 All borrowers of our Bank with total exposure (both Fund Based & Non Fund Based)
of up to Rs.25 Crore., be exempted from securing External Risk Ratings.
2 For borrowers having IRR PNB-B2 and exempted from requirement of ERR up to
Rs.25 Crs. (as per point 2.1), ZOCAC-II can sanction proposal for
fresh/enhancement/additional/adhoc limits where exposure is secured by the eligible
collaterals of at least 50% or more. The eligible collaterals for this purpose are as
under:-
Collaterals (Eligible)
I. Cash & Cash Equivalents like FDR, NSC, KVP etc.
II. LIC Policies (Surrender Value)
III. Immovable Properties in the form of Residential/ Industrial/ Commercial Properties.
Surplus value of primary securities of Land & Building, if available, can also be
considered for the purpose.
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In event of Non-availability of External Risk Ratings in case of new borrowers, the
sanctioning authority shall provide a suitable time of 3 to 6 months to the new
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borrowers for obtaining external risk rating in terms of sanction.. In case the entity is
externally rated after the period as granted by sanctioning authority and the External
Rating comes below the Investment grade rating i.e. below ‗BBB‘ rating grade, then
21
the rating outcome shall be placed before the next higher authority in case of ZO
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Sanctions i.e. HOCAC-I and to the appropriate sanctioning authority in case of HO

sanctions, for continuation of granted concessional rate of interest, if any and taking a
call on additional risk mitigant.
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6. Valuation of Property and Plant and Machinery:
(L&A circulars 53/2020, 144/ 2020, 157/2020, 186/ 2020, 07/2021 and 16/2021)
Criteria for valuation in fresh accounts:

 As against the earlier guidelines on obtainment of valuation report of IP from
the valuer on the Bank‘s approved panel in borrowal accounts where
aggregate credit limits are Rs.10 lac & above and value of immovable
property to be mortgaged/ charged is Rs.20 lac & above, it has been
decided that Banks shall solely rely upon the valuation reports of Bank‘s
approved valuers irrespective of the credit limit and value of the
mortgaged property.
 However, where the value of immovable property to be mortgaged/ charged is
above Rs.5 crore, branches shall get valuation of such IPs done from
minimum two valuers of category A or B (as per annexure) on the Bank‘s
approved panel. In case the difference in valuation is less than 15%, the
average value may be taken.
 In case the difference in two valuations is more than 15%, 3rd valuation may
1
be got done from a senior valuer in category A and the average of the two
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valuation reports having difference of not more than 15% be taken.
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Now a ceiling of Rs.5 cr. on value of property has been imposed for valuation
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of property by diploma holders in Civil Engineering /Architecture in case of

both retail loan as well as corporate loan. (LA 53/2020-Page17)
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Revaluation In existing accounts: (LA53/2020):

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Aggregate credit limits/ Value of IP Revaluation by Valuer on the

Outstanding Bank‘s approved panel
Provided the valuation is
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1 Rs.10 Lac & above but less Rs.20 Lac& Should more than one year old
$ than Rs.1.00 Crore and above $
2 Rs. 1 crore & above, Once in Three Years
$For 1 above, revaluation to be got done only If Branch Head feels that
realizable value of IPs is significantly lower than the one on bank‘s record
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 If, at the time of revaluation, negative variance of the individual property is 20% or
more from the earlier valuation, the matter shall be referred to sanctioning authority
to take appropriate safeguards.
 Frequent valuation of properties for allowing concession in ROI and sanction of
additional credit facility is not a fair practice and not allowed.
 Subsequent valuation should be assigned to the empaneled valuer other than the
valuer who has conducted the previous valuation
Valuation Report
Valuation report must be on prescribed format as per Appendix-I for valuation of all
the Immovable Properties (other than agriculture land), per Appendix-II for valuation
of Flats (other than agriculture land) and Appendix-III for valuation of Agriculture
Land of L&A 53/ 2020.
Valuation report should clearly indicate: i. Date of purchase of immovable property, ii.
Purchase Price of immovable property, iii.Book value of the IP, iv. Realizable Value

of IP, V. Distress Sale Value of immovable property and vi. Guideline Value (value
as per Circle Rates), if applicable, in the area where immovable property is
situated.vii) Independent accessibility of the IP, Viii. GPS Coordinates of IP, ix.
Photograph of owner with IP in the background. x. Building, Layout and Floor Plan.
However, for the purpose of determining the present value of the property
mortgaged/ to be mortgaged, the realizable or market value whichever is lower
should be taken into consideration
Cases of IP recently purchased :-

 In case the IPs are recently purchased then the purchase price as per sale
deed and not the market value shall be reckoned as value of the property.
The period for recent purchase be taken as 12 months from the date of sale
deed. However, if the guideline value has been revised after the date of sale
deed and it is higher than the purchase value then value of the property shall
be reckoned in terms of the guideline value even if the sale deed is recent i.e.
not one year old
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 Further, in case additional construction has been made during the 1st year,
cost of additional construction given by chartered engineer/valuer may be
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added to the consideration mentioned in the sale deed.
 If the duration between the date of allotment and date of conveyance deed /
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sale deed (executed by the development agencies/private builder) is more
than 1 year, fresh valuation shall be obtained.
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With respect to valuation of land in all proposals including Real Estate, if the land is
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acquired / purchased beyond one year, realizable value or 85% of the market value
whichever is lower assessed by the Bank‘s approved valuer should be taken as
value of the land.
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VALUATION OF PLANT & MACHINERY:
i) For new plant and machinery Valuation is the cost price as per quotation/
supplier‘s bill,To be verified through enquiries through other vendors
supplying such machinery.
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ii) In fresh borrowal accounts for existing plant & machinery, valuation from
the valuer on the Bank‘s approved panel .
iii) If the value of Plant & Machinery is Rs.50 crore & above,  valuation from
minimum two valuers on the Bank‘s approved panel.
iv) Valuation report as per Appendix-IV of LA 53/2020.
v) Realizable or market value whichever is lower to be accepted for valuation
purposes.
List of approved valuers is issued by SASTRA Division HO from time to time.

Presently the panels approved and circulated videSASTRA Division Cir. No. 38/2019
dated29.07.2019 is in force.
Categories of Valuers: (LA 53/2020):

Category of Work experience in Value of property for
valuers Undertaking valuation assignment of valuation
work.

A More than 10 years No limit
B More than 5 years and less Up to Rs.50 crores
than 10 years
C Upto 5 years* Up to Rs.5 crore
*In case of Diploma holders work experience of 8 years in the field of valuation
is required
Procedure to allot work to empaneled valuers: Bank shall maintain a Register of

Valuation Work Outsourcing. Work shall be offered to valuers based on their
performance. If a valuer does not take up the work for some reason, the same
should be recorded and then allotted to another valuer
Fee Structure (including SARFAESI):
VALUE OF ASSET* VALUATON FEE (In Rs.)

Up to ₹ 20 Lacs ₹ 2000/-
Above ₹ 20 Lacs and up to ₹ 50 Lacs ₹ 3000/-
Above ₹ 50 Lacs and up to ₹ 1 crore ₹ 4000/-
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Above ₹ 1 crore and up to ₹ 5 crore. ₹ 8000/-
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Above ₹ 5 crore and up to ₹ 10 crore ₹ 12000/-.
Above ₹ 10 crore 22 ₹ 15000/-
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* Includes Property/Fixed Assets/Plant and Machinery
**The fees are inclusive of out of pocket expenses.
The fee payable to the valuer would be recovered from the borrower
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Obligations of the Bank:

 Appointment/Empanelment of valuers is done in accordance with the
guidelines/circulars issued from time to time by Sastra Division (Sastra
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Division circular 30/2020,32/2020, 33/2020,34/2020)

 All instructions to valuer to be given by the bank in writing
 Maximum 10 days normally to be given for valuation
 Professional fees / payments to the valuers shall be paid by the bank within
45 days of the submission of the valuation.
 Detail of Property mortgaged be entered in CBS through MENU option
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―HCLM‖ vide LA Cir 14/2017 dated 13.02.2017 and further explained vide LA
Cir 21/2017 dated 04.03.2017.
Market value is defined as the estimated amount on the date of valuation for
which an asset should be exchanged between a willing buyer and a willing
seller. The transaction should be at arm‘s-length and after proper marketing. Each
party should act knowledgeably, prudently and without compulsion.(L&A circular
53/2020 dated 31.03.2020)
VALUATION OF ASSETS – DETAILS OF DEMARCATION / FOUR BOUNDARIES

OF PROPERTY (Loans and Advance circular 144/2020 dated 05.08.2020)
This has reference to L&A Cir. No. 53 dated 31.03.2020, inter-alia advising the
operative guidelines for valuation of assets alongwith the standardized formats in
respect of valuation of assets. It is informed that Central Vigilance Commission, while

examining the NPAs/Fraud cases has advised that Demarcation / Four Boundaries of
Property should be ensured before release of credit facilities.
It has been observed that demarcation can be divided in two parts:
i. Symbolic Demarcation: Such process is complied with the legal counsel and the
valuer, by indicatively designating the North, South, East, West properties of the
property in question, duly complying guidelines at para 3 above.
ii. Accurate Demarcation: Accurate Demarcation is a subject of Nautical Science

wherein proper methodology have been prescribed on the longitude and latitude of the
entire property and is subject of expert advice and may require an specialist to formally
confirm such demarcation, There is limitation on this subject since land reforms are in
various stages in different states and digitization of Land Records has not happened in
many states in India. The second limitation in the issue is that if we attempt to achieve
such clear demarcation, State Authority do not support and cost of obtention of non-
encumbrance may go up substantially.
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Since, accurate demarcation of property is scientific/technical aspect which requires in-
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depth knowledge, skills of the field and also involved huge cost, it is advised that details
of demarcation / boundaries of property as already covered in extant guidelines
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covering Symbolic Demarcation only including longitude/latitude and co-ordinates of the
Property Location and screen shot (in hard copy) of Global Positioning System
(GPS)/Various Applications (Apps)/Internet sites (eg. Google earth) etc. should be
21
obtained from the valuer as per the standardized valuation formats as advised by L&A
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Cir. No. 53 dated 31.03.2020.
DUE DILIGENCE TO BE FOLLOWED IN VALUATION OF ASSETS (Loan and

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advance circular 186/2020 dated 08.10.2010) :
Field functionaries are advised to further advise the valuers to enter the details of
properties of mixed nature (commercial and residential), while giving their valuation
report, in respect of ratio of their commercial and residential parts and suitably and
realistically evaluate the properties according to their nature under the best suited
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methodology for valuation considering the nature and location of the property along with
other relevant factors as per the standard industry practices in vogue.Further it is
reiterated that details /reference of at least two latest deals/transactions with respect to
adjacent properties in the areas have to be mentioned in the valuation report. It is
clarified that the deals being quoted should be of properties comparable in nature
VALUATION OF AGRICULTURAL LAND IN AGRICULTURAL LOANS

(L&A 41/2021 dated 01.03.2021)
This has reference to IRMD L&A circular No 53/2020 dated 31.03.2020 conveying
Policy and Standard Operating Procedure on Valuation of. In the said policy, it has
been advised that Bank shall solely rely upon the valuation reports of Bank‘s approved
valuers irrespective of the credit limit and value of the mortgaged property.

In agricultural loans up to credit limit of Rs. 2.00 Crore, where agricultural land is being
offered as security, valuation of such agricultural land may be assessed on the basis of
Circle Rates decided by revenue authorities. The same shall be authenticated from the
site/ latest data published by revenue authorities by the processing/ assessment officer
and a record of the same shall be kept in file. An SOP has been formulated regarding
the same and has been enclosed as ‗Annexure A‘ of L&A 41/2021 dated 01.03.2021.
Also the assessment of value of agricultural land proposed to be offered as security
shall be done on the proforma devised for the purpose and enclosed as ‗Annexure B‘ of
L&A 41/2021 dated 01.03.2021.
In all agricultural loans above Rs. 2.00Crore, the valuation of agricultural land shall
be continued to be taken from empanelled valuer.
GUIDELINES FOR INSPECTION OF IMMOVABLE PROPERTY CHARGED/

PROPOSED TO BE CHARGED IN FAVOUR OF BANK: - (L&A 16/2021 dated
18.01.2021)
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This is in reference to L&A Circular No. 53 dated 31.03.2020, inter-alia advising the
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Standard Operating Procedure (SOP) for valuation of assets along with the
standardised formats and other operative guidelines issued on the subject from time to
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time.
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To strengthen the due diligence in respect of the property to be mortgaged, certain

checks are already in place in the valuation report format such as obtainment of
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photograph of owner in the background of security, incorporation of longitude, latitude

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and GPS information, prevailing market rates and details/references of at least two
latest deals/transactions with respect to adjacent properties in the areas will have to be
mentioned by the valuer. Additionally, it has been stipulated that the valuer shall
3
indicate how the value has been arrived at, duly supported by necessary calculations
and furnish guideline value (on the basis of prevailing circle rates or any other reliable
source), market value as well as realizable value. In case of difference in the market
value and circle rate as applicable in that area, the same should be supported by
cogent reasons in the valuation report.It is also advised that reports submitted by the
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Empanelled Valuer and Panel Advocate has to be studied with regard to key aspects
such as identification, location and description of the property, ownership, basis for
arrival of the value of the property to ensure that the valuers and advocate adopt
prescribed procedure and guidelines as provided by the Bank.
As a due diligence measure when dealing with Immovable Property, it is now advised
that the official visiting the IP shall submit along with the visit report, his/her
observations in the proforma on counter checking the important particulars from the
valuation report and legal opinion as per Annexure. Further, it is to be ensured by the
visiting official that the valuer submits the value of property of similar nature in the same
locality drawn from any one of the popular property websites such as Magic bricks, 99
Acres, Housing NHB Residex etc., along with the valuation report. The copy of the
same is to be held on record. It is also advised that copy of the Legal Opinion and
Valuation report may be held on record during visit of IP.

The aforesaid guidelines on counterchecking the important particulars in the valuation
report shall be applicable where mortgage is created at our Bank and/ or where Bank is
the leader in Consortium arrangement
7. Insurance
(Loan and Advance circular 157/2020 dated 17.08.2020)
i. Insurance of each and every security is required to safeguard bank‘s interest,

Assets/securities mortgaged or hypothecated to the Bank should be adequately
insured at all times with the agreed Bank clause and renewed timely. The Insurance
Policy should be in the joint names of the borrower and the Bank and remain in the
custody of the Bank.
Risk coverage Policy be obtained Where IP is mortgaged to the Bank as

Primary Security Collateral Security
Equivalent to reconstruction Full market value excluding land cost
1
cost of the property excluding
land cost
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ii. Officers in SMG Scale IV at specified branches (RAM/MCC/LCB/ELCB) and
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above may waive insurance of collateral security in deserving cases in their own
sanctions only
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All insurance policies (Except Consortium accounts) shall be renewed on a common

date i.e. 15th May, 15th August, 15th November and 15th February. In case,
common date falls on Sunday/Holiday, insurance policies shall be renewed on the
3
preceding working day.
In addition to Life Policies issued by LIC of India and Non-Life Policies issued by
Public Sector General Insurance Companies, Insurance Policies (Life & Non-Life)
issued by Private Sector Insurance Companies registered with IRDA as per list given
in Appendix to LA Cir 46/2014 dated 23.04.2014 may be accepted.
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(LA Cir - 46/2014 and 113/2015 )

10. Genuineness of Title Deeds and Valid Mortgages
What constitutes Mortgage:
A mortgage is the transfer of an interest in specific immovable property for the
purpose of securing the payment of money advanced by way of loan, an existing
or future debt or performance of an engagement, which may give rise to
pecuniary liability.
A mortgage is a way to use one's real property, like land, a house, or a building,
as a guarantee for a loan to get money. Many people do this to buy the home
they use for mortgage: the loan provides them the money to buy the house and
the loan is guaranteed by the house.
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In a mortgage, there is a debtor and a creditor. The debtor is the owner of the
property, while the creditor is the owner of the loan. When the mortgage
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transaction is made, the debtor gets the money with the loan, and promises to
pay the loan. The creditor will receive money back with interest over time (usually
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in payments made each month by the debtor). If the debtor does not pay the
loan, the creditor may take the mortgaged property in place of the loan. This is
called foreclosure.
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Mortgagor and Mortgagee:

The transferor is called a mortgagor and the transferee a mortgagee. The
principal money and the interest of which payment is secured are called the
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mortgage money and the instrument (if any) by which the transfer is effected is
called the mortgage deed.
Immoveable Property:
Immovable property includes land, benefits that arise out of land and things
attached to the earth, like trees, buildings, fixed machinery etc. The machinery
which is not permanently attached to the earth and which can be shifted is not
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considered immovable property.
Types of Mortgage:
Simple Mortgage
Where, without delivering possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly that in the event of his failing to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged property to be sold and the
proceeds of sale to be applied, so far as may be necessary, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee
a simple mortgagee.
i) There is personal obligation/ liability to pay;
ii) Possession is not given;
iii) There is a right to cause the property to be sold through court; and

iv) Power of sale without intervention of the court can be conferred if the property
is, on the date of the execution of the mortgage deed, situated at Kolkata,
Chennai, Mumbai, Ahmedabad, Delhi and at such other places specified by state
Governments.
Mortgage by Conditional Sale:

Where, the mortgagor ostensibly sells the mortgaged property-
i. On condition that on default of payment of the mortgage-money on a certain date
the sale shall become absolute, or;
ii. On condition that on such payment being made the sale shall become void, or ;
iii. On condition that on such payment being made the buyer shall transfer the
property to the seller,
The transaction is called a mortgage by conditional sale and the mortgagee a
mortgagee by conditional sale:
PROVIDED that no such transaction shall be deemed to be a mortgage, unless
the condition is embodied in the document, which effects or purports to effect the
1
sale.
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Usufructuary Mortgage: 22
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Where the mortgagor delivers possession, or expressly or by implication binds
himself to deliver possession of the mortgaged property to the mortgagee and
authorizes him to retain such possession until payment of the mortgage money,
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and to receive the rents and profits accruing from the property or any part of
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such rents and profits and to appropriate the same in lieu of interest or partly in
payment of the mortgage money, partly in lieu of interest and partly in payment
of the mortgage money, the transaction is called a usufructuary mortgage and
3
the mortgagee a usufructuary mortgagee.
English Mortgage:
Where the mortgagor binds himself to repay the mortgage money on a certain
date, and transfers the mortgaged property absolutely to the mortgagee, but
05
subject to a proviso that he will re-transfer it to the mortgagor upon payment of

the mortgage money as agreed, the transaction is called an English mortgage.
Anomalous Mortgage:
A mortgage which is not a simple mortgage, a mortgage by conditional sale, an
usufructuary mortgage, an English mortgage or a mortgage by deposit of title
deeds within the meaning of section 58 is called an anomalous mortgage.
According to Section 58 (f) of Transfer of Property Act 1882 where a person delivers
to a creditor or his agent documents of title to immovable property, with the intent to
create a security thereon, the transaction is called a ―mortgage by deposit of title
deeds‖. This is also called Equitable Mortgage. This mortgage does not require
registration.
Equitable Mortgage can be created in the following manner:

BY DEPOSIT OF TITLE DEEDS ACCOMPANIED BY A REGISTERED
MEMORANDUM OF DEPOSIT: The memorandum as per APPENDIX 1 (specimen)
of LA Cir 53/2016 dt 03.07.2016 should invariably state the maximum amount to be
secured and that the mortgage covers all present and future advances. It requires to
be stamped under Article 6 of Schedule 1 of the Indian Stamp Act or the
corresponding Article of the State Stamp (Amendments) Act and must be registered
under Indian Registration Act, but it must not for this reason be confused with a
registered mortgage.
BY SIMPLE DEPOSIT OF TITLE DEEDS WITH INTENTION TO CREATE A

SECURITY:
For the purpose of bank for creation of mortgage by deposit of title deed, title deed is
understood to mean for example a Registered Conveyance Deed/Sale Deed, Gift
Deed, Exchange Deed, Lease Deed (where sanction stipulates mortgage by deposit
of Lease Deed) and Partition Deed, Probate of Will etc.
1
These are the documents to the title which exist by way of a single registered
document to title of a property at any given point of time.
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However in case of mortgage by deposit of certified copy of a decree alone should
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not be created because of the fact that there can be more than one certified copy of
a decree unless and until it is accompanied by Original Title deed of the IP (For
details see guidelines at Sr 12 Page 21-22 of LA Cir 53/2016).
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Under-mentioned steps be followed for this (Equitable) Mortgage:

1. Property to be mortgaged be visited by Bank officials.
2. Photograph of IP along with Mortgagor and Borrower with date and signature
3
of Mortgagor be obtained.
3. All dimensions of IP as per Title Deed/ Approved Map be tallied with actual.
4. Its value be ascertained from Neighbours/ Property dealers in vicinity.
5. Search in CERSAI Portal be made. In case of Hit, it be probed and in case of
No Hit, this report be kept on record.
6. Legal Opinion and Search from Advocate on bank‘s approved Panel on IP be
05
made.
7. Valuation be got done from valuer on bank‘s approved panel as per guidelines
contained in LA Cir. 53/2020.
8. All the documents required for creation of Equitable Mortgage (EM) as per
documents stated in Report of bank‘s counsel along with Original Title Deeds,
Certified copy of Title Deed and Chain of Title Deeds be obtained.
9. Any other document as per Bank‘s counsel report.
10. The terms on which the advance to be secured by the deposit of title deeds
has been made, including the maximum limit of the advances, must be recited
to the mortgagor(s) and his or their verbal acceptance obtained in the
presence of the witnesses.
11. Particulars of the deposit must be recorded in the title-deed register (Form
No.PNB 363) and must be verified and signed therein by two Bank witnesses.
The mortgagor(s) must on no account sign the register.

12. The entries in the title deed register must be made very carefully and in
chronological order. Proper maintenance of this register is necessary as the
entries therein afford admissible evidence of the transaction.
13. The specimen of recital is ordinarily to be as per format given on Page-4 of LA
Cir. 53/ 2016 (may vary as per circumstances). The mortgagor must in no
case sign the Mortgage register.
14. No writing is to be taken from the mortgagor(s) at the time of the deposit
except under legal advice.
15. If a registered memorandum of deposit is subsequently considered
necessary, it should be drawn up by the Bank's solicitors after consideration
of the attendant circumstances, lest the mortgage by simple deposit be
broken and any intervening encumbrances thereby allowed to gain priority.
16. In case of mortgagor being a company, there must be a resolution authorising
the person who is going to make the deposit of the title-deeds, to make the
necessary declarations and to complete all other formalities. A copy of the
resolution duly certified should be obtained and kept on branch record.
Resolution be got certified (see Page-5 of LA Cir 53/2016)
1
17. Obtain a letter of authority as per APPENDIX -11 (LA Cir 53/2016)
accompanied by Form No.PNB 374 from the owners authorising the Bank to
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effect insurance of the properties mortgaged in the event of their failure to do
so. 22
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18. Intention to create EM and subsequent acknowledgement by bank alongwith
all dates in chronological order is as under:
1. Date of Deposit of Title Deeds (date of EM) i.e. Intent to Create EM-
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(Verbal)
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2. Date of Documentation viz Date of First Disbursement

3. Date of Intent to Create EM
i. As per Appendix-2 (In case Borrower is Mortgagor)
3
ii. As per Appendix-2A (In case person other than Borrower is

Mortgagor)
4. Date of Acknowledgement by Bank
i. As per Appendix-3 (In case Borrower is Mortgagor)
ii. As per Appendix-3A (In case person other than Borrower is
Mortgagor)
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19. Stamp duty as per state act be paid (Page 8- BOI 30.06.2016)
20. Letter of Continuity for subsequent Mortgage be obtained with instructions as

under:
Make an entry in the title-deed register for the enhanced portion of the limit
only. The narration of the entry to be made in the title-deed register is given in
the specimen-'A' of APPENDIX -12 (Page 64 of LA Cir 53/2016). The party
must not sign the title-deed register. A "Letter of Continuity", as per specimen-
'B' of APPENDIX -12A (Page 65 of LA Cir 53/2016) signed by the party
whereby the party confirms the previous deposit of the title-deeds and agrees
that the title-deeds shall be held by the Bank as security for the enhanced limit
should be taken. Care may please be taken in dating these documents (Date
of entry in the title-deed register of Appendix-12 should be prior to the date of
letter of continuity).

21. Detail of Property mortgaged be entered in CBS through MENU option ―CLM‖
vide LA Cir 14/2017 dated 13.02.2017 and further explained vide LA Cir
21/2017 dated 04.03.2017.
Points to be noted for Creation of EM:

1. All queries as per Check List as per Appendix-4 (Page 40-46 of LA Cir.
53/2016) be answered and deficiencies as per check list be removed
before effecting EM.
2. The title deeds should, be passed on to local counsel (On Bank‘s
approved panel) with forwarding as per Appendix-7 (Of LA Cir. 53/2016)
for his inspection and opinion. The Special Report and Counsel‗s
Certificate (as per format given in APPENDIX 5 and APPENDIX 6 (Of LA
Cir. 53/2016)) shall be accompanied by chain of title and search report as
to encumbrances.
3. Search Report/Non-Encumbrance Certificate be obtained from Bank‘s
approved counsel (as per format given in APPENDIX 6 –A(Of LA Cir.
53/2016).
1
4. The guidelines with regard to verification of genuineness of the Title Deeds
and obtaining of Search Report in respect of non-encumbrance of the
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property as per Law Division Circular No. 07 dated 30.01.2014 be
observed. 22
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5. A Declaration as per APPENDIX-8 (Of LA Cir. 53/2016)to be obtained
from the owner of property, who is proposing to create mortgage.
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MORTGAGE OF IMMOVABLE PROPERY- PRECAUTIONS: For details see Page

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24 item 15 of LA Cir 53/2016- Summary as under:
1. That the borrowers have to obtain prior permission from government/local

3
government/other statutory authorities for the project including approval of the plan,
wherever required.
2. An affidavit-cum-undertaking may be obtained from the proposed borrower applying
for such credit facility that he shall not violate the sanctioned plan, and/or building
bye laws and wherever applicable borrower shall also submit a completion certificate.
3. An architect appointed by the Bank shall give a certificate at various stages of
construction that the construction is strictly as per the sanctioned plan.
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4. In cases where built up IPs are proposed to be accepted as primary/collateral

security, the following guidelines are required to be observed:
a) No loan against those properties which fall in the category of unauthorised
colonies unless and until they have been regularised and development and other
charges paid.
b) Substitution/ release of IP kept as collateral may not be permitted upto the
level of COCAC, except where the IP is proposed to be replaced by the cash
security/FDR of equivalent amount and in sanctions falling upto the vested
loaning powers of COCAC (including sanctions by LCBs), the substitution/release
of collateral in the form of IP shall be permitted by ZOCAC.
c) An architect/ valuer appointed by the bank shall also certify while giving
valuation of proposed IP that the built up property is strictly as per sanctioned
plan and/ or building bye-laws.
d) No loan shall be given in respect of properties meant for residential use but
the applicant intends to use the same for commercial purposes and declares
so while applying for loan.
e) Cost of Affidavit, certificates etc should be borne by the borrower(s).

f) A clause be put in the Sanction letter that any third party liability coming on
the bank due to wrong information/detail given by the borrower, will be his/her
responsibility.
g) Building plan duly approved by competent authority be made a pre-condition
for considering housing loans.
h) While financing specific housing/development projects/Real estate proposals,
following stipulations should be made as part of terms of sanction besides other
usual terms and conditions and funds should not be released unless the
builder/developer/company fulfils the same:
i. The builder/developer/company would disclose in the
Pamphlets/Brochures etc., the name(s) of the bank(s) to which the
property is mortgaged.
ii. The builder/developer/company would append the information relating
to mortgage while publishing advertisement of a particular scheme in
newspapers/magazines etc.
iii. The builder/developer/company would indicate in their pamphlets/
brochures, that they would provide No Objection Certificate (NOC)/
permission of the mortgagee bank for sale of flats/ property, if required
1
REGISTRATION:
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According to Section 59 of the Transfer of Property Act, 1882, where the principal
money secured is Rs.100 or more, a mortgage, other than a mortgage by deposit
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of title deeds, can be affected only by a registered instrument signed by the
mortgagor and attested by at least two witnesses. In case the instrument is not duly
attested and registered, the mortgage will be void.
21
In terms of Section 23 of the Indian Registration Act, 1908, the document is to be

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presented for registration at the offices of the Sub-Registrar of Assurances within 4

months from the date of its execution.
3
Leasehold Property:
In case of Lease hold property, 1st examine original Title to property to examine
whether person leasing the IP is competent to do the same. Then
1. Obtain Original Lease deed and examine :
i. Unexpired period of Lease Deed
ii. Study the terms and conditions of the lease
iii. If there are any onerous conditions such as the necessity of taking
05
lesser's consent before mortgaging the property.

iv. Borrower to surrender latest ground rent receipt to ensure that lease
money/ground rent is not in arrear
v. The lease continues to subsist.
vi. Lease hold rights must be mortgaged.
vii. The document conferring the title to property should be studied to
ascertain whether mortgage of the said property is permissible. If
necessary, permission from the appropriate authority concerned should
be obtained.
Municipal Tax Receipt:

For IP situated within the Municipal limits, the receipt for payment of house-tax be
obtained as Municipal taxes constitute preferential charge on property.
Government dues:
The borrower to produce latest receipts regarding the land revenue or any other
Government dues paid by him.

INCOME-TAX CLEARANCE:
To make necessary enquiries from the borrowers/guarantors/person creating security
about the liability, if any, payable or that may be payable in respect of Income Tax. If
need be, in appropriate matters, the permission of the Assessing Officer be insisted
upon.
Accordingly, branches should obtain the necessary permission/ certificate under

Section 281 of the Income Tax Act, wherever required.
Mortgage of agricultural properties for facilities to be granted for agricultural activities
In case of agricultural land, the borrower should be asked to produce certified

true copies of the latest revenue records.
Revenue record with true copies regarding Title of Land with type of land,
Crops for last five years sown in that land, Summary of share of applicant in
land be obtained, examined. As most of the states do not charge any
1
Registration Fee for mortgage of agriculture land for Agriculture activities,
Registered Mortgage be created and Mortgage deed filed with revenue
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authorities for recording charge of bank in revenue record. Before going for
Registered mortgage, it must be ensured that land being mortgaged in un-
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encumbered.
Mortgage of agricultural properties for facilities to be granted for non-agricultural

21
activities:
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1. As far as possible, Agricultural properties should not be mortgaged for

facilities to be granted for Non-Agricultural Activities.
2. In cases where facility is to be granted for Non-Agricultural purposes
3
against the mortgage of Agricultural property, the advocate giving opinion

on title shall state that mortgage of Agricultural property is permissible for
the purpose stated and shall give his advice as to the legal position
prevailing under local law.
Mortgage of immovable property located in cantonment areas:

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1. (a) It is to be ascertained that the person occupying the land has legal title to occupy
the same and;
(b) If it is there, then the super structure being owned by the individual occupier can be
mortgaged in favour of the Bank subject to obtaining permission of the Cantonment
Board.
2. Equitable Mortgage can be created at the Cantonment Area, if it is a notified town,
otherwise registered mortgage has to be got executed.
3. The value of the land may not be considered while arriving at the value of property
mortgaged, although the same may be got reflected while arriving at value of the
superstructure. Only the realizable value of property, as per guidelines of the Bank, if
sold as it is, may be taken for the purpose of financing.
4. The borrower has to deposit title deed of super structure alongwith Letter of
Authority / Lease from the Cantonment Board showing his right to occupy the same.
Permission of the Cantonment Board to mortgage with the Bank is also to be
furnished.

5. Mortgage of immovable property located in cantonment areas shall be
considered by Circle Heads and above within their vested loaning powers on
selective basis.
SECOND MORTGAGE: A mortgagor, after giving a first mortgage can thereafter

create a Second and even subsequent mortgage on the same property.
In case of Guarantor‘s (Not Borrower) Property  IP Agriculture or Ancestral means

do not possess Title deeds for offering as security security bond as per
APPENDIX -10 (LA Cir 53/2016) may be accepted wherever possible as per Laws of
the State.
PNB-576  Term loans are sanctioned against moveable assets alone

and/or hypothecation of moveable assets along with mortgage of immovable
property.
PNB-973  Term loans are sanctioned against mortgage of immovable

property alone.
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If a mortgagor wishes to inspect his title-deeds he may be allowed to do so at
the Bank in the presence of the manager or officer but he must not on any
22
account be permitted to take them away from the Bank.
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Particulars of mortgages (registered or equitable) created/ modified by limited

liability companies should be got registered with the registrar of companies
21
within 30 days of creation.

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On the expiry of the period for which a limit/loan against the security of
mortgage is sanctioned, permission from Circle Head/Head Office should be
3
obtained for further continuance of account. It should, however, be noted that

such account must be adjusted before the expiry of 12 years.
Balance confirmation on Form No. PNB 139 should be obtained from all the
obligants at the close of each half year.
05
Where IP is Collateral Security only  Renewal documents except BC letter

be not obtained. Existing accounts should not be closed and operation
continued in existing accounts.
Limitation  12 years against Mortgaged IP and 3 Years against Mortgagor.
If Minor has Interest in IP Not be accepted for Mortgage (See Pt. N on

Page 13 of LA Cir 53/2016)
Guidelines for creation of second charge/subsequent charge

1. Prior NOC from other institutions be obtained.
2. Legal opinion and upto date NEC be obtained and held on record.
3. Any permission/sanction/clearance certificate required from lessor or any
authority or any other law should be obtained and the original documents
granting permission are to be kept on bank's record.

4. Other precautions/enquiries/instructions as may be required in case of mortgage
as contained in Chapter 11 Mortgages – Immovable Property, of Book of
Instructions on Loans (on page4 and page 31 to 33) be complied with.
Procedure for mortgage of immovable property by branches not located

in notified towns:
Action Points For Lending Branch:

1. The lending branch shall complete all the formalities i.e. physical verification,
valuation of the IP from the approved valuer, obtaining of NEC and Legal opinion-
cum-Search Report from the Bank‗s approved Advocate, etc. and to take a view that
the IP is mortgagable. In this regard the responsibility shall lie with the lending
branch.
2. The lending branch shall address and send a suitable letter to the mortgage creating
branch containing :
a. The details of the credit facilities sanctioned (copy of the sanction letter be
also attached),
b. Complete details of the IPs (landed property) to be mortgaged as security for
1
the credit facilities,
c. Name(s), parentage and full address of the mortgagor(s),
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d. Correct location/address and description of the ips to be mortgaged,
e. The particulars of chain of title deeds to be deposited
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f. NEC /Legal Opinion-cum-Search Report given by the Advocate,
g. Valuation certificate of Bank‗s approved valuer alongwith valuation certificate
by Branch Head,
21
h. Photograph of the IP duly verified by the mortgagor.

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3. The original title deeds along with the chain of title deeds and all other papers
mentioned in the NEC and legal opinion-cum search report for valid creation of EM
shall be carried by the officer of the lending branch with him for creation of EM at the
3
mortgage creating branch accompanied by the mortgagor(s).He will sign as witness

in EM register.
4. Periodical inspection of the mortgaged property and its insurance shall be conducted
by the lending branch and copy is to be sent to EM creating branch for their record.
5. A copy each of the
a. Title deeds,
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b. NEC and legal opinion-cum-search report,

c. Letter of confirmation of deposit of title deeds from the mortgagor sent to the
mortgage creating branch
d. The acknowledgement sent to the mortgagor by the mortgage creating
branch in token of having received the title deeds,
e. Copy of receipt generated from central registry
shall also be kept with the lending branch.
6. After creation of EM, particulars shall be filed with Central Registry by the EM
creating branch. Lending branch shall obtain the details of central Registry particulars
and the same shall be entered in CBS system through menu option SRM as per
details given in ITD Circular No.88 dated 17.10.2011 and the details shall be kept
with loan documents.
Role /Action points for EM creating branch:

Follow procedure as per Sr 10(ii) on Page 19 of LA Cir 53/2016
In nut shell EM Creating branch is to accept papers as submitted by lending branch,
do all actions as required for creation of EM and register under CERSAI also.

EQUITABLE MORTGAGE ON THE BASIS OF CERTIFIED COPY OF TITLE
DEEDS:
Follow procedure as per Sr 11 on Page 19 of LA Cir 53/2016: Ordinarily not done

except with prior approval of Credit Division, HO. For staff housing Loans (Special
cases) See procedure as per Sr 11 (iii & iv) on Page 20 of LA Cir 53/2016.
Equitable mortgage of IP without making the owner as borrower/ guarantor:

It is legally possible for third party to offer his property as security without being liable
personally (For details See Item 13 Page 22-23 of LA Cir 53/2016).
LOSS OF TITLE DEEDS IN THE BANK CUSTODY- PRECAUTIONS:

To be discussed under heads: Duty of the Bank, Custody and Measures to be taken in the
event of a loss of title deed deposited for creating mortgage
Duty of the Bank :

If the title deed is lost, bank is liable for deficiency in service.
1
Custody:
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1. Enter in PNB-363, Keep in Fire proof cabinet, on adjustment of a/c  Receipt be obtained
and return recorded in PNB 363. 22
2. Movement of TD be recorded in Register as per Appendix-27 of LA Cir 53/2016.
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3. Stock taking of TDs be taken and certified in above Register as per Appendix-27 of LA Cir
53/2016.
4. Physical status of TDs be assessed, if it is torn or fragile, its status report be made and
21
got signed by the party. If the document requires lamination to be done, it should be got
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done by the party.
Measures to be taken in the event of a loss of title deed deposited for creating
3
mortgage:
1. The concerned branch will give a certificate that title deed has been lost from bank‗s
possession.
2. In appropriate matters (like when terrorists have taken away the title deeds) an FIR
be also lodged.
3. If bank‗s officials have lost the title deed, in transit when taking the same out for any
05
purpose, a report from the official be taken. Paper publication be also given.
4. Certified copy of title deeds be obtained from Sub-Registrar of Assurances at Bank‗s
cost.
5. With letter of regret, certificate referred to above as also certified copies of title deeds
be delivered to the mortgagor against receipt.
6. If mortgagor is still not satisfied and takes the matter to Court/Consumer
Forum/Banking Ombudsman, Bank has to go by their orders.
7. Bank‗s Concurrent Auditors/Inspectors while auditing the branches should verify
compliance of above guidelines.
Periodicity of visits to the site of mortgaged property

Particulars Primary security Collateral security
Value of property At least on yearly basis or At least once in three
mortgaged/charged is as per terms of sanction, years or as per terms of
upto Rs.20 Lac or credit whichever is earlier. sanction, whichever is
facilities are upto Rs.1 earlier.
crore.

Value of property At least on half yearly At least on yearly basis or
mortgaged/charged is basis or as per terms of as per terms of sanction,
above Rs.20 Lac or the sanction, whichever is whichever is earlier.
credit facilities are of earlier.
above Rs.1 crore,
For details refer Item 16 page 26-27 of LA Cir 53/2016 and 75/2020
For Common Irregularities in Mortgage: Please see Item 17 page 27 of LA Cir

53/2016
In nut shell: Dates in TD Register and Letter of Intent be taken special care of.
Similarly is case with dates w.r.t. Letter of Continuity. All Columns of TD
Register be filled completely/ accurately.
 Detail of Property mortgaged be entered in CBS through MENU option ―CLM‖

vide LA Cir 14/2017 dated 13.02.2017 and further explained vide LA Cir
21/2017 dated 04.03.2017.
1
LOANS & ADVANCES CIRCULAR NO. 136/2019:
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In view of various instances of defrauding the bank by borrowers availing multiple
credit facilities from multiple lending institutions against the same property, the
22
pre sanction and post sanction guidelines related to mortgage are recapitulated
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as under:-
 Pre sanction Measures

21
 Pre sanction Due Diligence of borrowers including KYC verification and CIR
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should be drawn and analyzed properly to know the previous credit facilities
availed by the borrower and property mortgaged for the same.
 Independent spot verification of residence, business & mortgaged IP should
3
be done by the branch officials.

 Certified copy be invariably matched meticulously (line to line) with the title
deed held on record.
 The property to be mortgaged should be mandatorily searched in CERSAI
portal and report should be filed.
 Particulars of the mortgages created by deposit of title deeds must be entered
05
in the CERSAI on date of creation of equitable mortgage of IPs without waiting for
30 days period specified under the Act. Further, the Branch head must ensure
that in no case disbursement shall be made without entering the particulars of
equitable mortgages by deposit of title deeds in CERSAI site, in order to curb the
frauds due to the gap in entering the particulars of mortgages of deposit of title
deeds.
 It should be ensured that charge in respect of mortgages has been got
registered with Registrar of Companies within 30 days from date of creation and
that Registration Certificate is held (in case of Companies).
 Branches are advised to be vigilant while getting the reports of Advocate and
other Third Parties Entities and extensive reliance on information given by
outside agencies/professional etc should be avoided.
 It is to be ensured that the title deeds held for mortgage are original and in
case copy is held, specific sanction of GM, HO & above has been obtained. If
equitable mortgage is to be created based on deposit of certified copy of Title

Deeds and Receipt (Chirkut) issued by Office of Sub-Registrar in cases where it
takes long time in getting the Registered Sale Deed from the Office of Sub-
Registrar, whether prior approval of Competent Authority of the Bank has been
obtained for the same.
 Further it should be ensured that the property is not situated in cantonment
area and in case situated, Head Office approval has been obtained.
 Post sanction Measures

 In order to minimise the instances of selling off of mortgaged IP/ multiple
mortgages, etc., the guidelines regarding periodic visit to the mortgaged (IP)
accepted as security should be adopted.
 As such, in case some change is observed in respect of aforesaid parameters
as well as any other issue relating to mortgaged IP since the date of last
inspection/visit of the site, the proper enquiries should be made locally/from the
borrower to ascertain that the mortgaged IP is properly charged to the bank.
 In case of any doubt further remedial measures such as obtention of fresh
NEC/ valuation report/ copy of approved map/mutation etc. may be obtained to
1
 End use of bank‘s fund should be verified properly.
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 The mortgaged properties should be insured in the joint names of bank and
mortgagers. 22
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Handover of security documents/ title deeds and process flow of release of

security documents inCBS:
1. Registered letters should be issued to the mortgagor(s) well in time for
21
collection of title deeds/security documents and all necessary precautions be

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taken during delivery of the documents to the owner(s) of the property or the
authorized persons as the case may be.
2. After repayment of all dues agreed to/contracted by parties, it is to be ensured
3
that :
A) The process of satisfaction of charge in security interest is to be completed at
the earliest.
B) Primary & Collateral security documents including title deeds are released
immediately but not later than 10 days of closure of loan. (IRMD L&A 99/2019
05
dated 29.08.2019)
Release of the security documents is to be captured in CBS through Menu option

―HOVRDOC‖. The detailed procedure, to be followed in CBS for capturing the
release of security documents has been provided vide L&A circular No 18/2020
dated 29.2.2020.
Guidelines on investigation of title and search report of immovable property (IP)

before initiating recovery process:
At the time of sale of property through auction/ by DRT or under SARFAESI action
respectively, in few cases it comes to the knowledge of the bank that the bank‘s
charge on the IP is defective. As such, before initiation of SARFAESI action or
initiation of auction proceedings by DRT, fresh NEC must invariably be obtained and
legal audit be done to avoid legal, financial and reputational risk to the bank. (LAW
DIVISION CIRCULAR NO. 15 dated 24.9.2020).

11. Accepting/ Obtaining of Personal/ Corporate Guarantee
and Invocation Thereof
(LOANS & ADVANCES CIRCULAR NO. 157/2020, 219/2020)
1. Pre sanction due diligence of guarantor(s) including KYC verification,

Independent spot verification of Guarantor‘s residence, business should be
diligently done by branch officials.
2. It is made obligatory on the part of the guarantor(s) to inform any change in
their office/residential address to bank at the earliest possible. This information of
changed office/residential address with telephone no. (landline/mobile) be
provided to the bank within 30 days along with residential proof as required under
KYC norms.
3. Drawing of CIR from CICs is mandatory for Guarantor(s), requiring fresh credit
facilities before sanction of facilities as well as at the time of
Renewal/Review/Enhancement of such facilities except in certain exempted
categories of advances.
4. Credit Information Reports (CIRs) on the Guarantor(s) drawn from the
1
database of Credit Information Companies (CICs) indicate their past credit
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history, overdue, loan accounts written off or settled by way of OTS, enquiries
made by Banks/FIs reflecting that how many times the borrower has approached
22
a Bank/FI for raising any loan etc.
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5. The compilation of CR of guarantors forms part of due diligence exercise which

helps the bank to verify the antecedents of co-obligant besides acting as a post
sanction follow up tool, it is imperative that the CRs should be invariably compiled
21
as per the terms of laid down guidelines.

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6. Information furnished for compilation of CRs of guarantors should be

independently verified through at least two reports from reliable sources,
uninfluenced by the party. Immovable property declared by guarantors should be
3
verified by examining the title deeds for ownership and a spot inspection be made
for physical verification and valuation purposes.
7. Undertaking from the guarantor to be obtained that properties mentioned in
Net worth should not be disposed off without the consent/permission of the bank
and no charge should be created in favour of any other bank during the currency
05
of loan.
8. Documentation is a critical and important area as the liability of a guarantor(s)
can be enforced in a court of law mainly on the basis of documents executed by
them and entries made in the Books of Accounts and the Registers of Bank. Thus
all documents prescribed for various facilities should be correctly executed.
9. As per clause 9 of Agreement of Guarantee, viz. PNB-58, the authority of the
guarantor has been made specific. It is, therefore, necessary that where the
borrower/borrowers acknowledges/acknowledge on behalf of other borrowers(s)/
guarantor(s) or the guarantor acknowledges on behalf of co-guarantor(s), he/they
should acknowledge. As such i.e. he/they should sign/execute balance
confirmation stating `for self and on behalf of........".It should be ensured that the
aforesaid requirement is invariably met with where the agreement of guarantee is
executed on form No.PNB-58.
10. Branches shall take steps to obtain personal guarantee with maximum cap of
2-3 times of net worth and the same shall be declared at the time of
executing/obtaining the guarantee.

11. In the event of default in repayment of the loan by the borrower company, all
the guarantors are liable to repay the guaranteed loan with interest as the liability
of the guarantor is co-extensive with the principal-debtor (borrower). The steps to
be taken against guarantors immediately when no sign of revival is visible are as
under:
 If any guarantor has created security interest over any property/asset
owned by him, the steps should be taken under section 13 of the
SARFAESI Act, 2002 for enforcement of security against the
guarantors.
 If the guarantor has given any pledge of shares held by him, the steps
should be taken to sell the pledged shares under section 176 of the
Indian Contract Act, 1872.
 If the guarantor has not created any security interest over his property
but owns property and other assets in the application for recovery filed
before the Debt recovery Tribunal, the banks should move application
before DRT for attachment and sales of such property under section
1
19(12) to 18 of the RDDB & FI Act, 1993.
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GUARANTEES & COLLATERAL SECURITY FOR BANK ADVANCES :-
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(L&A 219/202 dated 15.12.2020)
3rd party means any person other than the Borrower and Constituents of the
21
Borrower i.e. Proprietor/Partners/Directors/Promoters/Trustee. The guarantee

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provided by any 3rd party can be categorized as under: -
i. Guarantee for Loan: In case 3rd party is providing unconditional guarantee for full
3
value of Loan Amount beyond the value of specific property provided as collateral &
upto his entire Net worth.
ii. Guarantee by value of Collateral: where the 3rd party is providing specific
Collateral Security in form of IP and the guarantee is specifically limited to the extent
05
of value of collateral.
Law Division, HO has approved an undertaking available as per Annexure (Form No.
PNB 1257), to be obtained from Mortgagor, in cases, where 3rd party is willing to
provide limited liability guarantee to the extent of value of specific collateral security.
The draft undertaking shall be executed by the mortgagor(s), in bank‘s favour in
addition to his specific offer letter and compliance of other existing guidelines w.r.t.
creation of EM. However, if guarantor is willing to provide unconditional guarantee for
full value of loan alongwith mortgage of collateral security, existing Guarantee Form
(PNB 58) shall be continue to be take.

12. Investigation of Title and Search Report
Bank has prescribed detailed guidelines on Mortgage as contained in various
Circulars. Presently there are three main sources for these guidelines on
Mortgage. These are
1. Book of Instructions on Loans
2. Loans and Advances Circular No. 53/2016 , 44/2017& 60/2017
3. Law Division Circular No 07/2014 &08/2020 dated 26.03.2020
Besides these, there are other circulars on Mortgage viz.

LA Cir. 157/2020- The builder/developer/company would disclose in the
Pamphlets/Brochures/Website/while publishing advertisement of a particular
scheme etc., the name(s) of the bank(s) to which the property is mortgaged.
LA Cir. 126/2009- Mortgage of IP- Housing Loan that Construction is as per
approved Plan,
LA Cir 105/2015- Loss of Title Deeds in bank Custody,
LA Cir 53/2020- On Valuation of IP
1
As per guidelines: The inspection of title deeds and the verification of the
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borrower's title require thorough legal knowledge. The Photocopy of the Title
deeds should, therefore, be passed on to local counsel for his inspection and
22
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opinion by Bank Manager personally (LAW Div 04/2017) and in no case
Borrower should know the name of the Bank‘s approved counsel. All queries to
counsel be routed through BM only. Originals can be shown to the advocates
21
before issuing the certificates by them. A report stating name/ PF No. etc. of
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bank official handing over documents and accepting report from Counsel be
placed on record. (LAW Div 08/2020dt.26.03.2020)
3
Where the value of immovable property to be mortgaged/ charged is Rs. 1 crore

& above, branches shall take NEC from 2 different advocates on panel, one
before sanction and the 2nd after sanction, but before disbursement to
safeguard the interest of the bank. (LA 44/2017 dt. 29.04.2017)
As such this specialized job has been entrusted to Experts. First and foremost of
05
these jobs is to Inspect that Title Deeds being submitted for Creation of EM are
Genuine. For this complete set of documents relating to IP are passed on to
Bank‘s approved Counsel for Investigation, Search and Obtaining NEC.
A. The title deeds alongwith Chain of Title Deeds and other related
documents should be passed on to local counsel (On Bank‘s approved
panel) with forwarding as per Appendix-7 (Of LA Cir. 53/2016) for his
inspection and opinion. The Special Report and Counsel‗s Certificate (as
per format given in APPENDIX 5 and APPENDIX 6 (Of LA Cir. 53/2016))
shall be accompanied by chain of title and search report as to
encumbrances.
B. Search Report/ Non-Encumbrance Certificate be obtained from Bank‘s
approved counsel (as per format given in APPENDIX 6 –A(Of LA Cir.
53/2016).

C. The guidelines with regard to verification of genuineness of the Title Deeds
and obtention of Search Report in respect of non-encumbrance of the
property as per Law Division Circular No. 07 dated 30.01.2014 &
04/2017 dt 19.04.2017 read with LA 44/2017 dt 29.04.2017 be observed.
D. A Declaration as per APPENDIX-8 (Of LA Cir. 53/2016)to be obtained
from the owner of property, who is proposing to create mortgage.
E. All queries as per Check List as per Appendix-4 (Page 40-46 of LA Cir.
53/2016) be answered and deficiencies as per check list be removed
before effecting EM.
F. Report of Counsel be scrutinized and If Counsel has given his opinion on
Clear/ Un-encumbered and Marketable Title, All documents as per Report
of bank‘s approved counsel for creation of EM be obtained and EM
Created as per bank‘s guidelines.
G. Mortgage to be created before disbursement and entered in CERSAI on
the date of creation of Mortgage itself without waiting for 30 days period.
LA 60/2017 dated 19.07.2017.
1
MORTGAGE OF AGRICULTURAL PROPERTIES FOR FACILITIES TO BE
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GRANTED FOR NON-AGRICULTURAL ACTIVITIES :-
(IRMD LA circular 208/ 2020 dated 21.11.2020)
22
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As far as possible, Agricultural properties should not be mortgaged for facilities to

be granted for Non-Agricultural Activities. However, in cases where facility is to
21
be granted for Non-Agricultural purposes against the mortgage of Agricultural

/04 58
property, the advocate giving opinion on title shall state that mortgage of
Agricultural property is permissible for the purpose stated and shall give his
advice as to the legal position prevailing under local law.
05 3

13. Confidential Reports
Detailed guidelines are as per Book of Instructions, LA Cir 33/2011 and
157/2020. Please also refer L&A 157/2020 dated 17.08.2020
Compilation of CR forms part of due diligence exercise which helps the bank to verify the
antecedents of borrowers/co-obligants besides acting as a post sanction follow up tool.
As such, CR must be compiled on every Borrower/ Guarantor. CRs should

contain full and reliable record of character, estimated means, business
activities and credit-worthiness of all Individuals, firms and corporate bodies
who are under any form of liability to the Bank, whether as direct borrowers or
guarantors. Various tools/ data is available from KYC data duly verified,
Registration of Firm, Phone No, Associate and allied concern, Partnership deed,
Salary Certificate, CIBIL data, Statement of account of the Party/ Individual, ITRs,
Balance Sheets and Trading and P&L statement, Statement of Assets Liabilities
of Party with Proof for each Asset/ Liability, Spot Verification of all IPs mentioned
1
in CR with their status, Market Report, ROC Search etc.
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Exceptions where CR need not ordinarily be compiled:
i. Persons borrowing against security of Bank deposits,
22
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ii. Persons borrowing against government securities and other trustee
securities upto Rs.25000/-.
iii. Makers of bills of small amount which are re-discounted by third parties.
21
iv. Loans to staff members, including loans upto Rs.15000/- against

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share/debentures of approved company.

v. Advances upto Rs.10000/-, against gold/silver jewellery/ ornaments.
vi. Borrowers to whom temporary overdrafts are sanctioned occasionally by
3
the Branch Heads within their vested loaning powers.

vii. Persons borrowing against the pledge of their life policies.
Forms prescribed for preparing CRs are as under:

i. PNB 905 (Revised) (Annexure I) of BOI - To be used for preparing brief
CR.
05
ii. PNB 282A (Revised) (Annexure II) of BOI - To be used for Joint Stock
Companies and Co-operative Societies.
iii. PNB 282B (Revised) (Annexure III) of BOI - To be used for Borrowers/
Guarantors – Individuals {other than those covered under (iv) below}, sole
proprietorship firms, partnership firms, H.U.F. firms.
iv. PNB 282C (Revised) (Annexure IV) of BOI – To be used for Individual
Borrowers/ Guarantors, in case of loans under Retail Lending Schemes
(personal segment) i.e. car, consumer, housing, etc.
INDEXING
The CRs compiled on PNB 905 and PNB 282C need not be indexed and should
be part of loan document file, CRs compiled on PNB 282A and 282B should be
filed in CR binders and not with loan document files.

Confidential reports should be divided into four categories with Indexing as under:
Sr Sanctioning Code Index Here 1st two letters are Code/ Next
Authority alphabet is 1st letter of name of
category Borrower/ Guarantor/ Firm (if
I Branch BR BR/P/5 name of firm starts with ―The‖,
II COCAC CO CO/P/5 Alphabet next to ―The‖ be taken)/
III ZOCAC ZO ZO/P/5 Next Numeral in ‗P‘ series of this
IV Head Office HO HO/P/5 category.
M/s. Parkash Ram Chand Mal will be indexed as CO/P/57 if the facilities are
within the powers of Circle Head and there are already four CRs in "P" series of
this category.
If total No of CRs is small, then same CR binder can be further subdivided into
CRs under various Sanctioning Authority Powers
1
Index number once allotted to a party should in no case be changed irrespective
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of the fact whether CR remains on active record or not and the same index
number should not be allotted to another party.
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Scrutiny and Monitoring:

CRs will be complied in duplicate (except LCBs) under Category I & IIi.e Branch
21
and Circle Head Powers. One Copy in Branch Binder and other in Circle Office
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binder. For Category III and IV, CO to give confirmation that CR compiled as per
laid down systems/ procedures/ guidelines.
3
Compilations of CRs:
A. CRs on Joint Stock Companies (PNB 282 A Revised)

The heading under first part of the CRs are self-explanatory.
The second part of the CR consists of summary balance-sheet and
05
information relating to sales and profit.

B. CRs on Individual/Sole Proprietorship/Partnership Firms (PNB-282B
Revised)
The portion in respect of I to VI columns of the CR form is self-explanatory
and easy to fill. For No. VII (Means), the guidelines are as under:
As far as possible, the heads of Assets & Liabilities as given in the form
should not be changed.
Form No. PNB-282B (Revised) is meant for compilation of CRs on
individuals, sole proprietors, partnerships and H.U.F. concerns.
For compilation of means and other items especially details at Sr.10 in
each case, detailed guidelines are available in L & A Cir 33/2011 dated
31.03.2011
Means must be verified by evidences and all the evidences should be part of CR.
Securities mentioned under Sr. 10 (Details of IPs) should be personally verified

and details with date with PF No be mentioned in respective column in respect of
official who has visited the IPs. No Column to be left blank.
Brief Confidential Reports:

Brief CR (PNB-905) in respect of advances under certain priority sector schemes.
Brief CRs need not be indexed nor are their copies required to be sent to the
Circle Office.
For individual borrowers availing loans under Retail lending schemes i.e. car,
consumer and housing, etc., brief confidential report on individuals
(borrower/guarantor) is to be compiled on PNB 282 C (Revised) and it is not to
be indexed.
Review of CR:
CRs are to be reviewed annually. CRs should invariably be compiled after the
lapse of every two years even though there may not be any change in the
constitution and financial position of the party. It should be carefully noted that
1
―No Change Certificate‖ must not be sent for more than two years and fresh CR
should be prepared in the third year. In case of adverse development, fresh CR
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may be compiled earlier.
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3
05

14. Credit Information and Opinion on Borrowers
Many a times, branches are requested for giving reports/opinion on their customers. Such
requests generally come from:
1. Banks and Financial Institutions;
2. Directorate General of Supplies and Disposal and other Government Departments;
3. Trade Associations;
4. Diplomatic missions, commercial counsellors and trade attaches.
1. BANKS AND FINANCIAL INSTITUTIONS

Reports to banks and other financial institutions must be sent on the bank's prescribed
format as per Appendix `A' of LA Cir 100/2011. The related guidelines for compiling the
Credit Information Report are available at Appendix `B' of LA Cir 100/2011. Please ensure
that the report is based on the dealings of the customer and is given in general terms without
over-estimating or under estimating the customer‘s worth. Under no circumstances, details
of the facilities sanctioned or balance outstanding in the account and its turnover be
disclosed.
2. DIRECTORATE GENERAL OF SUPPLIES AND DISPOSAL AND OTHER
1
GOVERNMENT DEPARTMENTS
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Send the report on the prescribed format (Appendix A) of LA Cir 100/2011 keeping in view
the creditworthiness of the party. 22
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3. TRADE ASSOCIATIONS
Normally, no request from Trade Associations be entertained unless the written consent to
do so is obtained from the customers on whom the credit reports are called for. In this case,
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the procedure as given at serial No.1.be followed.

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4. DIPLOMATIC MISSIONS, COMMERCIAL COUNSELLORS AND ATTACHES

When reports are called by diplomatic missions, commercial counsellors and
3
trade attaches, the details should be carefully collected and properly worded and
passed on promptly on the prescribed format available at Appendix A of LA Cir
100/2011.
As there is disclaimer attached to report and signed, it should not even be signed by
any official.
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Suitable procedure to check issue of false credit reports

In case of Local Branch, Telephonic/ personal confirmation be obtained and In case
of outstation Bank Branch, an acknowledgement letter be sent thanking for issuance
of the credit report by Registered Post (To local branch also).
For Bank giving Report: Report should depict truestate of affairs and they should-
refrain from giving false statements.
Circulation of information submitted by member banks to IBA on alleged

irregularities/ malpractices/ mis-demeanours of bank customers
Branch should move through CO for this. No direct action be taken in this regard.

ISSUANCE OF SOLVENCY CERTIFICATE (IRMD LA circular 36/21 dated
16.02.21)
Solvency Certificates are required by the customers (Borrowal & Non Borrowal) for
submission to Government Departments / Municipal Bodies etc. in connection with
their registration as approved contractors / suppliers etc. It is advised that such
certificates should be issued after observing the following:
(i) Solvency Certificates should be issued on select clients only on merits.

(ii) Last three years sales, contracts, receipts and profit figures as well as value of
orders on hand should be obtained and kept on record. The trend should be
satisfactory.
(iii) Confidential report on the client must be compiled and kept on record.
(iv) Availment of facilities by clients and / or associate / allied concern should be
satisfactory without any adverse features being present in any of the accounts.
The format of solvency certificate is given hereunder :-

"This is to state that to the best of our knowledge and information (name of the
1
party), a customer of our Bank is respectable and can be treated as good up to a
sum of ₹................... (Rupees in words).
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It is clarified that this information is furnished without any risk and responsibility on
our part in any respect whatsoever more particularly either as guarantor or
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otherwise. This certificate is issued at the specific request of the customer."
Service charges as per IRMD L&A Circular No. 93/2020 dated 26.03.2020 are to
21
berecovered as updated from time to time.

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Delegated powers for issuance of solvency certificates to borrowers as well as

non-borrowers are as under :-
3
S.N Solvency Amount Solvency Certificate to be issued by

For Borrowal Account For Non-Borrowal
Accounts
1- Upto ₹10.00 Lakh GBB Head GBB Head
2- Above ₹10.00 Lakh to By respective Head of PLP Head
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₹1.00 Crore PLP / MCC where file

3- Above ₹1.00 Crore to is dealt with
₹10.00 Crore
4- Above ₹10.00 Crore*
*PLP Head /MCC Head shall issue the certificate after approval from Zonal Office
(DGM and above handling Credit Portfolio) for requests beyond their power (i.e. for
above ₹10.00 Crore)
Note: In case of LCB / ELCB Branches, Solvency Certificate shall be issued by DGM
and above of respective LCB / ELCB
Record Maintenance :-
In order to keep record of such solvency certificates issued by a branch, it is advised
that all such certificates issued be numbered serially and should be entered in the
register named as ‗solvency certificate issue register‘ which should include the

following:-
Solvency Certificate No and Date
Address & Contact No of applicant
E-mail ID
Purpose for which solvency certificate was issued
Amount of Solvency Certificate
Net Means
Charges recovered
Issuing Authority
Methodology for Computation of Networth / Total Net Means
The branch shall obtain all documents to proof the net worth of customers namely:-
Bank deposits
Ownership Proof for Investments
Ownership Proof for immovable property
Latest Balance Sheet
Capital investment.
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Any other documentary proof for net worth.
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Kindly refer the circular for detail methodology.
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GUIDELINES FOR COMPILATION OF CREDIT INFORMATION REPORT:

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Various Sources Of Credit Information

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1. Borrower: Through Personal Interview, History, Nature of Business, Past, Current

and Expected sales/ Profits, Orders in Hand, Degree of competition, Difficulties
3
faced/ expected in business etc.

2. Borrower's Financial Statements: Peruse Balance Sheet, Trading and PL, Cash
Flow and Fund Flow statement
3. Bank's Old Records: if old customer, Bank‘s old record be perused for information
and opinion.
4. Opinion: Opinion on their borrowers should contain full and reliable records of
the character, estimated means and business activities of all firms and
05
individuals who are under any form of liability to the Bank whether as direct
borrowers or as co-obligants. Full particulars of parties' immovable properties,
where they are situated, whether they are free from encumbrances and in the
case of land, the acreage should be recorded together with fair estimates of their
value. As far as possible, written statements of their properties should be taken in
evaluating properties owned by parties jointly with others. As a rule such properties
should be disregarded in arriving at the net means.
5. Means: cut off amount for classifying the net worth/means of the borrower under various
levels are as under as per LA Cir 77 dated 09.09.2015:
When a party's means He should be reported
are estimated at as having
Upto Rs. 1,00,000/- Very small means

Over Rs. 1,00,000/- & upto Rs.4,00,000/- Small means
Over Rs. 4,00,000/- & upto Rs.10,00,000/- Moderate means
Over Rs. 10,00,000/- & upto Rs.25 Lac Fair means

Over Rs. 25 Lac& upto Rs.1 Crore Good means
Over Rs. 1 Crore & upto Rs.10 Crore Very good means
Over Rs. 10 Crore & upto Rs.25 Crore Large means
Over Rs. 25 Crore Very large means
6. Methodology For Computation Of Networth:

Depending upon Type of Borrowers, different methodology is explained vide
LA Cir 100/2011 dt 01.10.2011 for meticulous compliance.
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3
05

15. Pre Disbursement Compliance (PDC)
(L&A Circular No 22 dated 29.01.2021; 35/21 dated 16.2.21)
For effectively implementation of compliance of Pre Disbursement Terms &

Conditions of Sanction, Pre Disbursement Audit (PDA) has been renamed as Pre
Disbursement Compliance (PDC). PDC shall be initiated on acceptance of terms &
conditions of sanction, execution of necessary documents by the borrower and
opening of the loan account in CBS but before disbursement.
System of Legal Compliance Certificate has been dispensed with.
Applicability :- The system of PDC is applicable for all credit facilities apart from
exempted category mentioned below.
Exempted Category
Following category of advances shall be exempted from PDC:
a. Loan to staff members under Staff Scheme or General Public Scheme
1
b. Renewal of Credit Facilities at existing or reduced level without any major change
(i.e. which does not require any documentation formalities) in terms and conditions of
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last sanction/renewal.
c. DL/OD against 100 % FDR. However, other loans fully secured by Liquid Security
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(e.g.BG/LC against 100% FDR/LIP/NSC etc.,) shall continue under PDC.
Clearance of PDC: -
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SN Credit Facility PDC to be cleared by

1. Upto ₹10.00 Lakh/ Branch Incumbent
GBB sanctioned cases
3
2. Above ₹10.00 lakh and PDC shall be cleared by any officer in scale-III and
upto₹100.00 Lakh/ above at PLP not involved in the credit appraisal
Retail Loans and sanction of respective proposal.‖ Here, it is
irrespective of limit clarified that any officer in scale-III and above from
sanctioned other segment/field visit team, may be designated
as PDCO. For example: In case loan is sanctioned
05
by Segment Head-MSME, segment head of

Agriculture or retail may be designated as PDCO.
Similarly any officer in scale-III and above from field
visit team may also be designated as PDCO
3. Above ₹100.00 Lakh Any independent officer preferably in the rank of
Scale-IV but not below the rank of Scale-III at MCC,
not involved in the Credit Appraisal and Sanction of
the respective proposal.
4. Cases dealt at LCB/ELCB Head
LCB/ELCB
i. In cases where PLP is not located / MCCs have not been established and GBBs
are linked only to PLPs: (For Cases above ₹100.00 Lakh and other than Retail
Credit) Respective GBB Head shall request Zonal Office well in time for ensuring
compliance of PDC. On receipt of request, Zonal Head shall assign an officer in
the rank of scale-IV but not below the level of scale-III, preferably from nearby

branch(s)/office to conduct PDC. The action to be taken by ZO on immediate
basis and also to be ensured that officer shall visit the concerned office within
one working day from the date of receipt of such order from Zonal office.
In case of exceptional circumstances/ due to non-availability of PDCO at
PLP/MCC, Zonal Head may assign an officer in the rank of scale IV but not
below the rank of scale-III, preferably from nearby branch(s)/office to conduct
PDC
ii. Clearance of PDC shall be ensured by an independent officer not connected with
Credit Appraisal/Sanction, Risk Function of the respective proposal for which
clearance of PDC is required. However for cases dealt at LCB/ELCB, PDC shall
be cleared by LCB/ELCB Head.
iii. Branch Visit for all cases upto ₹100.00 lakh (For retail loans irrespective of
limit sanctioned) is not required. The clearance of PDC shall be given by the
Authorized Official (PDCO) on the basis of compliance certificate submitted.
Here it is clarified that no other documents except specifically mentioned in
Compliance Certificate (AnnexureII) shall be asked for submission.
iv. In case PDC is qualified, observations with regard to compliance of terms &
1
conditions including documentation & mortgage shall be rectified by the
respective branch*.However, in case where compliance is not possible for any
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valid reason, the matter is to be referred to the sanctioning authority and
approval be obtained for any relaxation/deferment/ modification. In both the
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scenarios, the matter will again be referred to the PDCO. PDCO after
ensuring compliance of the observations/qualifications of the PDC, will give
confirmation of compliance. *Here Branch means GBB for GBB/PLP
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sanctioned cases, MCC/LCB/ELCB for accounts dealt by them irrespective of

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sanctioning authorities. (*Here Branch means GBB for GBB/PLP sanctioned

cases, MCC/LCB/ELCB for accounts dealt by them irrespective of sanctioning
authorities).
3
v. The official authorized for clearance of PDC shall submit his/her report in
format (As per Annexure-III) to the concerned Branch Head under intimation
to sanctioning authority. In case the PDC is unqualified, the Branch Head
shall allow the disbursing officer to proceed with the release of sanctioned
limit.
vi. The account shall be disbursed only after getting confirmation of compliance.
05
vii. No sanction as mentioned above should remain disbursed with uncomplied

terms & conditions except specifically permitted as above.
viii. Any disbursement prior to compliance with pre disbursement conditions
without approval of sanctioning authorities is to be treated as act of
misconduct/ indiscipline attracting appropriate disciplinary action.
ix. In case the PLP Head is on leave /travelling on duty, senior most segment
head at PLP may be assigned with the duty of counter signing the PDC
clearance certificate.
TAT for closure of PDC :-
1- Upto ₹10.00 Crore - within one working day

2- Above ₹10.00 Crore – within two working days

16. Validity of Sanction
(IRMD L&A circular 100/2020 dated 02.06.2020 and 157/2020 dated 17.08.2020)
In terms of Loaning Powers guidelines vide LA Cir 100/2020, Item 5.5 page 17, it has
been stipulated that sanctions in respect of working capital and term loan facilities
shall be valid for six months from the date of sanction. Facilities not availed within
the above period should be treated as lapsed and borrower be advised accordingly.
Unless a lapsed sanction is got revalidated by the Competent Authority within a
maximum period of 12 months from the date of sanction, no facility should be
released. Following powers shall be applicable for revalidation of the sanctions:
Sl. Sanctions Competent authority Time period upto which

No. made by to consider re- revalidation can be
validation considered from the date of
sanction
1
1. Sanctions upto Sanctioning Authority 12 months
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HOCAC III
3. Sanctions made HOCAC-II/III 22 12 months
by MC
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Where documents have been executed within a period of 6 months from the date of
sanction, the sanctions shall be valid for next 6 months from the date of
21
documentation. However, it should be ensured that there are no adverse

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developments/ material change in the financials during the intervening period

impacting the proposal adversely (LA Cir 100/2020,).
3
However, to safeguard the bank‘s interest, while permitting revalidation, the

competent authority shall obtain and study the latest financials of the borrowers/units
and also ensure that the projections submitted at the time of original sanction
continue to hold good.
Further, in order to put in place an effective monitoring system, to ascertain the
05
details of borrowers who have not availed the credit facilities within the stipulated
period and the relative sanctions have lapsed, details of sanctions lapsed at the level
of ZOCAC-I & above be submitted by all Zonal Offices to CRMD, on half-yearly basis
(31st March and 30th September) as per the format available at Appendix X (LA
157/2020). The details of sanctions lapsed at the level of LCBs/ELCBs shall be
submitted directly to CRMD.

17. Takeover of accounts from other banks
(Loans and advance circulars No 08/2021 dated 07.01.2021, 14/2021 dated 13.01.2021)
1. Borrowal account should be taken over from other Banks/FIs on selective basis
by respective sanctioning authority except GBB. GBB may consider the proposal
after obtaining prior approval from the next higher authority.
2. Such approval shall not be necessary in cases where the accounts of other
banks have been adjusted for over 3 months. However in case of borrower was
availing credit facilities from another Bank/ FIs within the period of three months
prior to submitting loan proposal to our Bank, such credit proposal shall be
treated as ‗Deemed takeover‖ and in that case prior approval of next higher
authority shall required.
3. In case of crop loans/KCC, the prior approval from next higher authority is not
necessary even if the accounts from other banks/FIs have been adjusted within
three months subject to the compliance of other takeover parameters and
subject to the condition that only those accounts be taken over wherein there was
no default in payment of interest/instalment during the last previous one year with
1
the previous banker.
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In all cases of takeover of accounts, it is necessary to do proper due diligence including visit
to the premises of the customer, it is advised that laid down guidelines in the matter of pre-
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sanction appraisal and post sanction follow up should be meticulously followed while taking
over borrowal accounts.
21
Internal Credit Risk Rating

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a. It should be ensured that takeover of only standard borrowal accounts is

considered without increasing our risk profile after subjecting the same to credit risk
rating.
3
b. The accounts for consideration of takeover should have a rating of ‗B1 & above‘
as per rating scale and should be duly vetted by Competent Authority as per extant
guidelines on Rating and Vetting. However, HOCAC II & III may consider takeover of
‗B2‘ & ‗B3‘ rated accounts on merits of the case within its vested loaning powers and
MC shall have full powers in this regard.
c. Further, the small loan accounts (aggregate exposure upto and including ₹5 crore)
05
with credit risk rating ‗B2 & below‘ are not to be considered for takeover
Benchmark Financials
a. Audited Balance Sheet (ABS) of last financial year is mandatory for takeover of
accounts. If ABS is older than 3 months, CA Certified provisional financials for last
quarter to be obtained and analysed so as to be satisfied that the activity level and
profitability, liquidity and solvency ratios are broadly in alignment with the estimates /
projections.
b. The accounts should be in the `Standard Asset' category of the existing bank and
the borrower should have earned net profit after tax in the immediately preceding 3
years and have sound financial position. However, ZOCAC-I & above have been
vested with the powers to relax the aforesaid criteria to profit after tax in any 2 years
out of immediate preceding 3 years.
c. In respect of accounts, which are in existence for a period of less than three years,
the unit should have earned cash profit during 1st year of commercial production and
from the 2nd year onwards, unit should have earned net profit after tax. However, in

such cases one audited Balance Sheet should be available before hand. However,
for assessing the criteria of cash profit in the first year of commercial production, the
working of 12 months should be reckoned, i.e. if production of the unit as on close of
the financial year is only for a part of year, say started in the month of October, 2018,
then its first year of commercial production should be taken as 1st April, 2019 to 31st
March, 2020 for the purpose of eligibility criteria of cash profit during the first year of
production.
d. It should be ensured that the business prospects of the company for the current
half year are good and it is showing profit in the current half year after the closure of
the Balance Sheet. The Unit should be in a position to generate sufficient surplus so
as to service the bank's dues.
e. The current ratio and debt equity ratio (wherever applicable) should be in the
prescribed range.
However, in cases where current ratio and debt equity ratio are not within the
prescribed range, the competent authority to consider takeover of such accounts
shall be as under:
 Such cases shall be considered by the next higher authority within his
1
vested loaning powers but not below the level of ZOCAC-I.
 However, ZOCAC-I & above shall exercise their vested loaning powers
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for considering takeover of such borrowal accounts.
 While considering the proposal, the sanctioning authority should give
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due justification/comment for accepting the account for takeover duly
highlighting the other favourable features of the account.
21
Accounts where the commercial production has not started or just started
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The accounts where the commercial production has not started or just started,
takeover can be considered, if project is found technically feasible and economically
viable subject to the fulfilment of the following conditions:
3
a. The account should be in standard category of the existing bank/FI and

running regular till the date of takeover. This should not be used as a
conduit for bringing in inferior quality account to our fold
b. The Term Loan instalment of existing FI/Bank, if any, must have been
paid regularly as per the original schedule and repayment schedule
should not be extended further, beyond the period originally envisaged
05
unless properly justified.

c. The Project Appraisal be done independently based on the original
projections given by the borrowing concern with particular attention to
cost/time over run and other developments taken place in
implementation of project during the period. If there is any cost/time
over run, justification for the same may be obtained and examined. The
viability of the project should be established/ensured beyond doubt.
d. Reasons for non-compliance of major terms and conditions in the
matter of security, margin, repayment, etc. as per the previous sanction
should be enquired into and properly examined.
e. Credit report from the present banker/FIs should be obtained prior to
sanction. The transferor bank besides giving the financial position and
credibility of the borrower, should also indicate whether its relationship
with the borrower has been generally satisfactory and, if not, the
specific adverse features noticed.

f. Takeover of such accounts shall be permitted by the officials not below
the level of ZOCAC-I and above.
g. The other stipulations for takeover of borrowal account as mentioned at
above should also be followed.
Independent Assessment
a. The branch should make independent assessment of credit requirements of the
borrower, as per norms of our Bank, before actually taking over the liability with the
existing bank by obtaining relevant financial, production and sales data as also the
latest audited annual accounts of the borrower, so that the borrower's genuine credit
needs are met.
b. As soon as possible after the takeover, the transferee bank should make an
independent assessment of the credit requirements of the borrower by calling for
complete financial position, production and sales data, as also the latest annual
accounts of the borrower, so that the borrower's genuine credit needs are fully met
by the bank. If, on the basis of such assessment, grant of additional/enhanced credit
limits is warranted at the time of takeover itself, the same may be considered as per
1
laid down guidelines subject to the following:
 In case of working capital limits if enhancement of above 25% is
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considered at the time of takeover, instead of seeking prior approval
from the next higher authority, the proposals shall be sanctioned by the
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next higher authority on merits of the case subject to the compliance of
the other guidelines. In case of ZOCAC-I & II/ HOCAC-I, if the takeover
of working capital facilities involves enhancement of more than 25%,
21
the cases shall be sanctioned by the next higher authority. However,

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HOCAC II & III shall exercise their normal loaning powers for
considering takeover irrespective of extent of enhancement in the
existing limits.
3
 In case of working capital limits with enhancement is considered at the

time of takeover, the proposals shall be sanctioned by below
mentioned authorities on merits of the case subject to compliance of
other takeover guidelines :-
Enhancement in Limit Competent Authority
Upto 25% Respective Sanctioning Authority
05
Above 25% Next Higher authority (For cases upto the

level of HOCAC-I)
However HOCAC II & III shall exercise their normal loaning powers
for considering takeover irrespective of extent of enhancement in the
existing limits.
 Further, transferee bank should ensure that there is no relaxation in

financial discipline vis-à-vis method of lending, information system, etc
Takeover of Borrowal Accounts from Financial Institutions (FIs)/NBFCs/Private

Financiers):
i. As regards takeover of accounts from FIs like SFCs and AIFIs and term loans
from other banks, besides following the guidelines mentioned as above, the
borrower must have been repaying the Term Loan instalments of the existing

FI/Bank regularly as per original schedule and the repayment schedule
should not be extended further.
ii. Payment towards adjustment/liquidation of the dues of the existing FI/Bank
should be made directly to them.
iii. The criteria as mentioned as above is also applicable for taking over of
borrowal accounts from NBFCs, Private Financiers etc. or for repaying the
supplier‘s credit in respect of block assets. However, while taking over such
accounts, it should be ensured that there is no default in payment of
supplier‘s credit by the borrower.
Sharing of Information :-
I. While taking over the borrowal accounts from other Banks/FIs, concrete
justification for the same be indicated in the loan proposal. Before taking over
the account, the transferee bank should obtain necessary credit report from
the transferor bank. In order to enable the transferee bank to be fully aware
of the irregularities, if any, existing in the borrower's account(s) with the
transferor bank, RBI has prescribed standardized format for sharing credit
1
information at the time of takeover of borrowal accounts. Accordingly, while
considering proposals for takeover of borrowal accounts, credit information
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should be obtained on the standardized format available at Annexure-II.
Similarly, upon receipt of request seeking credit information from some other
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Bank/FI, necessary credit information should be provided on the said
standardized format to ensure adoption of the same at the industry level.
II. In case of ‗B1 & above‘ credit risk rated accounts, obtention of Credit Report
21
may not be insisted at the time of sanctioning of credit facilities. Sanctioning

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authority may obtain the report about the conduct of account from the existing
banker of the borrower before disbursement of credit facilities. Further, the
statement of account for the last 6/12 months and certificate from the Auditor
3
of the Company that the account was classified as ‗Standard Assets‘ as on

the date of last Audited Balance Sheet be also obtained
III. In spite of all out efforts ,where such Credit Report is not received from the
transferor bank i.e. Credit Report not provided within 15 days (from the date
of letter sent through registered / speed post, Credit Report may be compiled
on the basis of information sourced from CICs/CRILC/MCA Site/GST
05
Verification/ other public forums i.e. Save Risk etc.

IV. Further, Credit Report of the borrower obtained from CICs (viz. Commercial
CIBIL/CRIF) and from CRILC (For cases of ₹5.00 crore and above) to be
scrutinized to ensure that there are no instances of irregular / overdue /
restructured / rescheduled during last 24 months.
V. The sanctioning authority shall obtain statement of account maintained with
existing Bank/FIs for last 12 months to ensure that the existing credit facilities
are classified as Standard Regular with them. The account statement thus
obtained shall be scrutinized as a part of the credit proposal and comments
on the same should be suitably incorporated in the process note separately.
VI. As regards to authenticity of account statement, the borrower may download
their bank statement for stipulated period through internet banking (in
presence of Bank Official) and provide the same to the Bank.

Restrictions on Takeover of Accounts:
Takeover of borrowal accounts from banks where our present EDs and MD & CEO
have worked earlier need not be considered
S. No. Name & designation of the official Names of the banks
1. Sh. Ch S SMallikarjuna Rao, MD & e-Allahabad Bank*, e-Syndicate
CEO Bank*
2. Sh Vijay Dube, ED e-Vijaya Bank*
3. Sh. Agyey Kumar Azad, ED Bank of India
*However proposal from Indian Bank, Canara Bank and Bank of Baroda shall not fall
under purview of takeover norms.
Loans taken over from new generation banks (i.e. Banks which have started
operations after 1993) require extra caution w.r.t to the health of borrowal accounts.
Field functionaries are advised to do proper due diligence and take all pre –sanction
measures while taking over accounts from new generation bank
Eligibility Criteria for Take Over of Retail Loans:
1
1. Borrowal account should be taken over from other banks on selective basis.
:0
2. The permission from the next higher authority shall not be applicable for taking over of
Retail Loan Accounts from other banks/FIs.
22
3. However, Loan Accounts with other banks/FIs are running regular with no defaults in
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payment of interest/instalment.
4. The account should be in the ‗Standard Asset‘ category of the existing Bank/FI.
5. Borrowers should have a rating of ―B2& above‖ as per credit risk rating models (PNB
21
Trac) as applicable in loans to business concerns. However, for takeover of Retail loans
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covered under the PNB Score Models, cut-off levels for sanction of all Retail Loans
circulated by Retail Assets Division, HO shall apply mutatis mutandis.
6. Obtaining of NOC/Credit Report may not be insisted at the time of sanctioning of
3
credit facilities. However, Statement of account of minimum 6 months, a certificate with

the content that account is running regular with no default and asset classification is
standard may be called from existing banks.
7. Takeover of borrowal accounts from the banks where our present EDs and MD&CEO
have worked earlier need not to be considered, in view of Ministry of Finance restriction
in this regard. However, in exceptional cases where takeover is considered from the
05
aforesaid banks, the credit proposal, shall be placed to Board for consideration and such
takeover proposal shall invariably contain the specific reasons justifying the need for
takeover etc.
TAKEOVER OF BORROWAL ACCOUNTS – CORRIGENDUM (L&A circular 14/2021

dated 13.01.2021)
The Para 7.4 of Annexure-I (Page no.12) of the L&A circular No 08/2021 to be read as
under: ―The collateral securities charged to existing banker should not be diluted. In
cases where deemed necessary, the sanctioning authority upto level of ZOCAC-I,
may permit release of collateral security in shape of Immovable Property (IP) subject
to fulfilment of following stipulations:
a. Internal Risk Rating of the borrower should be A4 & above.
b. After release, at least 125% and/or scheme specific collateral coverage, whichever
is higher, should be available to the bank. For the purpose of coverage, realizable
value of security shall be considered.

c. Property to be released should be other than residential / self-occupied.
ZOCAC-II & above may permit the release of collateral security on merits where
Internal Risk Rating of the borrower is B1 & above and stipulations mentioned at
above are not applicable, in respect of cases falling upto their vested loaning powers.‖
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21
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3
05

18. Time Norms
(L&A 157/2020 dated 17.08.2020)
Proposals other than Consortium Arrangement-Other Than Retail

Maximum time schedule for disposal is as under:-
Credit Limits Time Schedule (Max.)
Upto Rs. 2 Lacs 2 Weeks
Above Rs. 2 Lacs& Upto Rs. 50 Lacs 4 weeks
Above Rs.50 Lac& upto Rs.100 Lac 5-6 weeks
Above Rs.100 Lac& upto Rs.100 crore 6-7 weeks
Above Rs.100 crore 8-9 weeks
Proposals under Consortium Arrangement

Time schedule prescribed by RBI for processing/sanction of credit/loan proposals
1
under Consortium arrangement are indicated hereunder:
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Proposals for sanction of Other
Fresh/enhanced credit limits 22 Export Proposals Proposals
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Gold Card Other
Holder Exporter
Proposals for sanction of 25 Days 45 Days 60 Days
21
Fresh/enhanced credit limits

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Proposals for renewal of existing credit 15 Days 30 Days 45 Days

limits
3
Proposals for sanction of Adhoc facilities 07 Days 15 Days 30 Days
Time Norms for Retail Advance (RAD 110/2020))

Nature of loan Time Norms for PLP Time Norms for Branches
05
(GBBs)
Mortgage based loans 5 Days
(Housing Loan, OD/TL to
Housing Loan borrowers
for personal needs, My
Property Loan, Reverse
Mortgage)
Education Loan 4 days for loans where mortgage is not required. 1
week for loans where mortgage is required 2 weeks
for loans falling under powers of ZOCAC-I & above
Non Mortgage based loan 3 Days
viz. Vehicle, Gold,
Personal, Pension Loans

The time norm is from date of complete set of papers/ proposal. It is upper time limit.
Timely credit to business in the context of the covid-19 pandemic
In pursuant the instructions of DFS, following indicative timeframes from processing to
disbursement, has been advised :-
Credit Support Time Frame
A. COVID-19 Emergency Credit Line Within 3 to 6 working days
(i) Working capital demand loans for
existing MSME, Corporate and agriculture
borrowers
(ii) Financial assistance to SHG borrowers
Working capital reassessment upto ₹5 Crore
B Within 6 to 9 working days
for existing borrowers
Working capital reassessment above ₹5 Crore
C Within 12 to 15 working days
1
for existing borrowers
(L&A Circular No 73/2020 dated 20.04.2020)
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21
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3
05

19. Loaning Powers:
(L&A100/2020, 118/2020, 151/2020, 152/2020, 153/2020, 198/2020, 3/2021, 27/21, 32/21)
Consequent upon the transmutation in the organizational structure of the Bank, the
guidelines on Loaning Powers have been revised and have been conveyed vide LA
circular 100/2020 dated 2.6.2020.
The revised guidelines on loaning powers shall be applicable at all centres where it
is possible to adhere to such guidelines on partial/complete roll out of the modified
structure of the organization. For centres where the modified structure has not yet
been effectuated, and it is not possible to adhere to the revised guidelines, the
circular on Loaning Powers as circulated vide IRMD L&A circular No 122 dated
30.12.2017 shall prevail till the roll out of the modified structure at that centre except
for e-OBC and e-UNI which will be guided by their respective extant circulars on the
subject matter till the roll out of the structure at their centre. For details kindly refer
circular.
1
In terms of modified organizational structure, branches have been classified as
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General Banking Branches (GBBs), PNB Loan Points-Retail, Agriculture, MSME
(RAMs), Mid Corporate Centres (MCCs), Large Corporate Branches (LCBs) and
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Extra Large Corporate Branches (ELCBs). Efforts to be made to keep accounts of
borrower/ allied/ associate concerns at one place.
21
The loaning powers have been prescribed as per scale of officers, however, they
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shall be utilized upto the limits pegged at the respective branch type i.e. LCB, MCC,
RAM and GBBs.
3
1) General Banking Branches :-
The General Banking branches (GBBs) would be the touch points for general
banking operations for customers. GBBs will sanction loans up to 10 Lakh only within
their vested powers. The accounts of loans sanctioned by RAMs shall be opened by
the respective GBB and the GBBs in addition to looking after the operational aspects
05
of such loan accounts shall also be responsible for disbursement of loans. Further,
creation of charge in loans sanctioned by RAM, shall also remain the responsibility
of GBB.
Loaning power of GBB
A. GENERAL BANKING BRANCHES

(Rs in Lakh)
Sr. No. Nature of facilities Branch Heads in All Branches
JMG-I JMG-II MMG-III SMG-IV
A.1 REGULAR POWER
1 Aggregate 10.00 10.00 10.00 10.00
commitment - per
borrower/

2 Within (1) above:
i.Secured Fund 10.00 10.00 10.00 10.00
Based 2.00 10.00 10.00 10.00
ii.Unsecured Fund
6.00 10.00 10.00 10.00
based
iii. Non fund based
A.2 AD-HOC LOANING POWERS

1 Ad-hoc by way of NIL NIL NIL
drawings beyond limits
2 Ad-hoc facilities by way of NIL NIL NIL
reduction in margin
3- Temporary Over drawings 10% of sanctioned limit or Rs1.00 Lakh
(TOD) In emergent whichever is lower
circumstances, drawings (For accounts under own loaning
in SECURED FUND
1
power only)
BASED LIMITS in excess
:0
of sanctioned limits, within
available DP, may be
22
allowed for 2-3 days but
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not exceeding 7 days
subject to
21
A.3 OVER AND ABOVE AGGREGATE COMMITMENT PER BORROWER**

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(LA 198/2020 dated 16.10.2010)

1 Advance against Bank's own 50.00 160.00 800.00
deposit (all types)*
3
2 Advance against LIC 6.25 20.00 100.00

Policies/PLIs (assigned),
Postal Saving Certificates
(NSCs/KVPs) duly
pledged/assigned.
3- Opening ILCs with/without NIL NIL NIL
05
margin at risk and

responsibility of public sector
banks and banks approved by
Credit Division, HO
4. Acceptance of guarantees or NIL NIL NIL
confirming LCs issued by
public sector banks, strictly in
terms of LC
*It is clarified that such facilities include fund based and non-fund based facilities
both
A.4 MISCELLANEOUS (FULL POWERS)

1 Scooter/Motor- Full Powers
Cycle/Moped/Bicycle Loan to
Members of Staff

2 Negotiation of DA/DP bills on Full Powers
or before due date drawn
under bank‘s own ILCs strictly
in terms of ILC
3- Purchase of Govt. Cheques for Two times of their vested loaning
credit to accounts of Govt. powers for FB (secured) advances
Deptt./Corpn./Undertakings over & above the aggregate
4. Purchase of cheques drawn by
commitment per borrower.
Central & State Govts. & drafts
of public sector banks/banks
approved by Credit
Division/IBD, HO and from first
payee only
2) PNB Loan Points – RAM/ i-RAM (Retail, Agriculture, MSME) :-
PNB Loan Point viz. RAM/ i-RAM is for processing, dispensation and sanction of
1
credit facilities as under:
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a. Retail Loans: Above Rs. 10.00 lakh
b. Core Agriculture Loans (including KCC/ KGS Loans) Fresh and Enhancement:
22
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Above Rs. 3 Lakh and up-to Rs. 1 Crore
c. MSME and other Loans except mentioned at a and b: Above Rs. 10 Lakh and
uptoRs. 1.00 crore.
21
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However, at centres where MCCs have not been established, RAMs shall assume
the responsibility of MCCs and shall sanction all loans viz. Retail, Agriculture and
MSME for amount up to 10.00 crores AND shall also process proposals aboveRs.
3
10.00crore and upto Rs. 50.00 crores and forward the same to Zonal Office for
sanction.
In case of enhancement/additional facilities in existing accounts, RAM shall send

such proposals to MCC for consideration of sanction. However For centres, where
MCCs have not been established, RAMs shall send proposals of
05
enhancement/additional facilities in existing accounts that shall increase the

threshold limit of Rs. 10.00 crores to Zonal Office for consideration of sanction.
(Rs in Lakh
S.No Nature of SEGMENT HEAD Incumbent
. Facilities In charge RAM
RETAIL AGRICULTURE MSME
MMG- SMG- MMG- SMG-IV MMG- SMG- SMG- SMG-V
III IV III III IV IV
1- Aggregate 80.00 400.00 80.00 400.00 80.00 400.00 400.00 1000.00
Commitment -
per Borrower
2- Within (1) above
i. Secured FB 80.00 400.00 80.00 400.00 80.00 400.00 400.00 1000.00
ii. Unsecured FB 8.00 60.00 8.00 60.00 8.00 60.00 100.00 250.00
iii. Non fund 30.00 150.00 30.00 150.00 30.00 150.00 150.00 500.00
based**
Note: Powers shall be restricted to Rs. 100.00 Lakh at places where MCC is located

(However, at a place where MCC is not located and PLP is to consider credit facilities
above one crore under vested loaning power, It has been conveyed vide IRMD LA
circular 136/2020 dated 27.07.2020 that loans above Rs. 1 Crore at PLP level shall be
sanctioned under committee approach. Accordingly, Credit Risk Management
Committee has approved constitution of PLP Credit Approval Committee that will
sanction loans above Rs. 1 crore)
3) Mid Corporate Centres (MCCs):-
Mid Corporate Centres (MCCs) headed by AGM, are for processing and credit
dispensation of credit facilities of above 1 crore and upto 50 crores. MCC will be
responsible for sanction and disbursement of loans up to 10 crores, exercising
loaning powers of duly formed Credit Approval Committees (CACs). However, these
CACs (at MCCs) shall process and recommend the proposals of credit facilities of
above 10 crores and up to 50 crores and forward the same to their respective Zonal
Offices for consideration.
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Accounts sanctioned by MCCs or processed by MCCs and sanctioned by
respective Zonal Offices shall be opened by MCCs in the SOL of the branches
22
where the business was initiated. Responsibility of disbursement of loans shall lie
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with MCCs for all such accounts. Also, security creation shall remain the
responsibility of MCCs.
21
4) Large Corporate Branches (LCBs):-

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Large Corporate Branches (LCBs) headed by DGM, are for credit appraisal of loans
and advances above 50 crores. Whereas, Extra Large Corporate Branches(ELCBs)
3
headed by GM, is for credit appraisal of proposals above 500 crores. The LCBs and
ELCBs shall not sanction any loans and will only be dealing with the appraisal of
loans falling within their jurisdiction. The loans shall be processed and forwarded
directly to Head Office for sanction. The accounts so opened after sanction by HO,
shall be maintained at the SOL of LCB.
05
AD-HOC LOANING POWERS FOR RAMs/LCBs/ELCBs:

S Nature of Facilities Incumbent In- charge
No SMG-IV SMG-V SMG-VI SMG-VII
(RAMs) (RAMs (LCB) (E-LCB)
1. Ad-hoc facilities by way of drawings beyond limits (In emergent circumstances)
% Sanctioned Limit or Amount Specified whichever
is lower
a. Drawings in SECURED NIL 20% or 25% or 25% or
FUND BASED LIMITS in Rs Rs1000.00
excess of sanctioned Rs 100.00 500.00 Lakh
limits, within available DP, Lakh Lakh
may be allowed up to 3
months subject to

b. Drawings in UNSECURED NIL NIL 10% or 10% or
FUND BASED LIMITS in Rs
excess of sanctioned 100.00 Rs 150.00
limits, for a period of 3 Lakh Lakh
months, may be allowed
subject to:
2. Ad-hoc facilities by way of NIL 10% or Rs 10% or 10% or Rs
reduction in margin 10.00 Lakh Rs 150.00
100.00 Lakh
Lakh
3. Temporary Over drawings 15% or Rs Up to the Up to Up to the
(TOD) In emergent 40.00 Lakh vested the vested
circumstances, drawings Adhoc vested Adhoc
in SECURED FUND Loaning Adhoc Loaning
BASED LIMITS in excess Power Loaning Power
1
of sanctioned limits, within Power
:0
available DP, may be
allowed for 2-3 days but 22
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not exceeding 7 days
subject to
21
Restrictions:
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Following restrictions shall be adhered to while exercising of loaning powers by

officials up to AGM level:
SN Particular % of Secured Fund
3
Based Power
1. Term loan except Retail Loans* 50%
2. Packing Credit advance against firm orders 50%
3. Book Debt Facility 25%
4. Purchase/advance against demand documentary bills 15%
05
accompanied by MTRs of unapproved transporter

*Retail Loans shall be guided by relevant schematic lending circulars issued by RBD
as amended from time to time, within the vested powers prescribed at Table B of the
LA circular No 100/2020
% of Secured Fund
Based Power
5. Allowing Overdraft/Clean loans 5%
6. Advance against clearing instruments other than Bank 50%
drafts, Banker's cheque /pay order, Central & State Govt.
cheques and advances to Premium Clients (For
definition of Premium Clients please refer to S.No.4 of
Annexure-III of the LA circular No 100/2020)
7. Purchase/discount/advance against domestic and 50%*
foreign clean bills/clean cheques/clean domestic usance
bills/clean foreign usance documentary bills
accompanied by Bill of Lading/Airway Bill etc. (where

goods are consigned to the overseas branch of the
approved bank
*However, officials in Scale-IV & V shall exercise loaning powers to the extent of Rs
50 Lakh and Rs 150 Lakh respectively only if exporter is holding buyer-wise policy of
ECGC. In the absence of the same, loaning powers shall be restricted to 50% of
fund based unsecured powers. DGMs/GMs at LCBs/ELCBs shall exercise 50% of
their FB (secured) powers for advance against foreign usance documentary bills
8 Co-acceptance of bills limit/clean LC limit Not permitted
Sanction of Non Fund Based Facility:

 Officials from Scale-III to Scale-V level shall exercise 30% of their Non Fund
Based (NFB) powers for sanction of ILC/FLC (DA basis)* limit and 60% of
NFB powers for ILG (Financial) and FLG.
 Branch Heads in scale II are not empowered to exercise their loaning powers
for issuance of LC (DA basis) and ILG (Financial) & FLG.
* Officials up to AGM level, other than Branch Heads in the rank of scale- II
1
shall exercise their LC (DA) powers equivalent to Term loan powers in case of
project financing where Term loan has been sanctioned and the documents
:0
under LC (DA) are to be paid to the debit of Term Loan sanctioned for the
purpose provided the underlying assets along with other securities (both
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primary and collateral) taken for Term loan are charged to cover LC (DA)
facility as well.
21
 For financing to service sector under MSME segment, officials up to AGM

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level shall exercise their vested loaning powers. As such proposals outside
MSME segment shall be considered by Chief Manager and above within their
vested loaning powers depending on the nature of branches they are posted
3
at
 Branch Heads in GBBs shall not exercise powers for allowing OD against duty
draw back and cash incentive.
 Where any powers are restricted up to certain level say CM, AGM etc. it is
implied that the authorities above that scale shall have no such restrictions
 Unless specified otherwise, the guidelines conveyed in above notes
05
applicable for AGM shall also be applicable for MCC-CAC (headed by AGM).
OVER AND ABOVE AGGREGATE COMMITMENT PER BORROWER

(LA circular 198/2020 dated 16.10.2020) (Rs in lakh)
SN Nature of facilities Head / Incumbent of
PLP headed PLP/MCC LCBs ELCB
by Scale IV headed by s
Scale V
1. Advance against Bank's own deposit of 800.00 2000.00 5000.00 10000.0
all types 0
2. Advance against LIC Policies/PLIs 100.00 250.00 500.00 625.00
(assigned), Postal Saving Certificates
(NSCs/KVPs) duly pledged/assigned
3. Opening ILCs with/ without margin at NIL NIL 5000.00 10000.0
risk and responsibility of public sector 0
banks and banks approved by Credit

Division, HO. In such cases counter
guarantees of these banks have to be
obtained
4. Acceptance of guarantees or confirming NIL NIL NIL NIL
LCs issued by public sector banks,
strictly in terms of LC
i. The powers mentioned above are to be exercised subject to guidelines
mentioned at Item No. 5.14 of Chapter 5 of LA circular 100/2020
ii. ** These powers shall be utilized only permitted to the extent as per type
of branches i.e GBBs, RAMs and MCCs.
iii. The powers at S.No.9 above are to be exercised only by the Branch Head
of authorized branches subject to RBI‘s prescribed ceiling.
iv. The facility/limit of discounting DA bills backed by ILCs is to be allowed
after setting up of limit.
Miscellaneous (Full Powers):

SN Nature of facilities Branch Heads-RAMs/MCCs/LCBs/ELCBs
1. Scooter/Motor- Full powers*
1
Cycle/Moped/Bicycle Loan to
Members of Staff
:0
2. Negotiation of DA/DP bills on Full Powers
or before due date drawn 22
under bank‘s own ILCs
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strictly in terms of ILC.

3. Purchase of Govt. Cheques Branch Heads of RAMs: Two times of their
for credit to accounts of Govt. vested loaning powers for FB (secured)
21
Deptt./Corpn./Undertakings advances over & above the aggregate

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4. Purchase of cheques drawn commitment per borrower

by Central & State Govts. &
drafts of public sector Branch Heads of MCCs and LCBs: Three times
3
banks/banks approved by of their vested loaning powers for FB (secured)

Credit Division/IBD, HO and advances over & above the aggregate
from first payee only commitment per borrower
i. It is pertinent to note that full powers shall be exercised over and above the
prescribed ceilings and shall be equal to the value of the instruments.
ii. *Full powers are to be exercised for bonafide transactions for
05
existing/properly introduced customers only.

iii. Full powers are to be exercised subject to the guidelines mentioned at Item
5.14 of Chapter 5 of LA circular 100/2020
iv. Full powers are subject to the ceilings prescribed in the respective
schemes, if any.
E. MARGINS: Minimum margin for exercise of vested powers :-

SN Nature of Facilities MMG-II MMG-III SMG-IV SMG-V
(GBB (Segment (MCC/Segment (RAM/MCC)
Incharge) Head RAM/ Head RAM/GBB
GBB In-charge)
Incharge)
1 ILC-other than Capital Goods
a. DP Bills 10% 10% With or without With or
b. DA Bills NA 25% margin without margin
2. ILC-Capital Goods
a. DP Bills 25% 25% 20% 20%

b. DA Bills NA 25% 20% 20%
3. FLC-other than Capital Goods
4. FLC-Capital goods
5. Letter of Guarantee
a Inland Letter of 25% 15%* 15% 10% With or
Guarantee 10%* 5%* without margin
b. Foreign Letter of NA 15% 10% With or
Guarantee 10% 5%* without margin
6. Deferred Payment 25% 15% 10% 10%
Guarantee
* Denotes minimum margin prescribed for issuance of guarantee where the bank has
first charge over fixed assets and adequate surplus of security is available after
following the usual norms.
NOTES
1
i. Margins prescribed are the minimum. However, higher margins may be
:0
stipulated wherever deemed necessary.
ii. Normal Margins are around 25% in case of Term Loans, and in case of
CC against stocks. For CC against receivables prescribed margins are
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40% and above. However, margins have specifically been contoured in
structured circulars issued by Bank from time to time and may be referred
to for particular schemes.
21
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Loaning Power Chart For Credit Approval Committees (CACs) :-

(Rs in crore)
S.No. Nature of Credit Approval Committees (Headed By)
3
Facilities
MCC- ZOCAC ZOCAC HOCAC HOCAC - II HOCAC –I II
CAC -I - II -I
AGM DGM/ GM/ CGM - Senior MD & CEO
GM CGM Credit Most ED
1- Aggregate 10.00 30.00 50.00 100.00 300.00 800.00*
Commitment - per
05
Borrower
2- Within (1) above
iI Secured FB 10.00 30.00 50.00 100.00 300.00 800.00
ii. Unsecured FB 2.50 7.50 12.50 50.00 150.00 400.00
iii. Non fund based 5.00 30.00 50.00 100.00 300.00 800.00
(There is change in HOCAC-II and HOCAC-III power vide L&A circular 152/2020
dated 13.08.2020)
* Credit Proposals above Rs. 800.00 Cr shall be considered by Management
Committee.
i. ZOCAC-I shall be headed by DGM in case of GM headed Zones and GM in
case of CGM headed zones. Similarly ZOCAC-II shall be headed by GM or
CGM as the Incumbent of Zone may be.
ii. LETTER OF CREDIT (DA BASIS) and LETTER OF GUARANTEE
 ZOCAC-I shall exercise 100% of NFB powers for LC (DA) facilities for
Capital goods under Project financing.

 ZOCAC-I may exercise only 50% of their Non Fund based powers for
sanction of Letter of Credit (DA Basis)* limit and 60% of NFB powers
for Letter of Guarantee limit.
* ZOCAC-I shall exercise their LC (DA) powers equivalent to their
Term loan powers for capital goods under project financing where
Term loan has been sanctioned and the documents under LC (DA) are
to be paid to the debit of Term Loan sanctioned for the purpose
provided the underlying assets along with other securities (both
primary and collateral) taken for Term loan are charged to cover LC
(DA) facility as well.
Further, ZOCAC-I may exercise only their Unsecured Fund Based
powers or 25% of their Non Fund based powers, whichever is lower for
sanction of Co-acceptance of Bills limit or Clean LC limit taken
together.
iii. MCC-CAC shall exercise 50% and 25% of their Secured Fund Based powers
in case of Term loan(other than retail loans, which shall be guided by relevant
schematic lending circulars issued by RBD as amended from time to time,
1
within the vested powers prescribed in Table B (under Para 2.1 of Chapter-2)
and Book Debt facility respectively.
:0
iv. HOCAC-III may sanction facilities/limits in excess of the aforesaid levels upto
a maximum extent of 10%, but within the overall aggregate commitment of
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Rs400 crore.
v. In case of ZOCAC-I and above, ‗Secured advances‘ may be classified under
two heads: (a) Advances covered by primary security (b) Advances covered
21
by Tangible Collateral Security.

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vi. In case of Book Debt facility, ZOCAC-I, ZOCAC-II & HOCAC-I shall exercise
50% of their FB (secured) powers and for advance against foreign usance
documentary bills, ZOCAC-I & above shall exercise 50% of their FB (secured)
3
powers.
vii. MCC-CAC shall exercise their loaning powers subject to all guidelines
applicable for AGM (given in Para 2.1of Chapter-2).
viii. The ceiling of Rs 400 crore for HOCAC-III shall be for the aggregate
commitment per borrower including adhoc limits, if any. For group accounts,
HOCAC-III shall take aggregate exposure upto`800 crore.
05
ix. Miscellaneous matters of Credit Proposals :The powers vested with MC in

respect of miscellaneous matters of credit proposals shall be exercised by
HOCAC-III in case of credit proposals not exceeding Rs 400 crore per
borrower/ Rs800 crore per Group.
x. Following facilities shall be considered by HOCAC-III within their prescribed
ceiling of Rs 400 crores:
 Loaning powers for taking fresh exposure in B3, C1 to C3 rated
borrowers.
 Specific facilities such as issuance of guarantees favoring other banks
for the loans extended by the latter, credit facilities against the
guarantees issued by other banks etc.
xi. Loaning powers for taking fresh exposure in B2 rated accounts shall be
considered by HOCAC-I & above within their vested loaning power.

DEALING OF PROPOSALS :
i. The duly processed proposals of above Rs 10.00 crore and upto Rs 50.00
crore shall be forwarded to respective Zonal Offices by Mid Corporate Centres
(MCC)
ii. The duly processed proposals of above Rs 50.00 crore shall be forwarded
directly to Head Office by Large Corporate Branches (LCBs). Further, in
centres where ELCBs have been established, the proposals of above Rs 500
crore, after processing, shall be forwarded directly to Head Office by ELCBs.
iii. In case of proposals of enhancement/additional facilities, if the exposure after
such enhancement/additional facility shall exceed the maximum limit allocated
to the branch as per the pronounced organizational structure, the proposals
shall be forwarded to the next level of branch where such exposure is
permitted. For eg. an MSME loan was sanctioned at a RAM for Rs 85.00
Lakh and the borrower approaches with a request for enhancement of Rs
30.00 lakh. Since after sanction, this loan would be of an exposure of Rs 1.15
crores which shall be beyond the scope of RAM, RAM would forward the
enhancement proposal to MCC which shall process and sanction the same.
1
After sanction and disbursement of the enhanced amount, the RAM shall
send all papers of the loan to MCC. Similarly, if MCC has not been
:0
established at a centre and the proposed enhanced amount in an account
shall transcend the exposure threshold of RAM i.e. Rs 10.00 crore, RAM shall
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process the proposal and forward it to Zonal Office for sanction. In
circumstances, where account has been moved from MCC to LCB due to
increase in permissible allocated limit of MCC i.e. Rs 50.00 crores, the
21
account, after disbursement, shall be transferred from the SOL of GBB to the
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SOL of LCB.
iv. The files of existing accounts in GBBs which are beyond their sanctioning
powers i.e. Rs 10.00 lakh shall be transferred to RAMs, MCCs or LCBs as
3
applicable. However, accounts in CBS shall be transferred only in cases of

transfer of accounts to LCBs/ELCBs. For remaining accounts (supposed to be
covered under RAMs and MCCs), the SOL of the accounts shall remain the
same.
LINKING OF LOANING POWERS WITH CREDIT RISK RATING

05
The loaning powers have been linked to credit Risk Rating of the borrower. The
CACs/officials shall exercise loaning powers linked to risk rating of borrower/rating of
the industry, as under:-
Rating Loaning Powers
‗A1‘ & ‗A2‘ CMs, AGMs of RAMs and MCCs, ZOCAC-I & above shall exercise
125% of their normal loaning powers*. However, no fresh exposure
should be taken upto field level (branch office level) for such
accounts in case of unfavourable industries in terms of HO IRMD
L&A circular issued from time to time.
‗A3‘ & ‗A4‘ AGMs of RAMs and MCCs, ZOCAC-I & above shall exercise 110%
of their normal loaning powers*. However, no fresh exposure should
be taken upto field level (branch office level) for such accounts in
case of unfavourable industries
‗B1‘ Normal Loaning Powers by officials at all levels to the extent of their
vested loaning powers. However, no fresh exposure should be taken

upto field level (branch office level) for such accounts in case of
unfavourable industries
B2 a. Adhoc facility is to be sanctioned by the next higher authority not
below the level of ZOCAC-II. However, HOCAC-II & above shall
exercise their normal loaning powers for considering adhoc facility.
b. Additional/ enhancement facility is to be sanctioned by the next
higher authority not below the level of ZOCAC-II. However, HOCAC-I
& above shall exercise their normal loaning powers for considering
enhancement/ additional exposure.
c. No fresh exposure is to be taken in ‗B2‘ rated accounts. However,
HOCAC-I & above is empowered to consider fresh exposure in case
of B2 rated borrowers within their vested powers.
B3‘, ‗C1‘, No fresh exposure is to be taken in ‗B3‘ & below rated accounts.
‗C2‘ & ‗C3 However, MC/HOCAC-III is empowered to consider fresh exposure in
case of ‗B3‘ & below rated borrowers. Renewals shall be considered
by competent authority if exit is not feasible. Adhoc/Additional/
enhancement facility is to be sanctioned by the next higher authority
1
not below the level of ZOCAC-II. However, HOCAC-II & III shall
exercise their normal loaning powers for considering enhancement/
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additional/adhoc exposure.
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 While exercising higher powers i.e. 125% & 110% of normal loaning powers,
the aggregate commitment per borrower of HOCAC-II/III i.e. Rs 200 Crore/ Rs
400 Crore should not be exceeded by them. Further, while exercising higher
21
powers including the adhoc powers, the Officials/CACs other than HOCAC-
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II/III should ensure that the total commitment does not exceed the aggregate
powers vested with the next higher authority.
 After linking loaning powers with credit risk rating, the officials as mentioned
3
above, may exercise 125%, 110% and 100% of their vested powers as per
details given above. However in case of exporters, officials in Scale-III to
Scale-V may exercise loaning powers upto 125% of their normal powers
provided that additional 25% powers are utilized only for export limits.
 Relaxation/Deviation other than pricing in respect of ‗C1‘ rated accounts once
05
permitted by MC can be allowed to continue by the competent authority within

their vested loaning powers but not below HOCAC-I, unless it is specifically
mentioned that such concession is for a limited period, there is no increase in
limits, dilution of security or down gradation of Credit Risk Rating.
External RiskRating
The Hurdle Rate for External Risk Rating is as under:
External Rating Investment
Grades Categories
BBB & Above Investment Grade
BB & below Non-Investment
Grade
Internal RiskRating
Investment Grades Rating grades B2 and above (With
score of more than 46.00)
Borderline Risk Grade B3 (Having score more than 40.00 and

upto 46.00)
High Risk Grades C1, C2 and C3 (Having score up to
40.00
It should be noted that the counterparty shall invariably be internally rated & should
achieve Investment grade. For consideration as ‗Investment Grade‘, both the
conditions w.r.t. Internal & External Risk Rating shall be fulfilled.
The bank shall undertake new relationships in externally rated BBB & above
accounts, & on conduct of their Internal Rating should achieve B1 or B2. In such
cases where the account is Internally Rated B2, it shall be sanctioned at an
appropriate level as per vested loaning powers in terms of extant guidelines
No fresh exposure should be taken upto field level for borrowers under
unfavourable industries irrespective of their credit risk rating.
GENERAL GUIDELINES FOR EXERCISE OF LOANING POWERS
1
i. Loaning powers shall be exercised judiciously with due care and in good faith
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having regard to duties and responsibilities attached to the post held by the
sanctioning authority. Further, in the structure pronounced for the
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amalgamated entity, respective loaning powers shall be exercised by the field
functionaries as per type of their branch i.e. GBB/RAM/MCC etc for all types
of loans including government sponsored schemes like MUDRA, PMMY etc.
21
Efforts to be made to keep all the associate allied firms together under single
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set-up i.e. Branch, RAM, MCC, LCB

ii. Sanction of all loan facilities shall be governed by Bank's prevalent policy and
as per guidelines laid down in the Book of Instructions and circulars issued by
3
Head Office from time to time. Sanctions shall also be subject to margins in
force.
iii. Though various facilities are grouped for delegation purpose, the sanctioning
authority while sanctioning a proposal should clearly specify the nature of
facility, the security, margin etc., along with other norms/terms and conditions
governing the facility sanctioned
05
iv. All loan facilities must be considered after obtaining a loan application from
the borrower(s) concerned and compilation of confidential report(s) on
him/them and the guarantor(s), if any, in accordance with the instructions
given in Book of Instructions on loans and other instructions/guidelines issued
from time to time. However, in case of priority sector advances any specific
instructions issued shall have precedence over these instructions
v. Loaning powers shall not be exercised for sanction of any facility, which shall
be, directly or indirectly, to the advantage of sanctioning authority. Such
proposals should be referred to next higher authority.
vi. Sanctioning authority will sanction facilities within his loaning powers on
regular loan proposals prepared by another officer of the office. Where
second officer is not available, such proposal may be prepared by Special
Assistant of the office, if available. If neither officer nor Special Assistant is
available in the branch, clerk officiating as Special Assistant can recommend
loan proposal for sanction. Any officer deputed to a branch for the purpose of
preparing/appraising of loan proposals shall be treated as officer of such

office during the period of deputation. Subordinate staff while officiating in
clerical cadre is not allowed recommending any loan proposal. In the present
structure, such powers shall be exercised only in GBBs under exceptional
circumstances.
vii. Further, Managers in Scale-III or Scale-II posted in Exceptionally Large
Corporate Branches (ELCBs) and Large Corporate Branches (LCBs), who are
specifically designated by the Branch Head in terms of Office Order/Duty
Sheet, shall exercise loaning powers upto the extent of powers as vested as
per Table B, in the officials in Scale-III and Scale-II respectively. Such powers
shall, however, be exercised only for sanction of Festival Loans, Staff Welfare
Loans under specific schemes of the Bank, Demand loan/overdraft against
fixed deposits receipts, LIC and Govt. securities/Postal/National savings
certificate/Indira Vikas Patras and Public Sector Bonds. The designated
managers (in Scale II & III) can sanction such facilities to their senior officers
also, including CM/AGM of the branch. The designated Chief Managers and
above posted in ELCBs/LCBs shall, however, exercise their vested powers.
Such cases shall continue to be reported every month along with facilities
1
sanctioned by the Branch Head
viii. Total credit facilities proposed to be sanctioned to party shall be considered
:0
by an officer under whose powers they fall.
ix. Higher authority may exercise powers of the same nature/full powers as
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vested in a lower authority
x. GENERAL BANKING BRANCHES (GBBs) :
21
a) Branch Head of GBBs may process and sanction loan proposal falling
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within his own vested loaning powers in following cases even though
proposals have not been prepared/recommended by second officer
where no other officer is posted or second man is special assistant at
3
the branch :-
 All Priority Sector advances including Govt. sponsored schemes
and ―Loans under Retail Lending Schemes‖ upto ` 1 lakh each
 For loans upto Rs 3 lakh under KCC Scheme/other direct
agriculture
 For Tractor loans, the ceiling on individual loan will be Rs 3 lakh
05
 For Housing Loans, the ceiling on individual loan will be Rs 2

lakh
 Circle Heads are vested with powers to revise ceilings in case of
GBBs mentioned above depending upon potential existing in the
area subject to maximum of loaning powers vested with the
Branch Head/the ceiling prescribed under the scheme. Total
advance granted without recommendation of second man,
where there is none, would not exceed `20 lakh in a month. The
ceiling of total advance of `20 lakh in a month may be increased
by Circle Heads to `50 lakh wherever they find it necessary. All
such branches where the above ceilings of Branch Heads have
been revised Circle Offices will have close monitoring through
Limit Sanctioned Statement. This ceiling would not be applicable
where second man is provided and proposals are recommended
by him.

 Other loan proposals sponsored by developmental agencies
under Govt. sponsored schemes.
 However, efforts may be made by Branch Heads, to get
proposals prepared/recommended by Special Assistant or the
senior most clerk in the branch.
b) In cases where second person‘s name is included in List of Officials of

Doubtful Integrity (LODI) and there is no other officer posted at the GBB,
Circle Heads, depending upon the potential available in the area, may permit
Branch Head of such branches to process and sanction proposals in the
aforesaid matters without the recommendations of second man within his
vested loaning powers. It may be added that in all such cases close
monitoring of the limits sanctioned by these GBBs shall continue to be
undertaken by the Circle Office to ensure judicious exercising of powers.
Senior officials from concerned Circle Office, while visiting such branches,
should also look into this aspect in addition to other areas of monitoring.
However, officials in List of Officials of Doubtful Integrity (LODI) shall not be
1
posted at RAMs, MCCs, LCBs or any such centre with requirement of credit
dispensation of above Rs 10 lakh.
:0
xi. Powers will be exercised by Branch Head according to the type of branch and
scale in which he is placed. However, in order to ensure that business
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opportunities have not been lost on this count, MD & CEO/ED may delegate
higher loaning powers (of ZOCAC-II) to ZOCAC-I which otherwise should
have been headed by GMs/CGMs.
21
xii. Field functionaries are advised to refer to the Credit Risk and Management
/04 58
Policy, various circulars issued by HO Divisions from time to time regarding

schematic lending and the powers delegated therein and restrictions
thereupon.
3
xiii. While exercising powers, it may be ensured that proper mix of pre and post
sales limits are considered
xiv. The powers vested in officials can be exercised by them subject to the
ceilings/stipulations, if any, as per Bank's internal schemes, restrictions
imposed by Bank through Credit and Risk Management Policy or any circular
issued by Bank, Reserve Bank of India & Govt. of India guidelines issued from
05
time to time.
xv. MD & CEO may revise/amend any of the above guidelines and explanatory
note of the power chart as and when necessary in the interest of smooth
operations and in the light of experience gained
For detailed guidelines/power in respect of the followings,please refer IRMD

(LA) circular 100/2020 dated 02.06.2020 (Chapter-5 page 16 to 23):-
1. Authority on leave or on tour

2. Confirmation of action (allowed in emergent cases)
3. In principle consent
4. In anticipation sanction
5. Revalidation of sanction
6. Authority to decline/ reject credit proposals (revised vide IRMD LA 50/21)

7. Sanction of credit proposal rejected by higher authorities
8. Withdrawal of powers
9. Sanctioning powers prior to retirement
10. Enhancement within 6 months of sanction
11. Cases where negotiated settlement entered earlier
12. Sanction of credit facilities where prospective borrower‘s account/ group account
has been restructured in other bank
13. Allied/associate concerns (group concern)
14. Powers of lower authority, where limits have been sanctioned by higher authority
15. Amendments in terms and conditions of sanction
16. Sanctioning of credit facilities under government sponsored schemes for
restricted sectors
17. Sanction of separate facility in special cases
18. Substitution/release of ip (land & building)
19. Maintenance of borrowal account in more than one branch and allocation /fixing
of sub-limits
20. Transfer of credit facilities
1
21. Allowing the borrower to open a current account with other banks/another branch
of our bank
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22. Interchange of limits
23. Re-schedulement of term loan 22
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24. Waiver of insurance
AMENDMENT IN LOANING POWERS AND SANCTIONING AUTHORITY – CECF

21
AND GECL SCHEMES (L&A 118 dated 26.06.2020)

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In the backdrop of COVID-19 pandemic, amalgamation and implementation of new

organization structure, it is observed that the turn-around time of the above mentioned
3
schemes have increased. In view of the above competent authority has approved to
amend the loaning powers and sanctioning authority in respect of PNB-CECF and
GECL for temporary period up to 30.09.2020. Kindly refer for detail guidelines or go to
‗COVID-19 chapter‘ (at page 216)
05
CREDIT APPROVAL COMMITTEE STRUCTURE AND LOANING POWERS:

(L&A Circular No 40/2020 dtd 26.3.2020, 99/2020 dtd 01.6.2020 & 100/2020 dt 2.6.2020)
To attune the credit dispensation model with the transmuted organizational structure,
the constitution of the Credit Approval Committees has been redefined at all levels.
The revised guidelines on CACs shall be applicable at all centres where the modified
structure of the organization has been rolled out. For centres where the modified
structure has not yet been effectuated, the guidelines on CACs as circulated vide
IRMD L&A circular No 62 dated 23.08.2016 shall prevail till the roll out of the
modified structure at that centre.
CAC atMCC/ Credit Proposals

Headed by
ZO/ HOLevel
MCC CAC AGM Up to ₹10 crore
(Incumbent MCC)

ZO CAC-I DGM/ GM (Second-In- Above ₹10 crore & upto ₹30 crore
Charge of Zone)
Above ₹30 crore & upto ₹50
ZO CAC-II GM/ CGM (Incumbent of
Zone) crore
HO CAC CGM-Credit
Level-I Above ₹50 crore & upto
₹100crore
Senior Most ED ; Above ₹100 crore & upto
HO CAC
Level-II (Other Members- All EDs) ₹200crore
MD &CEO ; Above ₹200 crore & upto
HO CAC (Other Members- All EDs) ₹400 crore
Level-III
Directors on Board Above ₹400 crore
Management
Committee
LOANING POWERS – Interchangeability from Non Fund Based Limit to Fund
1
Based Limits & Non Fund Based to Non Fund Based limits (Loans and Advance
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circular 153/2020 dated 13.08.2020)
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Detailed guidelines in respect of Loaning Powers have been circulated vide IRMD L&A
circular No 100/2020 dated 02.06.2020. The circular L&A 100/2020 dated 02.06.2020
at Para 5.22, Page 22 also covers Powers for Interchange of limits. Powers for
21
allowing Interchangeability from Non Fund Based Limits to Fund based Limits & Non
/04 58
Fund Based to Non Fund Based limits was not allowed as per this circular.
Now loaning powers and guidelines for Interchangeability of limits at various levels has
3
been conveyed.
LOANING POWER FOR FINANCING COLD STORAGES (L&A Cir NO 27 dated

03.02.2021:-
This has reference to Para 7.7 at Page No 29 of IRMD L&A Circular No. 100/2020
05
dated 02.06.2020 which inter-alia stipulates loaning power for financing cold storages.
The above guidelines has been revised as under :-
‗The proposals for setting up of cold storages which includes construction for
preservation and storage of processed agro products, perishable goods such as fruits,
vegetables and flowers including testing facilities for quality shall be considered by
MCC-CAC / PLP Headed by AGM (where MCC is not located) and above within their
vested loaning powers‘.
AMENDMENT IN GUIDELINES ON LOANING POWERS :-
(LOANS AND ADVANCES CIRCULAR NO 32 dated 12.2.2021)

This has reference to guidelines on Loaning Powers vested with Officers at all levels
which has been conveyed vide L&A Circular No. 100 dated 02.06.2020 and other
circulars issued on the subject subsequently. Now certain modifications in the
guidelines on Loaning Powers has been conveyed as under :-.
 As per the approved modification henceforth overdraft facility shall not be

allowed in General Savings account at GBB level.
 While exercising vested loaning powers under ―aggregate commitment per
borrower/group‖ as per the loaning power chart, exposure to Retail Loans for
personal use/Non Business Loan to Individuals, shall not be reckoned.
However, all advances under such segment to a borrower shall also be subject
to vested loaning powers under aggregate commitment per borrower. For
example, GBB may sanction a business loan to a borrower of Rs. 10 Lacs and
in addition to this business loan, it may also sanction retail loan/s upto its
vested powers, i.e. Rs. 10 Lacs, to the borrower. But if a borrower is availing a
business loan of Rs. 10.00 lacs from the GBB and applies for a retail loan of
Rs. 12.00 lacs, the same shall not be sanctioned at the level of GBB since the
1
loan amount exceeds the vested loaning powers of GBBs i.e. Rs. 10.00 Lacs.
Similarly, PLP (where branches are linked with MCC) shall be able to sanction
:0
a business loan to a borrower of amount up to Rs. 1.00 crore and in addition to
this business loan, the PLP may also sanction a retail loan to the same
22
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borrower of amount up to Rs. 10.00 crores.
 Loaning Powers for Group Concerns: :-
Sanctioning Authority Loaning Power
21
Branch Heads -GBB Within their aggregate commitment per

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borrower i.e. upto ₹10.00 Lakh

PLP Upto 2 times of their ‗aggregate
MCC commitment per borrower‘ as per
3
Appendix I.
 i. Retail Loans to Business Concern/Promoter/Directors of existing corporate

borrower, for personal use, may be sanctioned by PLP even in cases where the
existing facilities to the business entities, have been sanctioned by a higher
authority. The Sanctioning Authority and Parent Branch (where facility to
05
Business Entity has been sanctioned) be informed of the facility sanctioned and
name of such business entity may also be incorporated in CLAPS / LenS.
ii. The restriction that only 50% of Secured Fund Based Powers can be
exercised for Packing Credit and 25% of Secured Fund Based Powers can be
exercised for advances against Book Debts shall not be applicable for cases
sanctioned by GBBs and PLPs where the branches are linked with MCC (i.e
PLP exercises Loaning powers upto Rs. 1.00 crore.) However such restrictions
shall continue on MCCs and PLPs where the branches are not linked with MCC
and the PLP exercises Loaning powers upto a maximum of Rs. 10.00 crores. In
case of restricted loaning powers for such exposures, the proposal shall be
forwarded to next higher authorities (In case of GBB next higher sanctioning
authority is PLP and in case of PLP/ MCC, ZOCAC-I and above) Further,
restriction of exercising 50% of Secured Fund Based Powers in Term Loan
shall not be applicable for cases sanctioned by GBBs, PLPs and MCCs and in

these cases Term Loans can be sanctioned to the extent of their Secured Fund
Based Powers.
iii. Enhancement within 6 months of sanction The restriction for enhancement

within 6 months of sanction is applicable for Fresh Sanctions. The powers for
enhancement within 6 months of fresh sanction under genuine cases supported
with proper justification shall be exercised as under:
For Cases Sanctioning Authority
Upto the power of ZOCAC-II Next Higher Authority
HOCAC-I & above Respective Sanctioning Authority
New Business Group (NBG)Forum:
All fresh credit proposals envisaging total exposure (both fund based and non-fund
based) of above ₹50 crore shall be placed before NBG to take a view by way of
1
―expression of interest‖ and the complete appraisal is to be undertaken. NBG
approvals are in the nature of expression of interest based on broad project
:0
parameters and management, the same do not constitute any commitment on behalf
of the bank to either sanction the loan or in the matter of pricing which could change
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after due diligence and risk rating. NBG proposals shall be submitted to Credit
Division in a structured format known as Preliminary Information Memorandum (PIM)
on the prescribed format (L&A circular 33/2020 dated 26.03.2020) for placing the
21
same before the NBG.NBG approval shall be valid for 6 months for considering the
/04 58
regular proposal.
NBG at HO will be in following form :- (IRMD LA circular 37/21)

3
A. NBG-I- Headed by Senior most Executive Director for proposals of above Rs. 50.00
crores and upto Rs. 200.00 crores.
B. NBG-II- Headed by MD & CEO for proposals above Rs. 200.00 crores
05

20. Credit Related Service Charges
(L&A circular 93/2020 dated 26.05.2020 and 100/2020 dated 02.06.2020)
All the service charges are exclusive of all taxes (e.g. GST etc.)unless otherwise
specified. Accordingly, all taxes, as applicable, at prevailing rates to be charged
additionally.
SERVICES RATES
ISSUANCE OF 0.10% of certificate amount with a minimum of Rs.1000/- and
SOLVENCY maximum Rs.25000/-.
CERTIFICATE Note: Any additional certificate issued within a period of 3 months of
issuance of 1stsolvency certificate, only 50% of the applicable charges
shall be levied.
Processing Fee (Fund based working capital) (Fresh/ Renewal/ Enhancement)
Upto Rs. 500000/- NIL. However (i.e. CIC/CERSAI/Insurance etc.) shall be borne by
the borrower.
Above Rs.500000/- Unified Process Fee @0.50%
&Rs. 10 Lac
- Above Rs.10 Lac Internal Rating Rate
1
A1 to A3 0.25%
:0
A4 to B2 0.30%
B3 & below 0.35%
22
No ceiling
/20 963
Note2: Wherever internal rating is

not applicable, effective rate shall
be in the range of “A4 to B2”)
21
Unified Process Fee includes all type of charges (i.e. CIC/CERSAI/Inspection/

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Documentation/ NEC/ Valuation etc.). However Insurance/ State specific Stamp Duty
charges on actual basis shall be borne by the borrower.
Processing Fees At par with fund based working capital charges
3
(Non-Fund Based
Limits) (Fresh/
Renewal/
Enhancement)
Processing Fees  150% of normal charges mentioned above on the amount of
ADHOC Sanction Adhoc are to be charged on pro-rata basis for the period for which
05
the Adhoc Sanction has been permitted to the borrowers.

 Additional interest of 2% shall be charged on Adhoc granted.
Review of Limits/ Review for first three Same as processing
Extension of months fees for FB/NFB
validity of Review for second three Up to ₹10/- Lac– Normal
sanction / Short months Charges
review Above ₹10/- Lac– 150%
of Normal charges
At the time of % of processing fees
Receipt of Loan 10%; Min ₹500/-
Recovery of Application (Non-Refundable)
Process Fees Conveying Sanction 40%
Disbursement 50%
Recovery in Accounts:
 In case of Exiting account, Process fee /upfront fee is to be
recovered in the month of April (max. up to 31st May) for the entire
year.

 In case of Fresh sanction / Enhancement, charges be
recovered proportionately for the remaining period of financial year
Process Fee If the proposal is approved in NBG meeting, charges of ₹2 Lac
/Upfront Fee for should be recovered by branch from the customer while
Conveying NBG conveying NBG approval if:
Approval a) Regular proposal is sanctioned and the limit has been
availed/ disbursed, the recovered amount of ₹2 Lac should be
adjusted towards upfront /processing fee.
b) Regular proposal has been sanctioned but the limit is not
disbursed the amount of ₹2 Lac should not be refunded.
c) Regular proposal is not presented within 6 months amount
of ₹2 Lac should not be refunded.
d) Regular proposal is declined, 50% of the amount i.e. ₹1
Lac should be refunded.
Such charges should be conveyed to the customer before

placing the proposal in NBG. In case of syndication
1
assignments, the pricing is not to be disclosed, till mandate is
received
:0
Upfront Fee for Term Loan (including DPG) 22
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Upto Rs. 5 Lac NIL. However(i.e. CIC/CERSAI/Insurance etc.) shall be borne by
the borrower.
Above 5 Lac to Rs 1.25%
21
10 Lac
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Above Rs. 10 Lac Rating A1 to A3 1.00%

(Based on internal Rating A4 to B2 1.25%
rating) Rating B3 & below 1.50%
3
Other than MSME
For MSME Up to ₹5 Lakh NILhowever(i.e.

CIC/CERSAI/Insurance
Borrowers etc.) shall be borne by the borrower
Above ₹5 Lakh 50% of normal charges as mentioned as
to ₹25 Lakh mentioned hereinabove in bracket as
05
applicable on above 5 lac to 10 lac

Above ₹25 Lakh Normal charges as mentioned herein
above according to IRR (bracket above 10
lac)
No ceiling
Note: Wherever internal rating is not applicable, effective rate shall be in the range of ―A4 to B2
Annual Review Limit Charges
Charges for Term Up to ₹1 Crore Standalone Term Loan: Nil
Loan Other: (which are reviewed
along with regular WC facility):
@0.10% on outstanding
Above ₹1Crore During implementation stage:
@0.10%; Max. - ₹10 Lac
After implementation:
@0.05%; Max. - ₹5 Lac.
Documentation Charges

Documentation Exposure Charges
Charges Including Up to ₹10 Lac NIL
Priority Sector > ₹10 Lac to ₹1 Cr 5000/-
Advance (Fund > ₹1 Cr to ₹5 Cr 10000/-
Based)/ (Non-Fund > ₹5 Cr to ₹50 Cr 20000/-
Based) > ₹50 Cr 50000/-
 In case of enhancement of the facility, Documentation Charges

shall be levied on enhanced portion only.
 Renewal/Review of limits: NIL
 Retail/Schematic Lending: As per scheme
 Loan Against 100% Liquid Securities (i.e. Bank’s own deposit/
NSC/ LIP etc.): NIL
Consortium Advances:
Documentation charges shall be applicable in line with Consortium.
Documentation charges on Adhoc:At par of normal documentation
charges.
1
INSPECTION / SUPERVISION CHARGES
Slab Charges(per annum)
:0
Inspection/ Up to₹ 10 Lakh NIL
Supervision Above ₹10 Lakh to ₹1 @0.10%; Min. ₹1000/-
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Charges
Crore
Above ₹1 Crore @0.05%; Min. ₹10000/- & Max. ₹30000/-
The above charges shallbe levied quarterly on pro-rata basis
21
through system.
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Note:
1. Actual conveyance and out of pocket expenses to be
3
reimbursed to visiting official through TA bill and the same

shall be recovered from borrowal account (except NPA
accounts).
2. In case of NPA account the charges shall be debited from
respective charges general and also be recorded in
memorandum.
05
3. To be recovered per borrower entity, irrespective of number

of facilities.
Charges for 0.02% of loan amount (Minimum Rs.1,000/- and Maximum Rs. 5Lac)
Amendments
/Modifications of
Accepted
Sanction Terms
HANDLING Wherever full waiver of Processing fee or Upfront fee is
CHARGES permitted, ‗Handling Charges‘ @ ₹15 per Lac or part thereof,
(Wherever full subject to maximum of ₹1 Lac are to be recovered from
waiver of borrowers availing limits of ₹1 Crore & above, separately in lieu
processing fee or of Processing fee & Upfront fee
upfront fee is
permitted)
LOAN/DEBT
SYNDICATION

CHARGES
Syndication Fees 0.50% of the total project loan
(Including Project
appraisal as a part
of syndication
assignment
Project Appraisal 0.20% of the total project loan (to becharged in those cases where
Fees wherever ourappraisal is being used for sanction of
appraisal is shared loan by other Banks / FIs).
with other
banks/SEBI and
our bank does not
undertake
syndication
assignment
Fee for 0.25% of Total Debt to be recovered at the time of conveying our
Underwriting Sanction and is over and above the syndication fee of 0.50% of Total
Assignment Debt
For additional Jobs / responsibilities on behalf of Lender banks under Consortium /
1
Syndication/ Multiple Banking Arrangement are to as per Item 10.14 of LA Cir 93/2020 dated
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6.05.20 which include, Project Implementation and Monitoring Fee, Security Agency Fee,
Escrow account Maintenance Fee
CONSORTIUM
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To be decided separately in each case
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ADVANCES/
LEAD Aggregate Limits Charge (As
BANKCHARGES (FB + NFB) from the percentage of
21
WHERE OUR Banking System Aggregate Limits from

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BANK IS LEAD the

BANK IN Banking system)
CONSORTIUM Up to ₹ 50 Crore @0.30%; subject to Min
3
₹5 Lac
Above ₹ 50 Crore @0.25%; subject to Min
₹ 15 Lac,
No ceiling
Normal charges, as applicable for accounts under Consortium
Lead Bank Charge as mentioned above shall be recovered at
05
the time of renew/review of facility.

COMMITMENT CHARGES( FOR FB + NFB LIMITS OF ABOVE ₹1.00 CROR)
Commitment charges shall not be levied in cases where existing/ prospective borrowers
have executed documents containing the required clause for unconditional cancellation
(UCC) of limits. Operative limit if fixed on the basis of QIS-I form, shall be reckoned for
calculating the commitment charges.
In case of partly drawn Term Loan, commitment charges to be levied irrespective of the fact
whether the borrower has executed the necessary documents containing unconditional
cancellable limit clause or not, the charges mentioned in page number 8-9 of IRMD L&A
Circular No 93//20 dated 26-05-2020 should be referred to.
Out of Pocket All out of pocket expenses such as Registration / Modification
expenses/Postage /Satisfaction of charges with RoC, postages, telegrams, telex,
cable charges, fax etc. shall be collected from the beneficiary,
unless otherwise specified.
TEV Studies: (LA 175/2020)
When TEV study is Conducted by bank officials –

strictly carried out 0.10% of project loan amount subject to minimum ₹50000
for Maximum fee for the Project Loan amount above ₹400 Crore:
our bank‘s internal ₹250 Lakh
use
and TEV report is
not TEV study by Consultant – Consultant fee + ₹ 15000/-
shared with
customer
When TEV study is Conducted by bank officials :-
carried out 0.15% of project loan amount subject to minimum ₹50000/-
internally Maximum fee for the Project Loan amount above ₹400 Crore:
and TEV report is
₹250 Lakh
shared with
customer
By consultant—Consultant fee + ₹ 15000
TEV Vetting Charges for vetting of TEV study shall be 50% of applicable TEV
Charges appraisal charges as mentioned above
Waiver of TEV Wherever TEV study is waived by the competent authority
Study Upto Project cost ₹ 5 cr. – Nil
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Above ₹ 5 cr. – ₹ 50000
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Legal Opinion / Exposure Max. Charges per Property
NEC Charges Metro 22 Urban/SemiU Rural
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Upto 1 Rs 3000/- Rs 1500/- Rs 1000/-
Crore
Above 1 Rs 4000/- Rs 2500/- Rs 1500/-
crore
21
Plus actual out of pocket expenses to be recovered from

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borrower.
Valuation Fees Value of Assets ** Fees
3
Up to ₹ 20 Lac Rs 2000/-
Above ₹ 20 Lac to ₹ 50 Rs 3000/-
Lac
Above ₹ 50 Lac to ₹ 1 Rs 4000/-
Crore
Above 1 Crore to ₹ 5 Crore Rs 8000/-
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Above 5 Crore to ₹ 10 Rs 12000/-

Crore
Above 10 Crore Rs 15000/-
** Includes Property/Fixed Assets/Plant & Machinery etc.
Concessions:
Software Application for Risk Adjusted Return on Capital (RAROC) Model:
Risk Adjusted Return on Capital (RAROC) framework is developed by the bank for
corporate borrowers (having/ proposing aggregate exposure above Rs. 5 crore) for
analyzing risk-adjusted return and providing a consistent view of profitability across
loans. RAROC software is applicable only on the fund based and non-fund based
facilities (above Rs. 5 crores) of those corporate where rate of interest / commission
is linked to risk rating of the borrower and borrower is requesting concessions on
card rate of the bank.Detailed guidelines in respect of Software Application for
RAROC Model have been advised. The applicable guidelines have been

consolidated in this circular along with the changes in the model(L&A Circular No
22/2020 dated 05.03.2020,72/2020 dated 22.04.2020)
Discretionary Power for Refund Of Excess Interest/ Service Charge Charged

on account of mistake (L&A 100/2020 dated 02.06.2020)
Please refer Para 14.03 page 48
Important Instructions:
Processing/upfront fee is to be charged as under:
i) Processing fee  For all loans upto one year
ii) Upfront fee  For loans over one year, in case loans are sanctioned to
meet capital expenditure
and
Processing fee is to be charged proportionately for the
period of sanction in case loans are sanctioned for working
capital requirements.
Recovery of Processing Charges (Procedure)
1
Processing fee is to be recovered as under:-
1. In existing accounts To be recovered in April Max upto 31st May for full year
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2. In 1st Year  Proportionately for remaining months upto 31st March
3. For fresh proposals  Proportionately for the remaining months upto 31st March
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Note: Charges once recovered by the bank for a particular period for specified limit
will remain valid for the entire financial year.
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However, in cases, where the processing/upfront fee could not be recovered due to
non-availment/ disbursement of limits, CMs/Circle Heads & above may consider
waivement of processing/upfront fee, in full, in such cases, on merits.
3
In case the loan proposal is declined or the limit sanctioned is not availed by the
customer within a period of six months the processing fee recovered shall be
forfeited after giving due notice to the borrower.
Proportionate Charges for Adhoc Limit to be recovered also.

05
Upfront fee is to be recovered as a one-time fee
In addition to above, the actual conveyance & out of pocket expenses (if any) paid to
the employee to be recovered from the borrower irrespective of the exposure.
Service Charges for Non Fund Based Facilities:

Please refer LA Cir 93/2020 dated 26.05.2020 and in terms of relevant NFB
circulars/guidelines.
Service Charges - Review of Services Charges (Commission) for Inland Bank
Guarantees (BG) / Inland Letter of Credit (LC)(L&A 21/21 dated 28.01.2021)
This has reference to IRMD L&A Cir. No. 93 dated 26.05.2020 inter-alia advising details
of ―Service Charges‘ for the various services provided by bank. Now vide the circular
Commission/Charges for BG & LC have revised.

Discretionary powers to permit relaxation in service charges prescribed for credit
related services) shall be as per discretionary power vested with various competent
authority. (Refer L&A Circular No. 100/2020 dated 02.06.2020 and other subsequent
circulars issued from time to time). Further vide L&A circular 167/2020 dated
05.09.2020 vested discretionary power to allow concession/relaxation in Rate of
Interest & Service Charges has been revised.
RECOVERY OF PROCESSING FEE / ANNUAL REVIEW CHARGES FOR TERM

LOAN / INSPECTION CHARGES: FY 2020-21 :- (L&A CIRCULAR NO 2 dated
4.1.2021)
Automated recovery of processing fee / inspection charges for FY 2020-21 were

deferred due to COVID-19 pandemic, amalgamation and implementation of new
organisational structure.
Further, vide IRMD L&A Circular No. 169/2020 dated 05.09.2020 it has been advised
to expedite recovery of processing fee / annual review charges for term loan for FY
1
2020-21 and complete the same by 31.12.2020 in all eligible borrowal accounts.
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However keeping in view that recovery of aforesaid charges are not in line with
previous years, branches has been advised to expedite recovery of processing fee /
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annual review charges for term loan / inspection charges applicable upto 31.03.2021
and complete the same on priority basis in all eligible borrowal accounts wherever
recovery is pending.
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3
05

21. Credit Proposal Tracking System (C.P.T.S)
Main Circular: LA 29/2010 dt 12.04.2010 and User manual available at main page of
application, Please also refer L&A circular No 157/2020 dated 17.08.2020
It is compulsory for Bank/ Branch to enter loan applications received and disposed in
Loan application receipt/ disposal register, presently PNB-587. An on Line system on
PNB-Non CBS Page has been introduced for this purpose, whereby all loan
applications received are to be entered, Sanctioning authority wise, then progress till
sanction is to be marked in the system. This helps the Bank in MIS about average
time taken for disposal of loan application till its sanction/ rejection etc. This is clear
and transparent system where applicant is also kept posted about development
regarding his/her loan proposal, till it is sanctioned. On entering the loan application
in system, an email/ SMS is auto generated at pre-given email address/ phone no.
The applicant can keep watch and knows the upto dated status. On entering the
proposal, a Proposal Tracking No. is generated, which is also known as Loan
application number and is to be recorded and used for all future references. The
1
system is Menu driven and very easy to use and requires no expertise.
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The application Processing window contains the following details:

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Branch name : Auto Populated
 Proposal number : Auto Populated
 Entry date : Auto Populated

21
Borrower request date

 Name of the borrower
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 Type of loan
 Email address
3
 Phone No.
 Sanction authority
 Facilities (in Lacks)
 Sector
 Last status
 Pending at- mentions the name of the branch at which the loan is
05
pending : For other than application entering branch

 Status history- status history includes from location(LOC) to location
(LOC) ,Received Date and remark (forward) date, remarks(max 150
characters), remark date change status(sanction, reject ,under
process, forward) ,date of change of status of proposal
 Some other information for HO proposals is also required viz; CIBIL
extraction date, Proposal Tracking control No with rating etc.
Progress is marked for all loan applications entered in the system, through ―Status
Update‖ till it is sanctioned. However, loan application is to be entered on receipt of
complete set of proposal, as Time Norms must be followed and any delay reflects
badly in MIS.
Proposals within BH powers are to marked till its sanction in the branch and
Proposals under Higher Powers viz; RAPC, CO, ZM, HO are to be forwarded to the
sanctioning authority. At the offices other than Branch, Proposals in queue are

tracked and processed till its disposal.
There is MIS available under ―Reports‖ Menu as under for Bank as per requirements:
 Loan / Credit Proposals Receipt / Disposal Register
 Pending Proposals at CO/Hub as on date
 List of Proposals Sanctioned
 List of Proposals Rejected
 Compiled Report
 Summary data of Credit Proposals
 Summary of Proposals as on Date
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21
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3
05

22. DEMAND LOANS/ OVERDRAFTS
Definition
A demand loan is a rare form of loan that can be called for complete repayment
without any prior warning to the borrower. In other words when the lender demands
the money, the borrower must pay it.
A loan with or without a fixed maturity date, but which can be recalled anytime (often
on a 24-hour notice) by the lender and must be paid in full on the date of demand.
Also, the borrower can pay off a demand loan at any time without incurring early-
payment penalties.
Characteristics
 A loan repayable on demand in one shot i.e. Bullet repayment, is a demand

loan.
1
 A demand loan account is an advance for a fixed amount where no further
enhancement is permitted under any circumstances.
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 No debits to the account are made subsequent to the initial advance except
for interest, insurance premia and other sundry charges.
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 Any amount credited to a demand loan account has the effect of permanently
reducing the original advance
 Any further drawings permitted in the account will not be secured by the
21
demand promissory note taken to cover the original loan.

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 As enhancement is not permitted in demand loan account, a fresh loan

account is to be opened for every new advance granted and a new demand
promissory note taken as security.
3
 Normally, Demand Loans are allowed against the Bank's own deposits,
government securities, approved shares and/or debentures of companies, life
insurance policies, pledge of gold/silver ornaments etc.
(BOI)
 Advances made to an HUF concern against the deposits standing in the name
of co-parcener subject to the below mentioned condition.
05
If the deposit in the name of coparcener is held by him in his capacity

as coparcener or such deposit relates to income/ transaction/ business of the
HUF, then such deposit shall be deemed to be own deposit of HUF.
Individual deposit in the name of coparcener be treated as his
individual deposit, i.e. third party deposit vis-a-vis the HUF, unless the
concerned coparcener and the HUF through Karta submit a declaration that
such deposit belongs to the HUF.
OVERDRAFTS
Characteristics
 All overdraft accounts are treated as current accounts.

 Temporary clean overdrafts in current accounts are maintained in the ordinary
current account ledgers.

 Normally, overdrafts are allowed against the Bank's own deposits,
government securities, approved shares and/or debentures of companies, life
 Insurance policies, government supply bills, cash incentive and duty
drawbacks, personal security etc.
(BOI)
CLEAN OVERDRAFTS
Branch Head, have discretion to allow temporary clean overdrafts within specified
limits and for short periods. Overdrafts thus allowed should not remain outstanding
for more than one month. Restrictions on exercising loaning powers on allowing
clean overdrafts advised by HO be strictly adhered to. Application on Form No. PNB
306 be obtained for allowing clean OD.
(BOI)
ADVANCE - OVERDRAFTS/ DEMAND LOANS AGAINST BANK DEPOSITSs

1
Provision for automatic selection/feeding of interest to be charged on such advances
by fetching the details of FDR/Deposit from CBS is customized.
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S.No. Highlights Brief Description
1- Scheme Code under DLDEP for Demand Loan Facility ODDEP for
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menu HOAACLA/ Overdraft Facility
HOAACOD
2- Menu Optio HLACM- For modifying existing collateral details,
21
deleting existing collateral, linking new collateral

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3- Applicability To all new advances granted against Bank‘s own

deposit in the form of FDR. Existing advances
under the captioned scheme shall not be dealt
3
under the above scheme codes.

4- Exceptions a. Advance against FCNR/NRE/NRO deposits shall
not be opened under the above mentioned scheme
code and has to be opened as per existing
procedure.
b. Advance against balance lying in Saving/Current
05
Account
c. Advance against Floating Rate Fixed Deposit
scheme d. Advance against Recurring Deposit
5. Key Features :-
a. Advance shall not be allowed on the same date when FDR account is opened in
CBS.
b. Interest rate shall be calculated above the ROI offered on FDR as the case may
be, on the basis of weighted average method.
c. Other loan parameters such as lendable amount, loan tenure and repayment
details shall be reflected on the basis of FDR account number.
d. Linkage of collateral in the form of FDR is integrated in the account opening stage
itself. Lien on FDR shall be marked automatically after verification of loan/overdraft
account.
e. It shall also handle marking of Lien on FDRs of other branches.
f. Renewal of overdraft account using menu HLACM. In case of renewal user has to

delete the existing collateral, then renew the FDR in CBS as per extant guidelines
and again add collateral details.
g. Advance against Intersol third party deposits shall not be allowed.
h. Advances at other than base branch to individual against his/her own deposit shall
be permitted where deposit value is up to Rs. 2.00 crore only.
i. Two Separate accounts shall be opened for advance against own deposit and
advance against third party deposit and ROI shall be applicable as the case may be.
j. For staff advance upto Rs. 10.00 lac shall be sanctioned under staff scheme where
margin of 5% is prescribed and above Rs. 10.00 lac it shall be dealt as the case of
advance to public.
k. Advances against Government FDRs shall be opened through the same
automated procedure on the applicable rate of interest. Concession if any shall be
approved and handled by the Zonal Office in line with the extant guidelines for other
loans with concessions.
l. Third party advance under automated scheme (DLDEP/ODDEP) shall be
permitted at base branch only.
m. In cases where account shall not be opened under DLDEP/ODDEP scheme the
1
existing procedure of marking lien shall be continued. Such cases could be advance
against FCNR/NRE/NRO deposits, advance against balance lying in saving/Current
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account, advance against Floating Rate Fixed Deposit scheme and advance against
Recurring Deposit. The lien in these cases shall be marked by base branch (where
22
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Deposit account is being maintained) and present procedure in vogue shall be
adhered to.
21
Following advances be treated as Loans and advances against Borrower‘s

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own deposits:
i) Advances made to a depositor against a deposit standing in his name
singly or jointly with other depositor(s).
3
ii) Advances made to a guardian competent to borrow against a deposit in

the name of his ward for the benefit of the ward.
iii) Advances made to a proprietary concern against a deposit in the name of
its proprietor.
iv) Advances made to a partnership firm against a deposit in the name of one
of the partners.
05
v) Advances made to a partnership firm against a deposit standing in the

name of a partner of the firm jointly with another person who is not a
partner in the firm and who may or may not be related to him.
vi) Advances made to a proprietorship concern against a deposit standing in
the name of the proprietor along with another person who may or may not
be related to the proprietor.
vii) Advances made to an individual against the deposit held in the name of a firm
where he stands as a proprietor
viii) Advances made to an HUF concern against the deposits standing in the
name of co-parcener subject to the below mentioned condition:
(i) If the deposit in the name of coparcener is held by him in his capacity
as coparcener or such deposit relates to income/ transaction/ business
of the HUF, then such deposit shall be deemed to be own deposit of
HUF.
(ii) Individual deposit in the name of coparcener be treated as his
individual deposit, i.e. third party deposit vis-a-vis the HUF, unless the

concerned coparcener and the HUF through Karta submit a
declaration that such deposit belongs to the HUF.
Except the above mentioned cases, All other advances against deposit to be
treated as third party deposit and margins/pricing be mapped accordingly
ADVANCES AGAINST DEPOSITS MADE BY A BANK

Loan and advance against deposit made by a bank (Except Land development
Bank) to be treated as to a depositor and all terms and conditions as applicable to
other borrowers to be followed. However third party advance not allowed.
ADVANCES AGAINST DEPOSITS IN THE NAME OF MINORS

Advances against deposits standing in the name of minor should be allowed to the
natural guardian or guardian appointed by court only in his individual capacity for the
benefit of the minor only and that he/she shall indemnify the bank against any claim
or loss in consequence of having allowed the said advances (Undertaking as per
Appendix-1 of LA Cir. 39/21). Further, no advance be allowed to a partnership
concern against deposit standing in the name of a minor.
1
ADVANCE AGAINST DEPOSITS TO ILLITERATE PERSONS
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Thumb Impression be obtained in presence of Incumbent Incharge, Certificate as per
Appendix-II of LA Cir. 39/21 be signed by I/C with Independent witnesses.
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Depositor/ Borrower knows only vernacular language:

In case of advance against deposits to the borrower knowing one of the vernacular
21
or regional languages but cannot write such language, the loan document executed
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by him, should be supplemented by a certificate signed by the Branch head of the

lending office as well as two independent witnesses as per Appendix-III. of LA Cir.
39/21
3
ADVANCE AGAINST DEPOSITS TO BLIND PERSONS

 Term Deposit be got discharged in presence of Two Witnesses (known to
bank) + 1 bank officer.
 If knows only Vernacular Language  Term Deposit discharge in presence of
(Two Witnesses (known to bank) + Incumbent Incharge) + Appendix-III of LA
05
Cir. 32/2020 dt 26.03.2020

 If Illiterate  his thumb impression be taken in the presence of Branch head
and be supplemented by a certificate in the form as per Appendix-II of LA Cir.
32/2020 dt 26.03.2020 signed by the Branch head of the lending office as well
as two independent witnesses;
 Terms and conditions to be read over with Signature of witnesses on AOF
 No cash payment shall be allowed. Demand loan disbursement shall
invariably be credited to his her saving account maintained with our bank or
any other bank/FI. However in emergent circumstances, on prior approval of
Branch Head cash payment of loan disbursement to a blind person shall be
made in the presence of two witnesses
NRE AND FCNR DEPOSITS

Branches to ensure that instructions issued by Exchange Control Department of RBI
from time to time contained in the Exchange Control Manual/Circulars issued by
International Banking Division are complied with. The advance against security of

deposit under NRE/NRO scheme shall be handled as per existing procedure and
shall not be opened under DLDEP/ODDEP scheme code
Credit Facilities against Balance held in (Exchange Earners Foreign Currency)

EEFC accounts
No fresh financing allowed. Existing accounts be adjusted on maturity.
Against Balances in Saving/Current Deposit Accounts: Advance permitted. Lien

be marked against Deposit. Margin (75%) . No loan shall be given against the
security of NRE saving deposit
Compensation Awarded by Court/ Tribunal: No advance against such deposit till

permitted by competent Court.
Margin: LA Cir 39/2021

Deposits in the name of Borrowers
Maturity period remaining at the time of granting advances Margin % (minimum)
1
Upto 2 years 5.00
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Above 2 years and upto 3 Years 7.50
Above 3 years and upto 4 years 10.00
A b o v e 4 years and upto 5 Years
22 12.00
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Above 5 years 20.00
Advance against third party deposits 25.00
Staff, Honorably/ Voluntarily retired/ widows of staff
21
(HRDD763/2017 dt 12.10.2017)
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Advance up to Rs.10.00 Lacs 5.00

Above Rs.10.00 Lacs As applicable for
3
Public
Non-Resident Deposits (FCNR/NRO)
Advance Against FCNR(B) deposit to Depositor
Upto 1 years 10.00
Above 1 years and upto 2 Years 20.00
Above 2 years 30.00
05
Advances against FCNR(B) Deposit to Third Party

Upto 2 years 20.00
Above 2 years 30.00
NRO Term Deposits 25.00 (Minimum)
Margin is to be maintained at all the times during currency of loan
This supersedes the L&A Circular No. 32 dated 26.03.2020 conveying guidelines in
respect of advance against Bank deposits. Subsequent amendments/modifications in
the guidelines have been advised vide various circulars issued on the subject from
time to time, last being L&A 192 dated 14.10.2020. Now Automation of Interest Rate
Selection (Interest Table Code) for Advance Against Bank‘s Own Deposit has been
conveyed wherein two scheme codes namely DLDEP/ODDEP have been customized.
revised/modified consolidated guidelines have been conveyed vide the circular.

 In case of term deposits under reinvestment plan, security for advances made
there against is not merely the amount of original deposit but also the amount
of interest accrued up to the last/preceding quarter. In such cases the interest
accrued may be determined at quarterly compounding basis till the preceding
quarter on the date of granting such advances and may be treated as deposit.
Rate of Interest and Penal Rate:
a) Interest rates be charged as advised through L&A Circulars issued from time
to time and shall be fixed for the currency of loan and shall change on
subsequent renewal only. Presently applicable ROI is as under :-
ADVANCE AGAINST DOMESTIC/ NRE DEPOSITS
Self 1.00%*
Third Party Deposit 2.00%* subject to Min. RLLR
*Over the applicable rates of interest on deposits
RUPEE LOAN AGAINST FCNR DEPOSITS/ RESIDENT FOREIGN
1
CURRENCY DEPOSIT (RFC) (IN INDIA)
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Self RLLR
Third Party Deposit RLLR + 1.00%
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FOREIGN CURRENCY LOAN AGAINST FCNR / NRE DEPOSITS (IN
INDIA)
Rate of interest is provided by the Treasury Division on case to case
21
basis
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b) In case there is more than one deposit in the name of the depositor(s) with
varied rate of interest, 1% or 2% higher on the weighted average of rate of
3
interest paid on deposits should be taken for calculating interest rate on loan.
It is reiterated that the Weighted Average of Rate of Interest on deposits is the
simple sum of (product of deposit amount and rate of interest applicable)
divided by the total deposit amount.
However for accounts opened under scheme DLDEP/ODDEP WAROI shall
05
be calculated by system only. No manual calculation and feeding of ROI shall

be required. Also dealing official to ensure that ROI charged by system is as
per bank guidelines and no deviation exist
PENAL RATE OF INTEREST ON PREMATURE / PART WITHDRAWAL OF TERM

DEPOSITS
As regards penal rate for premature withdrawal of term deposits, branches should
refer guidelines issued by Resource Mobilization Division, HO, issued from time to
time.
Discretionary powers to permit relaxation in rate of interest in case of

advances against Bank‘s own deposit
CONCESSIONS ON CARD RATE FOR ADVANCES AGAINST BANK‘S OWN
DEPOSITS
Authority (CACs headed Loans to Self Loans to third party
by) (subject to minimum of

RLLR)
GMs (HO/Field) Upto 0.25% below the Upto 1.00% below the
applicable rate applicable rate
ED Upto 0.50% below the Upto 1.50% below the
applicable rate applicable rate
MD & CEO Upto the Rate allowed on Upto the Rate allowed
deposits on deposits
Note: No discretionary powers are to be exercised by CACs (headed by
DGMs/GMs) for permitting relaxation in interest rates in case of advances
against bulk deposits
RESTRICTIONS
The advance against deposits of the following fixed deposit schemes have been
restricted:
a. PNB Tax saver FDR
b. Capital Gains Account scheme
1
c. Balika Shiksha Fixed Deposit scheme
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d. MIBOR linked deposit scheme which is not permitted
e. In terms of RBD (R) Cir No 15/2020 dated 30.03.2020 Demand Loan is not
permitted against Anupam Fixed Deposit scheme. Only Overdraft facility shall
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be allowed
Other Guidelines
21
 Demand Loan/Overdraft sanctioned against self FDRs should be credited only to the
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account with same Customer Id duly verifying that the account is in same name
Proceeds after adjustment of DL/OD should be credited in the account with the same
Customer-Id with same name from which proceeds have been originated.
3
 In case of multiple FDRs the principal repayment and loan expiry date shall be the
maturity date of FDR, maturing on the first coming date
 In case of Advance against deposit to staff member, loan amount upto Rs. 10.00 lac
shall be allowed under staff scheme and Margin and ROI shall be mapped
accordingly. In case of multiple accounts, the maximum allowed limit of Rs. 10.00 lac
shall be calculated manually on the basis of outstanding amount under the captioned
05
scheme. When the outstanding amount reaches the maximum allowed limit of Rs.
10.00 lac separate account shall be opened under the public scheme. However same
scheme code DLDEP/ODDEP shall be used for staff scheme also
 Advances at other than base branch to individual against his/her own deposit shall be
permitted where deposit value is up to Rs. 2.00 crore only
Documentation: As per LA Cir 39/2021
Loaning Powers:
a) Loaning power for granting advance against Bank‘s own deposit is present being
governed by IRMD L&A Circular No. 100 dated 02.06.2020. b) Further in terms of
IRMD L&A Cir No 198/2020 dated 16.10.2020 over and above aggregate
commitment per borrower powers for advance against Bank‘s own deposit are given
as under Bank's

GBBs Headed by Heads/Incumbents of
II III IV PLP head PLP/MCC LCB ELCB
ed by Head ed
Scale IV by Scale
V
50 160 800 800 2000 5000 10000
In case of advances against joint deposit accounts, the following guidelines be

kept in view:
If revised AOF Pledge portion of the form No. PNB 308 along with FDR/
not obtained for Receipt in RD to be signed/ discharged by all the depositors
the deposit
account
For ―Former or Survivor‖  Advance to Former without
reference to Survivor and pledge portion of PNB-308 may
be signed by Former only along with discharge of FDR/RD
1
Receipt by Former
If revised AOF
For ―Either or Survivor‖/ ― Any one of us or Survivor‖ 
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obtained for the
Advance to Any one during life time of other/s, without
deposit account 22
reference to Survivor and pledge portion of PNB-308 may
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be signed by depositor making request for advance along
with discharge of FDR/RD Receipt by depositor making
request for advance
21
In case No. of A letter of authority signed by all the borrowers to pay the
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borrowers is consideration money to one of them would be obtained.

two/ more
Against Third Application and pronote /PNB727A (for overdraft) to be
3
party deposits signed by Borrower, Pledge portion to be signed by

depositor.
BC Letter Not required unless
 Debit balance Exceeds VOS
 Pledged deposit matures after two years
 Depositor given mandate for auto renewal of deposit.
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In Auto renewal Follow instructions as per LA Cir 39/21.

mandate
 Signature in AOF and Loan Documents, should be taken invariably in presence
of Bank Official or Branch Head or any officer deputed by Branch Head.
 To avoid instances of fraud, sudden spurt in business mix of any branch in a
single day or in a quarter shall be monitored by Circle office, Zonal Office and
HO-IAD. Monitoring of change in deposit or advance figure of any branch shall
be done based on below threshold levels:
a. 5% of total deposit or advance of the branch or ₹ 50.00 Cr, whichever is
lower in a single day.
b. 10% of the total deposit or advance of the branch or ₹ 100.00 cr, whichever
is lower in the last quarter.

c. Similar type of loan sanctioned in a short span of time by any branch be
monitored through Limit Sanction Statement (LSS) by the controlling offices
(i.e. CO / ZO
ADVANCES AGAINST FIXED DEPOSITS OF PNB HOUSING FINANCE LTD (Loan

and Advance circular 182/2020 dated 06.10.2020)
This has reference to IRMD L&A Cir. No. 60 dt 11.05.2004 regarding Advances against
Fixed Deposits of PNB Housing Finance Ltd. Now it is informed that the facility of
advance against Fixed Deposits of PNB Housing Finance Ltd. stands withdrawn with
immediate effect. No fresh exposure/enhancement /adhoc facility/renewal is to be
allowed under the said scheme
ADVANCES AGAINST LIFE POLICIES (L&A 83/2020 dated 6.5.2020)

Advance against Life Policies be considered after taking into account the purpose of
advance and repaying capacity of the borrower.
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Advances against the security of Life Insurance Policies (other than Money Back
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Policies) issued by Life Insurance Corporation of India and Policies issued by
approved Private Sector Insurance Companies, should be considered in individual
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cases on merits after ensuring the following eligibility criteria:
i) All Indian Nationals of 18 years and above shall be eligible under the scheme.
21
ii) Firms/companies provided the offered securities are in the name of those
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firms/companies
iii) Borrower having a satisfactory account with our bank at least for the last 6 months.
3
iv) There are no encumbrances on the relative policy.

v) The age of the assured stands admitted in the books of the LIC of India/ Approved
Private Sector Insurance Companies; an
vi) Premia are paid up to date
Nature & Extent of Facility: Need Based
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Maximum 80% of Surrender Value of Life Insurance Policy issued by LIC of

India/Insurance Company by way of Demand Loan/OD facility to Public & Members of
Staff. No facility shall be considered against Money Back Policies of LIC of India or any
other Life Insurance Company. Further, Unit Linked Life Insurance Policies shall also
not be covered under the scheme.
LIC of India/Private Sector Insurance Companies allow the Surrender Value after
completion of 3 years period of policy and the Bonus is accrued only when the policy
has run for complete 5 years from the date of commencement. The branches should
get the surrender value calculated from the concerned office of LIC of India/Private
Sector Insurance Companies and Certificate obtained in this regard be kept along with
the Loan Document
Repayment Demand Loan:
60 months or the period up till maturity of the security whichever is earlie

Assignment of Policy:
Policies are to be sent directly to the Insurance Companies by Registered Post or
through a Staff member for getting the assignment registered, along with a copy of the
Surrender Value certificate for getting its correctness authenticated.
i) For advances upto Rs.5 lac against life policies, after receipt of duly assigned
policy in favour of the branch and surrender value certificate from the office of the
Insurance company, a Registered Letter seeking confirmation of assignment in
bank‘s favour (As per Appendix V) be sent to the insurance company and in case,
confirmation from insurance company is not received within 10 days from the
date of the letter, the same may be treated as confirmed by the insurance
company and loan can be disbursed thereafter.
ii) For advances above Rs 5 lac against life policies, after receipt of duly assigned
policy in favour of the branch and surrender value certificate from the office of the
Insurance company, a Registered Letter seeking confirmation of assignment in
bank‘s favour (as per Appendix V) be sent to the office of the insurance company.
The loan can be disbursed only after receipt of confirmation of assignment from
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the Insurance company
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Precautions:
LIC Policies effected by a married man for the benefit of his wife and/or children under
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Section 6 of the Married Women's Property Act, should not be accepted as security.
Hence no advance should be allowed against such polic
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ADVANCE AGAINST GOVERNMENT SECURITIES(L&A 83/2020 dated

6.5.2020
3
The details of Govt. Securities and Bonds issued by State/Central Govt. against which
the advances can be considered are given hereunder:-
I. G.P. Notes/All Type of Bonds issued by the Central and State Government or
Other Public Bodies duly guaranteed by Central or State Govt. except PSU
BONDS.
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II. Securities and Bonds issued by Municipalities and Other Bodies bearing the
Guarantee of Central or State Govt.
However, I. Tax Saving Bonds issued by Banks/PSUs shall not be considered for
financing there against. II. Advance against PSU Bonds shall be considered as per the
guidelines on Advances Against Shares, Debentures and PSU Bonds issued from time
to time.
Scope: Advances should be considered in individual cases on merits, taking into
account the purpose of the advance, repaying capacity of the borrowers etc. and not as
a matter of routine.
Security All type of Central/State Govt. Bonds and Securities and Bonds issued by
Municipalities and Other Bodies, bearing the Guarantee of Central/State Govt which are
endorsable/ transferable and lien can be marked in bank‘s favour for allowing such
advances.
Margin(Public & Members of Staff)

For loans against Bonds having the residual period upto 48 months to their maturity -
25%
For loans against Bonds having the residual period exceeding 48 months to their
maturity - 35%
Wherever circumstances so warrant, a higher margin should be prescribed by the
sanctioning authority based on the residual period as well as the maturity value of the
security/bond. It should be ensured that at no time outstanding in the loan accounts
exceeds the value of security
Documentation: As advised vide L&A circular 83/2020 dated 06.05.2020
Advance against NSCs , KVPs(L&A 83/2020 dated 06.05.2020)

Purpose: Productive and meeting contingencies
Nature: Demand Loan and Overdraft
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Security: Pledge of NSCs / KVPs (For KVPs, Issued on or before 30.11.2011 and on
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or after 23.09.14)
Margin: For NSCs: (LA Cir 74/2017 dt.30.08.2017)
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Period for which NSCs have run at the time of Margin
Advance VIII – IX-
ISSUE ISSUE
21
(a) Less than 3 years from the date of NSCs 30% N.A.
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(b)3 years & above but less than 5 years from the date 25% 40%
of NSCs
(c) above 5 years from the date of NSCs N.A. 30%
3
Marginfor KVPs
(LA Cir 83/2020 dated 06.05.2020)
➢ For advance against KVPs issued on or after 23.09.2014 :

05
Period for which KVPs have run at the time of Advance Margin
(a) 2 years from the date of issue of KVPs 40%
(b) Above 2 years & upto 5 years from the date of issue of KVPs 35%
(c) Above 5 years from the date of issue of KVPs 25%
➢For advance against KVPs issued on or before 30.11.2011 :20%
Documentation: As advised vide L&A circular 83/2020 dated 06.05.2020
Note: Never send NSCs / KVPs through Borrower for pledge. For details, follow
instructions as conveyed videLA Cir 83/2020 dated 06.05.2020
FINANCE AGAINST LIC POLICIES, NSCs, KVPS, PLIs AND GOVERNMENT/ RBI
BONDS- SCHEME CODE and INTEREST TABLE CODE

In continuation to guidelines conveyed vide L&A circular 83/2020 dated 06.05.2020
(on Finance against LIC policies, NSCs, KVPs, PLIs and Government/ RBI bonds),
it is advised that the interest table codes to be used , are as under :-
Nature of Facility Scheme Code Benchmark Lending Rate Interest Table Code
OVERDRAFT ODGOV If Linked with MCLR ODGS1
If Linked with RLLR ODGSR
DEMAND DLGOV If Linked with MCLR DLGS1
LOAN If Linked with RLLR DLGSR
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21
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3
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23. Audit of Annual Accounts of Borrowers by Chartered
Accountants
Annual accounts of all borrowers enjoying aggregate credit limits of ₹20 lac & above (both
fund based & non-fund based) from the banking system should be submitted to the
Bank duly audited by Chartered Accountants. However, in case credit facility is
allowed under specific schemes such as mortgage loan scheme, loan to property
owners against future lease rentals, housing loan, etc., where credit requirement is
assessed based on the repaying capacity of the borrower independent of its
business operations/annual accounts, such cases may be exempted from submitting
the audited annual accounts irrespective of the quantum of the credit limits.
Where the borrowers, enjoying credit limits below ₹20 lac, are not able to supply
audited Balance Sheet, such proposals must be accompanied by Proforma Balance
Sheet and Profit & Loss Statement.
1
However, in cases where accounts are required to be audited under any other law
(Income Tax Act, Company account under Company‘s Act, etc.), the borrowers
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should get the accounts audited in compliance of the law, even if the credit limit is
below ₹ 20 lac or credit is availed under specific scheme. The branches should
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ensure that on finalization of audit, a copy of the audited balance sheet must be
submitted to the bank
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Also, in respect of Non Corporate Micro Enterprises having annual sales less than ₹
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40 lakhs, annual accounts duly audited by Chartered Accountants shall not be

insisted upon irrespective of the credit limit. However, the key figures (i.e. sales, net
profit, capital etc) be verified from documents like IT returns, sales tax returns etc.
3
CMA Data Base Forms for Assessment of Working Capital Requirements

Where assessment of working capital limits is done as per Simplified Turnover
method (Nayak Committee), information on Credit Monitoring Arrangement (CMA)
data base forms shall not be obtained. Sanctioning Authority, however, may satisfy
05
himself on the projected turnover.
LOAN APPLICATION –OTHER THAN PRIORITY SECTOR

Loan application- PNB 325 from the borrower.
In following cases, this form need not be taken and a simple application requesting
the Bank to allow a loan/limit upto a specified extent against a stated security, details
of which should be given, be taken as loan application:
i). Borrowing against the security of bank deposit.

ii) Borrowing against government securities and other trust receipts upto
Rs.25,000/-.
iii) Small fixed loans ranging upto Rs.5,000/- against the security of jewellery and
bullion.
iv) Borrowing against the pledge of life policies.
v) Borrowing against shares and debentures of approved companies upto Rs.

15,000/- raised by members of staff.
vi) Borrowers to whom purely temporary overdrafts are sanctioned occasionally
by the Incumbents Incharge within their personal powers.
Scheduled margin be specified in the limit proposal form in terms of `percentage'.

(LA133/30.08.2008)
Indicate in proposal as well as in the CR on the guarantors, the actual amount
invested by the guarantors in the shares of the borrower companies.
(LA133/30.08.2008).
Pending Court Cases of the Bank/FIs./Other financiers against
borrowers/partners/directors containing details of cases and their latest
developments/position
Loan proposals should also contain comments on the above aspect under a
separate head. The details of the litigation faced by the companies/firms and their
directors/partners/proprietors should invariably be commented upon in the appraisal
note.
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21
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3
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24. Command Area
Large Borrowal Accounts (availing limits above ₹5.00 crore)
To be dealt with by a branch office of the bank functioning:
At the place where the registered/head/administrative office of the borrowing

company/firm is located.
OR
At the place where factory/ manufacturing unit of the borrowing company/firm/project
site office (for infrastructure advances) is located.
In case the borrowing company/firm have more than one factory/manufacturing unit,
the responsibility to collect the necessary financial data/other relevant information for
compiling the loan proposal shall rest with the branch where the company/firm
1
desires to avail the facilities.
In case where proposals are sanctioned at an office other than the place of
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manufacturing unit/factory, borrowers may be advised to open Current Account or
avail sub-Limits at the branch near to the manufacturing unit/factory for monitoring of
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sale proceeds effectively.
In view of latest developments in technology and other modern infrastructure

21
available for supervising/monitoring the accounts and to inbuild operational flexibility

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to preclude the possibility of loss of bankable business opportunity outside the

command area, it has been decided that ZOCAC-I & above may consider cases of
large corporate borrowers beyond the purview of command area guidelines for the
3
proposals falling within their vested loaning powers.
Small & Medium Accounts (availing limits upto ₹5.00 crore)
Loan proposal may be dealt by that branch office of the bank, which is near to the
factory/commercial establishment (e.g. office/ shop in case of trading accounts). The
05
Controlling Authority may demarcate the command area depending upon the density
of the branches in the area, infrastructure/skills available in the branch, location of the
branch, etc.
The guidelines for priority sector advances shall continue to be followed as per PSFID
circulars issued from time to time.

25. Financial Appraisal
Financial Appraisal is a method for evaluating economic viability of any project. The
appraiser should have sound knowledge of various financial statements for analyzing
them.
As per Section 2 (40) of Companies Act 2013 ―financial statement‖ in relation to a

company, includes—
(i) a balance sheet as at the end of the financial year;

(ii) a profit and loss account, or in the case of a company carrying on anyactivity
not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any documentreferred to in
sub-clause (i) to sub-clause (iv)
1
a) UNDERSTANDING & ANALYSING FINANCIAL STATEMENTS
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While analyzing financial statements it is to be ensured that they are as per
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provisions of Company Act 2013.
As per Section 129 (1) of Companies Act 2013:-

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―The financial statements shall give a true and fair view of the state of affairs of the
company or companies, comply with the accounting standards notified under section
133 and shall be in the form or forms as may be provided for different class or
3
classes of companies in Schedule III‖.
Further, as per Section 129 (5) of Companies Act 2013:-
―Without prejudice to sub-section (1), where the financial statements of a company

do not comply with the accounting standards referred to in sub-section (1), the
05
company shall disclose in its financial statements, the deviation from the accounting
standards, the reasons for such deviation and the financial effects, if any, arising out
of such deviation.‖
Accounting Standards
As per Section 133 of Companies Act 2013:-
―The Central Government may prescribe the standards of accounting or any

addendum thereto, as recommended by the Institute of Chartered Accountants of
India, constituted under section 3 of the Chartered Accountants Act, 1949, in
consultation with and after examination of the recommendations made by the
National Financial Reporting Authority.‖

Rule 7 of the Companies (Accounts) Rules, 2014 provides that as a transition
provision, the standards of accounting as specified under the Companies Act, 1956
(i.e. the Companies (Accounting Standards) Rules, 2006) shall be deemed to be the
accounting standards until accounting standards are specified by the Central
Government under Section 133.
Formats for Financial Statements
Financial Statements are prepared for a definite period i.e. one year. As per Section
2 (41) of Companies Act 2013
- ―financial year‖, in relation to any company or body corporate, means the period
ending on the 31st day of March every year, and where it has been incorporated on
or after the 1st day of January of a year, the period ending on the 31st day of March
of the following year, in respect whereof financial statement of the company or body
corporate is made up‖
1
GENERAL INSTRUCTIONS AS PER SCHEDULE III OF THE COMPANIES ACT
2013:
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1) Additional disclosures specified in the Accounting Standards shall be made in the
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notes to accounts or by way of additional statement unless required to be
disclosed on the face of the Financial Statements.
2) Similarly, all other disclosures as required by the Companies Act shall be made in
21
the notes to accounts in addition to the requirements set out in this Schedule.
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3) (i) Notes to accounts shall contain information in addition to that presented in the
Financial Statements and shall provide where required (a) narrative descriptions
or disaggregations of items recognised in those statements; and (b) information
3
about items that do not qualify for recognition in those statements.

(ii) Each item on the face of the Balance Sheet and Statement of Profit and Loss
shall be cross-referenced to any related information in the notes to accounts. In
preparing the Financial Statements including the notes to accounts, a balance
shall be maintained between providing excessive detail that may not assist users
of financial statements and not providing important information as a result of too
05
much aggregation.
4) (i) Depending upon the turnover of the company, the figures appearing in the
Financial Statements may be rounded off as given below:—
Turnover Rounding off

(a) less than one hundred crore To the nearest hundreds, thousands, Lacs
rupees or millions, or decimals thereof.
(b) one hundred crore rupees or To the nearest Lacs, millions or crores, or
more decimals thereof.
(ii) Once a unit of measurement is used, it shall be used uniformly in the
FinancialStatements.
5. Except in the case of the first Financial Statements laid before the Company (after
its incorporation) the corresponding amounts (comparatives) for the immediately

preceding reporting period for all items shown in the Financial Statements
including notes shall also be given.
6. the terms used herein shall be as per the applicable Accounting Standards.
Note:—This part of Schedule sets out the minimum requirements for disclosure on
the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter
referred to as ―Financial Statements‖ for the purpose of this Schedule) and Notes.
Line items, sub-line items and sub-totals shall be presented as an addition or
substitution on the face of the Financial Statements when such presentation is
relevant to an understanding of the company‘s financial position or performance or to
cater to industry/sector-specific disclosure requirements or when required for
compliance with the amendments to the Companies Act or under the Accounting
Standards.
PART I — BALANCE SHEET
1
Name of the Company…………………….
Balance Sheet as at ………………………
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(Rupees in…………)
Particulars Note 22 Figures as at Figures as at the
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No. the end of end of the
current previous
reporting reporting period
21
period
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1 2 3 4
I. EQUITY AND LIABILITIES
3
(1) Shareholders‘ funds
(a) Share capital

(b) Reserves and surplus
(c) Money received against share
warrants
05
(2) Share application money pending

allotment
(3) Non-current liabilities
(a) Long-term borrowings

(b) Deferred tax liabilities (Net)
(c) Other Long term liabilities
(d) Long-term provisions
(4) Current liabilities
(a) Short-term borrowings

(b) Trade payables

(c) Other current liabilities
(d) Short-term provisions
TOTAL
II. ASSETS
Non-current assets
(1) (a) Fixed assets
(i) Tangible assets

(ii) Intangible assets
(iii) Capital work-in-progress
(iv) Intangible assets under
development
(b) Non-current investments
1
(c) Deferred tax assets (net)
(d) Long-term loans and advances
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(e) Other non-current assets
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(2) Current assets
(a) Current investments

21
(b) Inventories
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(c) Trade receivables

(d) Cash and cash equivalents
(e) Short-term loans and advances
3
(f) Other current assets

TOTAL
See accompanying notes to the Financial Statements.
Notes
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GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
1. An asset shall be classified as current when it satisfies any of the following

criteria:—
a) it is expected to be realised in, or is intended for sale or consumption in, the
company‘s normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is expected to be realised within twelve months after the reporting date; or
d) it is cash or cash equivalent unless it is restricted from being exchanged orto
settle a liability for at least twelve months after the reporting date.
All other assets shall be classified as non-current.

2. An operating cycle is the time between the acquisition of assets for processing
and their realisation in cash or cash equivalents. Where the normal operating
cycle cannot be identified, it is assumed to have a duration of twelve months.
3. A liability shall be classified as current when it satisfies any of the following

criteria:—
a) it is expected to be settled in the company‘s normal operating cycle;

b) it is held primarily for the purpose of being traded;
c) it is due to be settled within twelve months after the reporting date; or
d) the company does not have an unconditional right to defer settlement of
theliability for at least twelve months after the reporting date. Terms of a
liability thatcould, at the option of the counterparty, result in its settlement by
the issue of equityinstruments do not affect its classification.
All other liabilities shall be classified as non-current.
1
4. A receivable shall be classified as a ―trade receivable‖ if it is in respect of the
amount due on account of goods sold or services rendered in the normal course
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of business.
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5. A payable shall be classified as a ―trade payable‖ if it is in respect of the amount
due on account of goods purchased or services received in the normal course of
business.
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6. A company shall disclose the following in the notes to accounts:
A. Share Capital
3
For each class of share capital (different classes of preference shares to be treated
separately):
(a) the number and amount of shares authorised;

(b) the number of shares issued, subscribed and fully paid, and subscribed but
05
not fully paid;

(c) par value per share;
(d) a reconciliation of the number of shares outstanding at the beginning and at
the end of the reporting period;
(e) the rights, preferences and restrictions attaching to each class of shares
including restrictions on the distribution of dividends and the repayment of
capital;
(f) shares in respect of each class in the company held by its holding company or
its ultimate holding company including shares held by or by subsidiaries or
associates of the holding company or the ultimate holding company in
aggregate;
(g) shares in the company held by each shareholder holding more than 5 per
cent. shares specifying the number of shares held;
(h) shares reserved for issue under options and contracts/commitments for the
sale of shares /disinvestment, including the terms and amounts;

(i) for the period of five years immediately preceding the date as at which the
Balance Sheet is prepared:
(A) Aggregate number and class of shares allotted as fully paid-uppursuant to

contract(s) without payment being received in cash.
(B) Aggregate number and class of shares allotted as fully paid-upby way of
bonus shares.
(C) Aggregate number and class of shares bought back.
(j) terms of any securities convertible into equity/preference shares issued along
with the earliest date of conversion in descending order starting from the
farthest such date;
(k) calls unpaid (showing aggregate value of calls unpaid by directors and
officers);
(l) forfeited shares (amount originally paid-up).
B. Reserves and Surplus
1
(i) Reserves and Surplus shall be classified as:
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a) Capital Reserves;
b) Capital Redemption Reserve; 22
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c) Securities Premium Reserve;
d) Debenture Redemption Reserve;
e) Revaluation Reserve;
21
f) Share Options Outstanding Account;

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g) Other Reserves–(specify the nature and purpose of each reserve and the
amount in respect thereof);
h) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations
3
andappropriations such as dividend, bonus shares and transfer to/ from

reserves, etc.;
(Additions and deductions since last balance sheet to be shown under each of
the specified heads);
05
(ii) A reserve specifically represented by earmarked investments shall be termed as

a ―fund‖.
(iii) Debit balance of statement of profit and loss shall be shown as a negative figure
under the
head ―Surplus‖. Similarly, the balance of ―Reserves and Surplus‖, after adjusting
negative balance of surplus, if any, shall be shown under the head ―Reserves
and Surplus‖ even if the resulting figure is in the negative.
C. Long-Term Borrowings
(i) Long-term borrowings shall be classified as:
(a) Bonds/debentures;
(b) Term loans:

(A) from banks.
(B) from other parties.
(c) Deferred payment liabilities;

(d) Deposits;
(e) Loans and advances from related parties;
(f) Long term maturities of finance lease obligations;
(g) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of

security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the aggregate
amount of such loans under each head shall be disclosed.
(iv) Bonds/debentures (along with the rate of interest and particulars of redemption
or conversion, as the case may be) shall be stated in descending order of
maturity or conversion, starting from farthest redemption or conversion date, as
the case may be. Where bonds/ debentures are redeemable by instalments, the
1
date of maturity for this purpose must be reckoned as the date on which the first
instalment becomes due.
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(v) Particulars of any redeemed bonds/debentures which the company has power
to reissue shall be disclosed. 22
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(vi) Terms of repayment of term loans and other loans shall be stated.
(vii) Period and amount of continuing default as on the balance sheet date in
repayment of loans and interest, shall be specified separately in each case.
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D. Other Long-term Liabilities
Other Long-term Liabilities shall be classified as:

3
(a) Trade payables;(A receivable shall be classified as a ―trade receivable‖ if it is in

respect of the amount due on account of goods sold or services rendered in the
normal course of business.)
(b) Others.
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E. Long-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits;

(b) Others (specify nature).
F. Short-term borrowings
(i) Short-term borrowings shall be classified as:
(a) Loans repayable on demand;

(A) from banks.
(B) from other parties.

(b) Loans and advances from related parties;
(c) Deposits;
(d) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of

security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, the aggregate amount
of such loans under each head shall be disclosed.
(iv) Period and amount of default as on the balance sheet date in repayment of loans
and interest, shall be specified separately in each case.
G. Other current liabilities
1
(a) Current maturities of long-term debt; (for elaboration see Point 3 (c) above)
(b) Current maturities of finance lease obligations;
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(c) Interest accrued but not due on borrowings;
(d) Interest accrued and due on borrowings;
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(e) Income received in advance;
(f) Unpaid dividends;
(g) Application money received for allotment of securities and due for refund and
21
interest accrued thereon. Share application money includes advances towards

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allotment of share capital. The terms and conditions including the number of
shares proposed to be issued, the amount of premium, if any, and the period
before which shares shall be allotted shall be disclosed. It shall also be disclosed
3
whether the company has sufficient authorised capital to cover the share capital
amount resulting from allotment of shares out of such share application money.
Further, the period for which the share application money has been pending
beyond the period for allotment as mentioned in the document inviting application
for shares along with the reason for such share application money being pending
05
shall be disclosed. Share application money not exceeding the issued capital and
to the extent not refundable shall be shown under the head Equity and share
application money to the extent refundable, i.e., the amount in excess of
subscription or in case the requirements of minimum subscription are not met,
shall be separately shown under ―Óther current liabilities‖;
(h) Unpaid matured deposits and interest accrued thereon;

(i) Unpaid matured debentures and interest accrued thereon;
(j) Other payables (specify nature).
H. Short-term provisions
(a) Provision for employee benefits.

I. Tangible assets
(i) Classification shall be given as:

(a) Land;
(b) Buildings;
(c) Plant and Equipment;
(d) Furniture and Fixtures;
(e) Vehicles;
(f) Office equipment;
(g) Others (specify nature).
(ii) Assets under lease shall be separately specified under each class of asset.
(iii) A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the
1
related depreciation and impairment losses/reversals shall be disclosed
separately.
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(iv) Where sums have been written-off on a reduction of capital or revaluation of
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assets or where sums have been added on revaluation of assets, every balance
sheet subsequent to date of such write-off, or addition shall show the reduced or
increased figures as applicable and shall by way of a note also show the amount
21
of the reduction or increase as applicable together with the date thereof for the
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first five years subsequent to the date of such reduction or increase.
J. Intangible assets
3
(i) Classification shall be given as:
(a) Goodwill;
(b) Brands /trademarks;
(c) Computer software;
05
(d) Mastheads and publishing titles;

(e) Mining rights;
(f) Copyrights, and patents and other intellectual property rights, services and
operating rights;
(g) Recipes, formulae, models, designs and prototypes;
(h) Licences and franchise;
(i) Others (specify nature).
(ii) A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the related
amortization and impairment losses/reversals shall be disclosed separately.
(iii) Where sums have been written-off on a reduction of capital or revaluation of

assets or where sums have been added on revaluation of assets, every balance

sheet subsequent to date of such write-off, or addition shall show the reduced or
increased figures as applicable and shall by way of a note also show the amount
of the reduction or increase as applicable together with the date thereof for the
first five years subsequent to the date of such reduction or increase.
K. Non-current investments
(i) Non-current investments shall be classified as trade investments and other

investments and further classified as:
(a) Investment property;

(b) Investments in Equity Instruments;
(c) Investments in preference shares;
(d) Investments in Government or trust securities;
(e) Investments in debentures or bonds;
(f) Investments in Mutual Funds;
(g) Investments in partnership firms;
1
(h) Other non-current investments (specify nature).
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Under each classification, details shall be given of names of the bodies corporate
indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii)
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joint ventures, or (iv) controlled special purpose entities in whom investments have
been made and the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly-paid). In regard to
21
investments in the capital of partnership firms, the names of the firms (with the
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names of all their partners, total capital and the shares of each partner) shall be
given.
3
(ii) Investments carried at other than at cost should be separately stated specifying
the basis for valuation thereof;
(iii) The following shall also be disclosed:
(a) Aggregate amount of quoted investments and market value thereof;

05
(b) Aggregate amount of unquoted investments;

(c) Aggregate provision for diminution in value of investments.
L. Long-term loans and advances
(i) Long-term loans and advances shall be classified as:

(a) Capital Advances;
(b) Security Deposits;
(c) Loans and advances to related parties (giving details thereof);
(d) Other loans and advances (specify nature).
(ii) The above shall also be separately sub-classified as:

(a) Secured, considered good;
(b) Unsecured, considered good;
(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be disclosed under the
relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company or any of
them either severally or jointly with any other persons or amounts due by firms or
private companies respectively in which any director is a partner or a director or
a member should be separately stated.
M. Other non-current assets
Other non-current assets shall be classified as:
(i) Long-term Trade Receivables (including trade receivables on deferred credit

terms);
(ii) Others (specify nature);
(iii) Long term Trade Receivables, shall be sub-classified as:
1
(b ) Unsecured, considered good;
(c ) Doubtful.
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(iv) Allowance for bad and doubtful debts shall be disclosed under the relevant
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heads separately.
(v) Debts due by directors or other officers of the company or any of them either
severally or jointly with any other person or debts due by firms or private
21
companies respectively in which any director is a partner or a director or a

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member should be separately stated.
N. Current Investments
3
(i) Current investments shall be classified as:
(a) Investments in Equity Instruments;

(b) Investment in Preference Shares;
(c) Investments in Government or trust securities;
05
(d) Investments in debentures or bonds;

(e) Investments in Mutual Funds;
(f) Investments in partnership firms;
(g) Other investments (specify nature).
Under each classification, details shall be given of names of the bodies corporate
[indicating separately whether such bodies are: (i) subsidiaries, (ii) associates, (iii)
joint ventures, or (iv) controlled special purpose entities] in whom investments have
been made and the nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly paid). In regard to
investments in the capital of partnership firms, the names of the firms (with the
names of all their partners, total capital and the shares of each partner) shall be
given.
(ii) The following shall also be disclosed:

(a) The basis of valuation of individual investments;
(b) Aggregate amount of quoted investments and market value thereof;
(c) Aggregate amount of unquoted investments;
(d) Aggregate provision made for diminution in value of investments.
O. Inventories
(i) Inventories shall be classified as:
(a) Raw materials;

(b) Work-in-progress;
(c) Finished goods;
(d) Stock-in-trade (in respect of goods acquired for trading);
(e) Stores and spares;
(f) Loose tools;
(g) Others (specify nature).
1
(ii) Goods-in-transit shall be disclosed under the relevant sub-head of inventories.
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(iii) Mode of valuation shall be stated.
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P. Trade Receivables
(i) Aggregate amount of Trade Receivables outstanding for a period exceeding six
21
months from the date they are due for payment should be separately stated.
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(ii) Trade receivables shall be sub-classified as:

3

(c) Doubtful.
(iii) Allowance for bad and doubtful debts shall be disclosed under the relevant heads
separately.
(iv) Debts due by directors or other officers of the company or any of them either
05
severally or jointly with any other person or debts due by firms or private
companies respectively in which any director is a partner or a director or a
member should be separately stated.
Q. Cash and cash equivalents
(i) Cash and cash equivalents shall be classified as:
(a) Balances with banks;

(b) Cheques, drafts on hand;
(c) Cash on hand;
(d) Others (specify nature).
(ii) Earmarked balances with banks (for example, for unpaid dividend) shall be
separately stated.

(iii) Balances with banks to the extent held as margin money or security against the
borrowings, guarantees, other commitments shall be disclosed separately.
(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be
separately stated.
(v) Bank deposits with more than twelve months maturity shall be disclosed
separately.
R. Short-term loans and advances
(i) Short-term loans and advances shall be classified as:-
(a) Loans and advances to related parties (giving details thereof);

(ii) The above shall also be sub-classified as:
1
(c) Doubtful.
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(iii) Allowance for bad and doubtful loans and advances shall be disclosed under the
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relevant heads separately.
(iv) Loans and advances due by directors or other officers of the company or any of
21
them either severally or jointly with any other person or amounts due by firms or
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private companies respectively in which any director is a partner or a director or

a member shall be separately stated.
3
S. Other current assets (specify nature)
This is an all-inclusive heading, which incorporates current assets that do not fit into
any other asset categories.
T. Contingent liabilities and commitments (to the extent not provided for)
05
(i) Contingent liabilities shall be classified as:
(a) Claims against the company not acknowledged as debt;

(b) Guarantees;
(c) Other money for which the company is contingently liable.
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on capital account and

not provided for;
(b) Uncalled liability on shares and other investments partly paid;
(c) Other commitments (specify nature).

U. The amount of dividends proposed to be distributed to equity and preference
shareholders for the period and the related amount per share shall be disclosed
separately. Arrears of fixed cumulative dividends on preference shares shall also
be disclosed separately.
V. Where in respect of an issue of securities made for a specific purpose, the whole
or part of the amount has not been used for the specific purpose at the balance
sheet date, there shall be indicated by way of note how such unutilised amounts
have been used or invested.
W. If, in the opinion of the Board, any of the assets other than fixed assets and non-
current investments do not have a value on realisation in the ordinary course of
business at least equal to the amount at which they are stated, the fact that the
Board is of that opinion, shall be stated.
PART II – STATEMENT OF PROFIT AND LOSS
1
Name of the Company…………………….
Profit and loss statement for the year ended ………………………
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(Rupees in…………)
Particulars 22Note No. Figures as at Figures as at
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the end of the end of the
current previous
reporting reporting
21
period period
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1 2 3 4
I Revenue from xxx xxx
operations
3
II Other income xxx xxx

III Total Revenue (I + II) xxx xxx
IV Expenses:
Cost of materials Xxx Xxx
consumed
05
Xxx Xxx
Purchases of Stock-in-
Trade Xxx Xxx
Changes in inventories
of finished goods Xxx Xxx
work-in-progress and Xxx Xxx
Stock-in-Trade xxx Xxx
Employee benefits
expense
Finance costs
Depreciation and
amortization expense

Other expenses
Total expenses
V Profit before Xxx xxx

exceptional and
extraordinary items
and tax (III - IV)
VI Exceptional items xxx xxx
VII Profit before xxx xxx
extraordinary items
and tax (V - VI)
VIII Extraordinary items xxx xxx
IX Profit before tax (VII- xxx xxx
VIII)
X Tax expense:
1
(1) Current tax Xxx Xxx
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(2) Deferred tax Xxx Xxx
XI Profit (Loss) for the 22 xxx xxx
period from continuing
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operations (VII-VIII)
XII Profit/(loss) from xxx xxx
discontinuing
21
operations
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XIII Tax expense of xxx xxx

discontinuing
3
operations
XIV Profit/(loss) from xxx xxx
Discontinuing
operations (after tax)
(XII-XIII)
XV Profit (Loss) for the xxx xxx
05
period (XI + XIV)

XVI Earnings per equity
share: Xxx Xxx
(1) Basic xxx xxx
(2) Diluted
See accompanying notes to the financial statements.
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF PROFIT

AND LOSS
1. The provisions of this Part shall apply to the income and expenditure account
referred to in sub-clause (ii) of clause (40) of section 2 (of Companies Act 2013)
in like manner as they apply to a statement of profit and loss.
2.(A) In respect of a company other than a finance company revenue from

operations shall disclose separately in the notes revenue from—

(a) Sale of products;
(b) Sale of services;
(c) Other operating revenues;
Less:
(d) Excise duty.
(B) In respect of a finance company, revenue from operations shall include revenue
from—
(a) Interest; and

(b) Other financial services.
Revenue under each of the above heads shall be disclosed separately by way
of notes to accounts to the extent applicable.
3.Finance Costs
1
Finance costs shall be classified as:
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(a) Interest expense; 22
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(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
21
4. Other income
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Other income shall be classified as:

3
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable to such
income).
05
5. Additional Information
A Company shall disclose by way of notes additional information regarding

aggregateexpenditure and income on the following items:—
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages, (ii)
contribution to provident and other funds, (iii) expense on Employee Stock
Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv)
staff welfare expenses].
(b) Depreciation and amortisation expense;
(c) Any item of income or expenditure which exceeds one per cent of the
revenue from operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest expense;
(f) Dividend income;

(g) Net gain/loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation (other than
considered as finance cost);
(j) Payments to the auditor as (a) auditor; (b) for taxation matters; (c) for
company law matters; (d) for management services; (e) for other services;
and (f) for reimbursement of expenses;
(k) In case of Companies covered under section 135, amount of expenditure
incurred on corporate social responsibility activities;
(l) Details of items of exceptional and extraordinary nature;
(m) Prior period items;
(ii) (a) In the case of manufacturing companies,—
(1) Raw materials under broad heads.

(2) Goods purchased under broad heads.
1
(b) In the case of trading companies, purchases in respect of goods traded in
by the company under broad heads.
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(c) In the case of companies rendering or supplying services, gross income
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derived from services rendered or supplied under broad heads.
(d) In the case of a company, which falls under more than one of the
21
categories mentioned in (a), (b) and (c) above, it shall be sufficient compliance
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with the requirements herein if purchases, sales and consumption of raw

material and the gross income from services rendered is shown under broad
heads.
3
(e) In the case of other companies, gross income derived under broad heads.
(iii) In the case of all concerns having works in progress, works-in-progress under
broad heads.
(iv)(a) The aggregate, if material, of any amounts set aside or proposed to be set
05
aside, to reserve, but not including provisions made to meet any specific
liability, contingency or commitment known to exist at the date as to which the
balance sheet is made up.
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
(v) (a) The aggregate, if material, of the amounts set aside to provisions made for
meeting specific liabilities, contingencies or commitments.
(b) The aggregate, if material, of the amounts withdrawn from such provisions,
as no longer required.
(vi) Expenditure incurred on each of the following items, separately for each
item:—
(a) Consumption of stores and spare parts;
(b) Power and fuel;
(c) Rent;

(d) Repairs to buildings;
(e) Repairs to machinery;
(f) Insurance;
(g) Rates and taxes, excluding, taxes on income;
(h) Miscellaneous expenses,
(vii)(a) Dividends from subsidiary companies.
(b) Provisions for losses of subsidiary companies.
(viii) The profit and loss account shall also contain by way of a note the following
information, namely:—
(a) Value of imports calculated on C.I.F basis by the company during the financial
year in respect of—
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
1
(b) Expenditure in foreign currency during the financial year on account of royalty,
know-how, professional and consultation fees, interest, and other matters;
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(c) Total value if all imported raw materials, spare parts and components consumed
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during the financial year and the total value of all indigenous raw materials,
spare parts and components similarly consumed and the percentage of each to
the total consumption;
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(d) The amount remitted during the year in foreign currencies on account of
dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the dividends
3
were due and the year to which the dividends related;
(e) Earnings in foreign exchange classified under the following heads, namely:—
I. Export of goods calculated on F.O.B. basis;

II. Royalty, know-how, professional and consultation fees;
05
III. Interest and dividend;

IV. Other income, indicating the nature thereof.
Note:— Broad heads shall be decided taking into account the concept of materiality
and presentation of true and fair view of financial statements.
As mentioned earlier, as per Section 2(40) of Companies Act 2013 ―financial

statement‖ in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;

(ii) a profit and loss account, or in the case of a company carrying on any activity
not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and

(v) any explanatory note annexed to, or forming part of, any document referred to
in sub-clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to One Person Company,
small company and dormant company, may not include the cash flow
statement.
Requirement of Audited Balance Sheet: As per Bank‘s internal guidelines,annual

accounts of all borrowers with credit limits of Rs. 20 Lacs and above from the
banking system (except the exempted category) and cases where accounts are
required to be audited under any other law i.e. Income Tax Act, Company‘s Act, etc.
should compulsorily be presented to the Bank duly audited by Chartered Accounts.
(Refer LA Cir 110/2008 dt 30.07.2008)
Also, as perSection 44 AB of Income Tax Act – Every person
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the
1
case may be, in business exceed or exceeds one crore rupees in any previous
:0
year; or
(b) carrying on profession shall, if his gross receipts in profession exceed [fifty]Lac
22
rupees in any previous year; or
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(c) carrying on the business shall, if the profits and gains from the business are
deemed to be the profits and gains of such person under section 44AE or
21
section 44BB or section 44BBB, as the case may be, and he has claimed his
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income to be lower than the profits or gains so deemed to be the profits and
gains of his business, as the case may be, in any previous year; or
(d) carrying on the [business]shall, if the profits and gains from the [business]are
3
deemed to be the profits and gains of such person under [section 44AD] and
he has claimed such income to be lower than the profits and gains so deemed
to be the profits and gains of his [business]and his income exceeds the
maximum amount which is not chargeable to income-tax in any [previous year,]
Following clause (e) shall be inserted after clause (d) of section 44AB by
05
the Finance Act, 2016, w.e.f. 1-4-2017:

(e) carrying on the business shall, if the provisions of sub-section (4) of section
44AD are applicable in his case and his income exceeds the maximum amount
which is not chargeable to income-tax in any previous year,
get his accounts of such previous year audited by an accountant before the specified
date and furnish by that date the report of such audit in the prescribed form duly
signed and verified by such accountant and setting forth such particulars as may be
prescribed :
Provided that this section shall not apply to the person, who derives income of the
nature referred to in section 44B or section 44BBA, on and from the 1st day of April,
1985 or, as the case may be, the date on which the relevant section came into force,
whichever is later:
Provided further that in a case where such person is required by or under any other
law to get his accounts audited, it shall be sufficient compliance with the provisions
of this section if such person gets the accounts of such business or profession

audited under such law before the specified date and furnishes by that date the
report of the audit as required under such other law and a further report by an
accountant in the form prescribed under this section.
Auditors‘ are required to comply with Companies (Auditor‘s Report) Order,

2015[CARO 2015]as per MCA Order dated 10.04.2015, which came into force on
the date of its publication in the Official Gazette, which set out the guidelines and
specify the area which an auditor is required to look into and comment in his report.
It shall apply to every company including a foreign company as defined in clause

(42) of section 2 of the Companies Act, 2013 (18 of 2013) [hereinafter referred to as
the Companies Act], except -
(i) a banking company as defined in clause (c) of section 5 of the Banking

Regulation Act, 1949 (10 of 1949);
(ii) an insurance company as defined under the Insurance Act,1938 (4 of 1938);
(iii) a company licensed to operate under section 8 of the Companies Act;
1
(iv) a One Person Company as defined under clause (62) of section 2 of the
Companies Act and a smallcompany as defined under clause (85) of section 2
:0
of the Companies Act; and
(v) a private limited company with a paid up capital and reserves not more than
22
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rupees fifty Lac andwhich does not have loan outstanding exceeding rupees
twenty five Lac from any bank or financialinstitution and does not have a
turnover exceeding rupees five crore at any point of time during thefinancial
21
year.
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Accounting Standard (AS)

3
Objective: As per Ministry of Corporate Affairs – ―This Standard prescribes the basis
for presentation of general purpose financial statements to ensure comparability both
with the entity‘s financial statements of previous periods and with the financial
statements of other entities. It sets out overall requirements for the presentation of
financial statements, guidelines for their structure and minimum requirements for
their content.‖
05
Formulation: The Accounting Standards Board (ASB)formulate Accounting

Standards with a view to assisting the Council of the ICAI in evolving and
establishing Accounting Standards in India. It examine how far the relevant
International Accounting Standard/ International Financial Reporting Standard can
be adapted while formulating the Accounting Standard and to adapt the same.
As per Section 133 of Companies Act 2013 – ―The Central Government may
prescribe the standards of accounting or any addendum thereto, as recommended
by the Institute of Chartered Accountants of India, constituted under section 3 of the
Chartered Accountants Act, 1949, in consultation with and after examination of the
recommendations made by the National Financial Reporting Authority.‖
The Accounting Standards have been notified by Ministry of Corporate Affairs (MCA)
through official Gazette.

International Financial Reporting Standards (IFRS) are Standards, Interpretations
and the Framework adopted by the International Accounting Standards Board
(IASB). Many of the standards forming part of IFRS are known by the older name of
International Accounting Standards (IAS). IAS were issued between 1973 and
2001 by the Board of the International Accounting Standards Committee (IASC). On
1 April 2001, the new IASB took over from the IASC the responsibility for setting
International Accounting Standards.
b) Reclassification and Rearrangement of Balance Sheet By Lender:
A banker needs to analyze financial statements of a company while appraising a

proposal to know itsrepayingcapacity and ensuring its liquidity and solvency. While
analyzing these financial statements, reclassification and rearrangement of Balance
Sheet is required.
Balance Sheet is divided into two parts i.e. Assets & Liabilities. From a banker‘s
1
point of view, a broad classification of assets & liabilities can be as under:-
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ASSETS
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 NON-CURRENT ASSETS
 CURRENT ASSETS
21
LIABILITIES
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 SHAREHOLDER‘S FUNDS (Net Worth)

 NON CURRENT LIABILITIES
3
 CURRENT LIABILITIES
In a balance sheet of a company assets and liabilities are shown as long term or
short term which needs to be reclassified for analysis as per internal Bank
guidelines. As such, it is necessary to be aware of Bank‘s guidelines issued from
05
time to time on this score.
The items of Balance Sheet and Profit & Loss Accounts are as per Companies Act
2013 and already discussed above.Reclassification & rearrangement of these items
should be as per Bank guidelines enumerated hereunder:-
1. Treatment of unsecured loans for Balance Sheet analysis
In terms of L&A Cir. No.227 dated 19.12.2020– For Balance Sheet analysis,
treatment of unsecured loans raised by the corporate in normal course of their
business may be done as under :-
i. In case of Partnership, Proprietorship and Private Ltd. Companies, the
unsecured loans raised from friends, relatives and Directors etc. which
remain in the business on continuous basis may be treated as quasi
capital to the extent not exceeding 100% of tangible net worth of the
party subject to the condition that these loans shall not be withdrawn

during the currency of the loan and shall be subordinate to bank
borrowings. An undertaking to the effect that these loans and advances
shall not be withdrawn during the subsistence of credit facilities shall be
obtained.
Amount of unsecured loans over & above the tangible net worth of the
party, if any, should be treated as term liability for calculation of various
financial ratios
ii. In case of Public Ltd. Company, the unsecured loans should be treated
as long term debts
2. Treatment of Sundry Creditors for Calculating Drawing Power
In terms of L&A Cir. No.153 dated 16.12.2009 – Sundry creditors to include

outstanding creditors for direct expenses incurred in manufacturing process
such as job work charges etc. in addition to sundry creditors for purchase of
stocks. As such, borrowers to provide, as on date of inventory, complete
statement of stocks, sundry creditors (for purchase of stocks and for job-work
1
etc.) and sundry debtors (receivables).
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Keeping in view the above guidelines, items pertaining to sundry creditors are
to be rearranged while calculating Drawing Power.
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3. Treatment of Term Loan Instalments for assessment of MPBF, Current

Ratio and NWC
21
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In terms of L&A Cir. No.227 dated 19.12.2020 - Term loan instalments

payable within next 12 months has to be treated as ‗Other Current liabilities‘ for
assessment of MPBF, NWC and Current Ratio
3
4. Treatment of Export Receivables (LA 227/2020 dt 19.12.2020)
a) For calculating MPBF the amount of export receivables may be excluded

from the current assets as need based limits for export receivables could
be sanctioned and in respect of such receivables borrowers are not
05
required to bring in 25% by way of Net Working Capital (NWC).
b) Where an exporters desires, export receivables may be included in the

total current assets for arriving at MPBF, but the minimum stipulated NWC
(i.e. 25% of total current assets under second method of lending) may be
reckoned after excluding the quantum of export receivables from the total
current assets for fixing up the post shipment credit limit.
In the above situation, the sanctioning authority may permit to accept

lower current ratio keeping in view the margin requirement in respect of
limits set up for domestic sales as against normal current ratio 1.33:1
where export receivables are being financed without any margin

5. Treatment of Margin Money on Account of Letters of Credit/Bank
Guarantees
Margin Money is insisted upon, by a bank to cover risk, its inclusion in the build-
up of Current Assets would defeat the very purpose for which "Margin Money"
is taken. As such it is advised "Margin Money" should be excluded from the
projected build-up of Current Assets while assessing working capital credit
needs of the borrower.(LA 227/2020 dated 19.12.2020)
6. Treatment of Investment made in Associate/Allied companies/

Subsidiaries Etc.(LA 227/2020 dated 19.12.2020)
Investments made in shares, debentures, etc. of a current nature, units of Unit

Trust of India and other Mutual Funds and in associate companies/subsidiaries
as well as investments made and/or loan extended as inter corporate deposits
are to be excluded from the build up of current assets at the time of
assessment of Maximum Permissible Bank Finance. It is also advised that as
1
far as possible, on account of investments made in associate/allied/subsidiary
concerns and inter corporate deposits, the current ratio should not slip below
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the stipulated level .
As regards adjustment of such investments for arriving at net working capital
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(NWC), sanctioning authority may permit adjustment, provided the company is
financially sound and its current ratio does not slip back below 1.33: 1 after
such investments.
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7. Treatment of Redeemable Preference Shares.(LA 227/2020 dated

19.12.2020)
3
Preference shares redeemable within one year be treated as current liabilities.

However, preference shares redeemable after one year be treated as term
liabilities
8. Treatment of Deferred Tax Liability/ Deferred Tax Asset (DTL / DTA)

05
The tax effect of the timing difference originating during a period (Difference
between Accounting Income & Taxable Income) is referred to as Deferred Tax
Asset/ Deferred Tax Liability depending on whether the Tax rebate relating to
the current accounting period would be available in the subsequent accounting
periods or the rebate available in the subsequent accounting periods has been
claimed in advance during the current accounting period. DTL/DTA is disclosed
under a separate head in the balance sheet from current assets and current
liabilities. Further the break-up of DTL/DTA in the major components is
disclosed in the notes to accounts.
DTA is arrived at through increasing the profits/ reducing the loss. The eligible
tax rebate reflected as DTA can be recognised only if it is reasonably certain
that the company will earn adequate profits in the subsequent accounting
period(s). Till such time, it is in the nature of anintangible asset. Therefore, it
should be reduced from the Net Worth to arrive at the TNW.

DTL represents tax benefits claimed in advance and there is no payment
obligation attached to it. Further, its reversal in the subsequent accounting
period(s) will be only by way of transfer to the surplus. Therefore,
notwithstanding the DTL being shown separately, it should be treated as a part
of the Net Worth.
Since DTL & DTA are accounting treatments only, DTL is to be added to, and
DTA is to be subtracted from, the net profit for arriving at PAT (DTA / DTL for
this purpose would only mean the amount recognized as such during the
accounting year under reference).
In the event there is a reversal in a particular accounting year of DTA/DTL

either in full or in part, in respect of DTA/DTL in an earlier accounting period,
the amount of such reversal should be ignored. As the existence of DTA/DTL is
an indication that the borrower is entitled to tax concessions in subsequent
years / tax concessions relating to subsequent years have been claimed in
1
advance, this fact needs to be kept in view while deciding upon the estimated /
projected financials.
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c) RATIO ANALYSIS 22
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Everything which can be expressed in monetary value is presented in the financial

statements. These statements require analysis in order to make them meaningful.
21
Analysis of balance sheet not only requires comparison of absolute figures with
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previous periods of the same firm/ company or other firms/ companies but also
requires comparing of various ratios.
3
Ratio is a relationship between two accounting figures. Ratio Analysis is an

important tool in the hands of bankers for the analysis of financial statements of a
business entity. It helps in meaningful summarization of large number of financial
data to provide a qualitative judgement about the financial performance of a
business unit. The general standards used by bankers are Time Series
Analysis/Trend Analysis and Cross Sectional Analysis.
05
Time Series Analysis/Trend Analysis
The simple way to evaluate the financial performance of a unit is to compare the
current year ratios with that of the past. When the financial ratio of a business
entity is compared with each other over a period of time, it is known as Time
Series Analysis. This type of analysis provides an insight to whether units
performance has improved, deteriorated or remained unchanged over a particular
period of time.
Cross Sectional Analysis
The other way of comparison is to compare the ratios of one business entity with
the ratios of other business entities in the same industry at the same point of time.
This type of analysis is called Cross Sectional Analysis and gives the relative
performance of the unit and its standing amongst the competitors.

The commonly used ratios while appraising a proposal are as under:-
 CURRENT RATIO: It is a liquidity ratio. A business entity is expected to have
sufficient short term liquidity to meet out its current obligations that may arise
out of day to day operations. Shortage of liquidity results in poor credit
worthiness, loss of creditors' confidence and short term insolvency which may
ultimately lead to closure of the unit. Current Ratio is arrived as under:-
Current Assets
Current Ratio =
Current Liabilities
Minimum Current Ratio of a business entity should not be less than 1.33:1
implying that current assets will be reasonably higher than current
liabilities to take care of the business entity's short term liquidity. However,
where PBF is assessed under Nayak Committee Recommendations, current
ratio of 1.25 should be acceptable. (LA 100/2000)
Though healthy current ratio is desirable but unreasonably high current ratio
1
tends to pull down the profits of the unit indicating inefficient use of current
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assets, which are partly financed by costly long term sources. It may also
indicate undesirable build up of inventory or book debts.
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 NET WORKING CAPITAL: Though Net Working Capital (NWC) is not a ratio
still it is an important concept for arriving at working capital requirement of a
business entity from financial institutions. It can be worked out by taking
21
difference of Current Assets & Current Liabilities.

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Net Working Capital = Current Assets – Current Liabilities

3
From the view point of a financial analyst, NWC is that part of long term funds
which is employed in the business for operating activities and is also looked
upon as the margin contributed by the owners towards working capital funds.
As such, NWC is arrived as under:-
Net Working Capital = Long Term Sources – Long Term Uses
05
Current Ratio is a popular indicator of short term liquidity position of a

business entity but should always be supplemented by absolute figure of
NWC. An increase in Current Ratio by itself does not always mean increased
contribution from long term funds for business operations.
It can be illustrated by taking an example. Suppose a business entity is
having Current Assets of Rs.60 Lac and Current Liabilities of Rs.30 Lac. The
Current Ratio will be 2:1. However, if Current Assets are reduced by Rs.15
Lac for paying equivalent amount of Current Liability, Current Ratio will jump
to 3:1, whereas in both the cases NWC remains same at Rs.30 Lac. As such,
NWC should always be used withCurrent Ratio for analyzing the financial
position of an entity as regards to liquidity and margin contribution.
 DEBT EQUITY RATIO:The ratio indicates long term solvency of a business

entity and it is a measure of long term liabilities with respect to Tangible Net
Worth(TNW). Debt includes all long term liabilities whereas TNW is sum total

of Capital andReserves &Surplus, net of intangible assets. Reserves for
calculation of TNW denotes free reserves created out of profit and not those
created for meeting specific liabilities or revaluation reserve. A lower ratio
represents higher stake of the promoters in the business and looked upon
favourably by a banker. Higher ratio indicatesentity‘s larger dependence on
outside long term liabilities. DER is arrived as under:-
Long Term Debts

Debt Equity Ratio =
Tangible Net Worth
Long Term Debts include long term unsecured loans raised by a business
entity. However, that portion of unsecured loans which is treated as quasi
equity (in case of Partnership, Proprietorship and Private Ltd. Companies)is
to be deducted from long term debts and it is to be included as part of TNW
for arriving at DER.
Our Bank has in place Policy on DER, contained in L&A Cir. No.145 dated
1
31.12.2019,wherein level of DER for project financing under different
industries and vested powers with various authorities has been
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prescribed.However DER norms for loan pertaining to Hybrid Annuity Model
(HAM) has been prescribed vide LA circular 102/2020 dated 01.06.2020.
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 TOL/ ADJUSTED TNW: It is a measure of a business entity's financial

leverage calculated by dividing the total outside liabilities (i.e. long term
21
loans, short term loans and current liabilities OR entire liabilities excluding
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shareholders‘ fund.) by tangible net worth(less investments in associate/

allied/ subsidiary units) of thatentity. A high ratio indicates high financial
leverage and banks/ financial institutions prefer to abstain extending further
3
financial assistance to such entities.
Long Term Debts + Short Term Debts + Current

TOL/ Adjusted TNW = Liabilities
Net Owned Funds – Intangible Assets
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 TERM LIABILITY/ ADJUSTED TNW:It is a measure of Term Liabilities

(liabilities which are expected to be repaid in a definite period) to Adjusted
TNW. The ratio supplements other leverage ratios while taking decisions for
extending long term loans to a business entity. A high ratio is not favoured for
extending further long term loan to the concerned party.
Term Liabilities
Term Liability/ Adjusted TNW = Net Owned Funds – Intangible
Assets
 OPERATING PROFIT RATIO: It is a profitability ratio signifying margin of

profit on business operations.
Operating Profit
Operating Profit Ratio =
Net Sales

Operating Profit includes profits from operations only. Any secondary income,
extraordinary income and/ or expenditure and taxes are excluded while
arriving at Operating Profits.Net Sales implies Gross Sales Less Excise Duty.
A high ratio indicates good profit margin and is considered favourable.
 DEBT SERVICE COVERAGE RATIO:It indicates the ability of a business

entity to generate cash accruals for repayment of installment and interest.
PAT + Depreciation + Interest on Term Loan

DSCR =
Annual Installment + Interest on Term Loan
A ratio of 1.5 to 2 is considered reasonable. Lower ratio needs to be looked

into further while a very high ratio may require fixing lower repayment period.
 FIXED ASSET COVERAGE RATIO (FACR): This ratio indicates the degree
of security available to the secured term lenders. It is arrived at by dividing
1
the Net Fixed Assets by the Term Debt outstanding. All those term liabilities,
which have been secured by charge on fixed assets (e.g. Term Loans,
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Debentures, Fixed Deposits from Public etc.), should be reckoned. It is
desired that FACR does not go below unity so that the lent funds are secured
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by assets at all times.
 INTERNAL RATE OF RETURN: It is a discount rate which equates the

21
present value of cash inflows with the present value of cash outflows of an
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investment. In other words, the internal rate of return equates to the interest
rate, expressed as a percentage that would yield the same return if the funds
had been invested over the same period of time.
3
If the internal rate of return for the project is less than the current bank interest
rate it would be more profitable to put the money in the bank than execute the
project. For any project to be acceptable, it must meet a minimum IRR
requirement. The project would be acceptable only if its IRR is higher than the
opportunity cost of capital (also known as the required rate of return).
05
 BREAK EVEN POINT:BEP is the level of operations (in terms of sales or

production or capacity utilization) at which total revenues are equal to total
operating costs (fixed and variable) or, in other words, the operating profit is
equal to zero. A business entity starts earning operating profits only after the
break-even is reached. At BEP, ―contribution‖ exactly equals the ―fixed costs‖.
The value of BEP gives an indication to the margin of safety available while
operating at certain capacity utilization. A high value of BEP indicates that the
entity has to operate on higher capacity utilization to cover its fixed cost
implying low margin of safety. Banker takes calibrated decision for financing
business entities with high BEP considering various factors like past history
(in case of existing unit only), expected business opportunities, managerial
competence, acceptability of the product, level of competition in the market in
that particular industry etc. A low BEP indicates higher margin of safety and

provides comfort to a banker while taking business decisions. However,
various factors having impact on business of a unit should be carefully
scrutinized even in case of units having low BEP.
 SENSITIVITY ANALYSIS: Projects do not always run to plan. Projected

profitsmay be eroded by an increase in costs or a decrease in revenue.
Sensitivity Analysis involves changing input variable estimates (cost &
revenue) from an original set of estimates (called the base case) and
determines their impact on a project‘s measured results, such as DSCR.
While conducting sensitivity analysis, values of inputs are varied to work out
viability of the project even in adverse scenarios. There can be three adverse
scenarios i.e. rise in critical input cost which the business unit may not be
able to pass to the consumers, reduction of selling price (say due to
completion) thereby reducing total revenue and in worse conditions it may be
a combination of the two i.e. increase in critical input cost with simultaneous
decrease in selling price. Any of these situations will have impact of reducing
1
profits of a unit and adverse impact on DSCR.
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The input cost or revenues may be increased or decreased respectively
taking some sensitivity factor, say 5% i.e. if input cost is increased, it will be
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5% more than projected values and if revenues are decreased, it will be 5%
lesser than projected value. Profits are reworked out after taking impact of
such increase in cost or decrease in revenue and fresh DSCR is worked out
21
for above mentioned situations. In case DSCR remains in acceptable limits

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even after considering such adverse movements, the project is considered to

be viable.
3
d) WORKING CAPITAL ASSESSMENT
Working capital for any unit means the total amount of circulating funds required for
meeting day to day requirements of the unit. For proper working a manufacturing unit
needs a specific level of current assets such as raw material, stock in process,
finished goods, receivables and other current assets such as cash in hand/ bank and
05
advances etc. So the working capital means the funds invested in current assets.
The trading units need the working capital for holding goods and allowing credit to its
customers. The service units need the working capital for meeting the expenditure,
for making advance payments to its staff and providing credit to its customers. So all
type of units whether in manufacturing or trading or service sector need working
capital.
Gross Working Capital and Net Working capital:
Gross Working Capital means total funds required for procuringentire current assets.
Net Working Capital is that part of long term funds which is employed in the business
for operating activities and is also looked upon as the margin contributed by the
owners towards working capital funds.
Role of Banker:The unit should have sufficient amount of working capital. A portion

of it is to be financed from long term sources called the liquid surplus or net working
capital (NWC). The remaining is normally financed by a bank in the form of working
capital limits. Assessment of Working Capital limit is a technique for extending
appropriate limit to the borrowing unit.
Parameters for various stages in computation of working capital:
Stage Time V a l ue
Raw Material Holding period value of RM consumed during
the period
SIP Time taken in converting the RM + Mfg.Exp. during theperiod
RM into FG (Cost of production)
FG Holding period of FG before R.M + Mfg. Exp. +Adm.
being sold overheads for the period (Cost of
sales)
Receivables Credit allowed to buyer RM+ Mfg. Exp. + Adm. Exp.+
Profit for the period (sales)
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For Holding Period in respect of some major Industries please refer (LA Cir
176/2004 dt 31.12.2004)
The assessment of working capital requirement of business unit has been engaging
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the attention of the Govt., RBI and a series of committees were set up to suggest
appropriate modalities of financing working capital.
21
At present, common methods for assessing working capital are Turnover Method as
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per Nayak Committee recommendations, second method of lending as per Tandon

Committee recommendations and Cash Budgeting Method.
3
Cash budgeting method is based on the concept of financing mismatch of inflows

and outflows of funds of a business entity during a year and the method is used
largely in Sugar, Tea, , Film Production, construction industry, service industry,
industries based on seasonal activities etc.
Working Capital requirement of other business entities are assessed as per Nayak
05
Committee recommendations and second method of lendingas per Tandon

Committee recommendations based on quantum of loan.( LA 40/2020)
NAYAK COMMITTEE RECOMMENDATIONS
To give a comprehensive and straight line method for the assessment of working
capital requirement of the borrowers, RBI constituted a working group under the
chairmanship of Shri P.R. Nayak.In terms of extant guidelines units having
aggregate working capital requirement upto Rs.5.00 crore for MSME units and
Rs.2.00 crore for others from the banking system have to be assessed as per
‗Simplified Turn Over Method‘.
Under this method working capital limits are to be computed on the basis of a
minimum of 25% of their Projected Annual Turn-Over (PATO) assessed on realistic

basis for new as well as existing units. Out of this, at least 4/5 th(20% of their PATO)
be provided by the bank and the borrower should contribute 1/5 th of this estimated
working capital requirement (5% of PATO) as margin money of working capital.
(Detail as per LA Cir. 100/2000 dt 28.09.2000)
These guidelines have been partially amended as under:
As per MSME Cir. No.14/2017 dated 27.02.2017 (in supersession of Circular

letter No.1 dated 12.01.2017&Cir. Letter No.3 dated 08.02.2017)& L&A Cir.
40/2020 dated 26.3.2020 L&A Cir. No.26/201847/2019 dated 19.04.2018
18.04.2019 (Page -80),due torecent developments on account of demonetization
and to encourage the MSE units to shift to digital mode, it has been decided that
WC requirement of MSE units (availing Fund Based Working
Capitalrequirementupto Rs.5.00 crore) will be assessed at 31.25% of the
projected annual turnover and unit will be sanctioned limit of a minimum 25% of the
projected annual turnover (amount equivalent to minimum 6.25% will be brought in
as margin) as also need-based on the production /processing cycle of the relative
1
units. Further in case of those units which are also effecting sales through digital
mode, the assessment for fixing limits to the extent of 30% of digital part of Sales
:0
against existing 20% be considered, keeping the prescribed margin (37.5% of annual
turnover registered digitally, shall be working capital requirement and 7.5% shall be
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the margin).
Further as per MSME Cir. No.29/2018 dated 02.05.2018, with introduction of GST,
21
it has been decided that WC limit of MSE (Micro & Small) units registered under
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GST (availing Fund Based Working Capitalrequirementupto Rs.5.00 crore) is to

be fixed to the extent of 30% of Annual Turnover/ Sales* against existing 25%,
keeping the prescribed margin (37.50% of annual turnover, shall be working
3
capital requirement and 7.5% shall be the margin to be brought in by MSEs).
*(Sales should be as per GST return & Sales must be duly verified by CA). These
guidelines are in addition to the above guidelines for Micro & Small Enterprises.
Also,IBA Managing Committee in its meeting held on 27.01.2017 has approved

05
advisory along with ‗Standard Operating Procedure (SOP)‘ for digital transactions.
Standard operating procedure for Digital transactions

Digital transactions:
All sales transactions reflected in the bank books other than cash and paper based
instruments (such as cheques, DDs, POs etc.) should be considered.
Eligibility
Units with minimum 25 percent digital portion of projected Turnover should be
considered.
How to fix limits

Assessment of limit on digital portion of projected Turnover should be based on past
andcurrent trends.
TANDON COMM ITTEE RECOMMENDATIONS

RBI constituted a working group under the chairmanship of Shri P.L. Tandon for
assessment of need based working capital limits to various business entities.
The Committee gave three methods of lending, out of which second method of
lending is widely used by bankers for assessing working capital requirement of any
business unit.
As per second method of lending, chargeable current assets are worked out based
on holding period of inventory (raw material, stock-in-process, finished goods) and
receivables. Norms of holding has been specified for some major industriesvideLA
Cir 176/2004 dt 31.12.2004. However, where norms are not available, holding period
can be compared with other units of the same industry and also with the past trend
of the same unit. Any major variation needs to be addressed before working out
1
maximum permissible bank finance (MPBF).
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Chargeable current assets are those assets on which Bank can create charge.
Assets on which charge cannot be created e.g. cash are to be taken as ‗Other
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Current Assets‘.
The working capital requirement of any business entity as per second method of
21
lending is worked out as under:-

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S. No. ITEMS Estimates Accepted for

Assessment Year__
1. Chargeable Current Assets
3
2. Other Current Assets

3. Total Current Assets (1 + 2)
4. Less: Other Current Liabilities
5. Working Capital Gap (3 – 4)
6. NWC at 25% of Total Current Assets (3) Less
Export Receivables
05
7. Projected Net Working Capital

8. Permissible Bank Finance (5 – 6)
9. Permissible Bank Finance (5 – 7)
10. Maximum Permissible Bank Finance
(Lower of 8 and 9)

26. Bank Guarantees
(L& A Circular No. 129 Dated 17.7.2020 and No. 12 dated 12.1.2021)
Definition
Guarantee is a contract to perform the promise, or discharge the liability of a third

person in case of his default. The guarantees can broadly be classified under two
main heads, namely, Performance and Financial Guarantees. The broad criteria for
classification of performance and financial guarantees are as under:-
A. Performance Guarantees
The guarantees which are essentially transaction-related contingencies that involve

an irrevocable undertaking to pay a third party in the event the counterparty fails to
fulfill or perform a contractual non-financial obligation, are to be classified as
performance guarantees. In such transactions, the risk of loss depends on the event
1
which need not necessarily be related to the creditworthiness of the counterparty
involved. An indicative list of performance guarantees is as under:
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i. Bid bonds; 22
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ii. Performance bonds and export performance guarantees;
iii. Guarantees in lieu of security deposits/ earnest money deposits (EMD) for
participating in tenders;
21
iv. Retention money guarantees;

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v. Warranties, indemnities and standby letters of credit related to particular

transaction.
3
B. Financial Guarantee
The guarantees which are direct credit substitutes wherein a bank irrevocably
undertakes to guarantee the repayment of a contractual financial obligation, are to
be classified as financial guarantees. Financial guarantees essentially carry the
same credit risk as a direct extension of credit i.e., the risk of loss is directly linked to
05
the creditworthiness of the counterparty against whom a potential claim is acquired.

An indicative list of financial guarantees is as under:
(i) Guarantees for credit facilities;

(ii) Guarantees in lieu of repayment of financial securities;
(iii) Guarantees in lieu of margin requirements of exchanges;
(iv) Guarantees for mobilization advance, advance money before the
commencement of a project and for money to be received in various stages of
project implementation;
(v) Guarantees towards revenue dues, taxes, duties, levies etc. in favour of
Tax/Customs/Port/Excise Authorities and for disputed liabilities for litigation
pending at courts;
(vi) Credit enhancements;
(vii) Liquidity facilities for securitization transactions;
(viii) Acceptances (including endorsements with the character of acceptance);

(ix) Deferred payment guarantees.
In addition to applying the above criteria for classifying the guarantees, the contents
of the guarantee to be issued are required to be gone through carefully and also the
contract entered into between the principal and the beneficiary to decide as to
whether a particular guarantee is a Performance Guarantee or Financial Guarantee.
1- APPLICATION, MODEL GUARANTEE FORM AND COUNTER INDEMNITY/

GENERAL COUNTERINDEMNITY:-
i. Application form on PNB-777 (Appendix-I) is to be obtained from the

customer as a request for issue of any guarantee.
ii. A copy of the Model Guarantee Form (PNB-685-Revised) to be issued in
favour of Govt. Departments, finalized by Reserve Bank of India in
consultation with Indian Banks' Association and various Govt. Departments is
enclosed (Appendix-II).
iii. Branches while issuing the guarantees need to ensure that Limitation Clause
1
is duly incorporated in the Guarantee Bond as under :-
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―Notwithstanding anything to the contrary contained herein:-
Our liability under this Guarantee shall not exceed ` [……….]/-;
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This Bank Guarantee shall be valid up to (being the date of expiry of the
Guarantee);
We are liable to pay up to the guarantee amount only and only if we receive
from you a written claim or demand not later than 12 months from the said
21
expiry date…………. (Date of expiry of guarantee).”

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iv. Counter indemnity (stamped) should be obtained from customers whereby

3
customer indemnifies the bank against any claim/loss/liability that might be

sustained in consequence of having paid the guarantee amount, as per
Appendix-III. However, in case of 100% margin, counter indemnity may be
dispensed with subject to taking a letter authorizing the bank to appropriate
the amount of security in the event of breach or default in contract
v. In cases where guarantee limit is set up in favour of a borrower, a General
05
Counter Indemnity (Appendix-IV) is to be executed once at the time of

documentation along with a request (Appendix-V) to be taken every time for
issuance of fresh BG
vi. Letter of guarantee issued by the bank on behalf of a customer is to be
compulsorily signed by two authorised officers both of whom should be power
of attorney holders of the bank. Where, however, there is only one power of
attorney holder at any office, the guarantee may be got signed by the
authorized power of attorney holder from a nearby office, but the Branch
Head/Manager/ Dy. Manager should compulsorily be the other signing officer
2- ISSUANCE OF GUARANTEE UNDER PRESCRIBED COVERING LETTER –

TO CHECK MISUSE/MALPRACTICES
i. The guarantees issued by the branches should be sent to the beneficiary

under a Standard Covering Letter available at Appendix-VIII (S-41-Revised).
This covering letter will be on a security paper in sets of four, serially in

number and should contain the telephone number and e-mail address of the
branch and controlling office. The first copy of the covering letter is to form the
first page of letter of guarantee and second and third copy on manifold paper
along with copy of BG bond is to be mailed to the Controlling Office of issuing
branch. The fourth copy is to form Office Copy for reference purposes and will
be kept at the issuing branch. The covering letter is to be signed by one of the
joint authorised officials, who signs the main guarantee bond
ii. Controlling office for the limited purpose of confirmation of Bank Guarantee is
defined as under :-
BG issuing Branch Controlling Office
GBB Circle office
LCB/ELCB Zonal Office
BGs sanctioned by GBB/MCC/RAM shall be issued by GBBs only
iii. Guarantees issued by branches should be sent to the beneficiary directly as

per laid down guidelines. It should be insisted upon the applicant that BGs to
be submitted by them should be sent to the organization/beneficiary directly
1
by the bank under Regd. Post (A.D.). In exceptional cases, where the
guarantee is handed over to the customer for any genuine reasons, the
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branch should immediately send by Regd. AD an unstamped duplicate copy
of the guarantee directly to the beneficiary with a covering letter requesting
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them to compare with the original receipt from their customer and confirm that
it is in order. The AD card should be kept with the loan papers of the
concerned guarantee. Further, the issuing branch may send the scanned
21
copy of BG bond along with office copy of standard covering letter to the
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beneficiary by email also, if available.
3- USE OF STRUCTUREDFINANCIAL MESSAGING SYSTEM (SFMS) FOR

3
SENDING AND RECEIVING MESSAGES FOR BANK GUARANTEES
Bank guarantees to be issued in paper form and delivered by issuing banks to

beneficiary/applicant. However, a separate advice of the BG be sent to the advising
bank i.e. beneficiary‘s bank through SFMS only.As per extant Bank guidelines,
sending and receiving of bank guarantee message has been made mandatory w.e.f
05
27.01.2015 and branches are to issue/receive message of bank guarantee, issued in

paper form, electronically using SFMS platform. Similarly, sending and receiving
bank guarantee amendment message through SFMS has also been customized in
CBS and has been made mandatory w.e.f.13.07.2015. Process flow to be followed
by the branches will be as per L&A circulars issued on the subject from time to time
A sum of Rs. 110.00 + GST per ILG/ILC message (LA 196/2020), is to be recovered
by branch officials as charges for each bank guarantee message originated through
SFMS at the time of fresh issuance of ILG and subsequent amendment, if any vide
LA Cir 90/2018 Dt 17.09.2018. These charges have been customized vide LA Cir
54/2019 dated 04.05.2019& 54/2019 dated 04.05.2019 and reports to be generated
have also been customized vide the same circular. The process flow to be followed
by the branches in CBS is given in L&A Cir.42/16 &L&A 90/2018.
4- PERIOD OF GUARANTEE:

i. Guarantees should be issued for a definite period and normally not to run for
more than a year. In special circumstances, these may be issued for periods
exceeding 12 months in terms of delegated powers. The guarantees which
have been issued by branches under guarantee limit sanctioned by higher
authorities can be renewed provided: -
- They are within sanctioned limit.
- Extension is for a period not exceeding 12 months,
- No adverse feature has been noticed.
ii. In case of guarantees extending over a period of two years, yearly review of
cases be put up to the sanctioning authority.
iii. For Projects of Long Gestation period and National importance bank guarantee
for maximum 15 years could be approved by sanctioning authority not below
HOCAC-I.Since such types of guarantees are generally issued for long
duration projects specially infrastructure projects, the complete credit
appraisal should be undertaken strictly in accordance with the laid down
guidelines.
1
5- Loaning Power:
As per extant guidelines, CMs/AGMs may permit issuance of letter of Guarantee
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upto a maximum of 5 years and Branch Heads in scale-II & III may permit issuance
of LG upto the maximum of 1 year, excluding the claim period of 12 months.
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ZOCAC-I may permit issuance of Letter of Guarantee up to a maximum of 10 years,
excluding the claim period of 12 months.
21
Bank Guarantees to Government departments with automatic renewal clause shall

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be issued on demand only and the sanctioning authority for such issuance shall be
one step higher, of the official with the vested powers for issuance of such letter of
guarantee. However, in case of opening of ILG/FLG against 100% coverage by
3
deposits, the guarantees may be issued irrespective of time period within vested
loaning powers(IRMD L&A cir No 100/2020).
6-SECURITY/MARGIN :
i. Branches to obtain security by way of cash margin/fixed deposit as the case

05
may be and/or a collateral security by way of charge on the immovable

properties and/or indemnity/guarantees from third person. In addition,
branches to obtain counter indemnity of the clients in order to protect bank's
interest. Minimum margin to be taken in respect of Bank Guarantees is
defined as under :-
MARGINS: Minimum margin for exercise of vested powers

Nature of MMG-II MMG-III SMG-IV SMG-V
Facilities (GBB (Segment Head (MCC/Segment (RAM/MCC
Incharge) RAM/ GBB Head
Incharge RAM/GBB
In-charge)
Letter of Guarantee
Inland Letter of 25% 15% 10% With or without
Guarantee 15%* 10%* 5%* Margin
Foreign Letter of NA 15% 10% With or without

Guarantee 10%* 5%* Margin
Deferred 25% 15% 10% 10%
Payment
Guarantee
*Denotes minimum margin prescribed for issuance of guarantee where the
bank has first charge over fixed assets and adequate surplus of security is
available after following the usual norms. Margins prescribed are the
minimum. However, higher margins may be stipulated wherever deemed
necessary
 Guarantees issued in favour of Court or to Government or any other person

on behalf of party/borrower relating to payment of taxes, excise duty, custom
duty or other Government dues, in dispute should be issued with only 100%
cash margin.
 Adequate security cover be obtained to prevent the constituents to develop a
tendency of defaulting in payments when invoked guarantees are honoured
by the branches.
 Margins as prescribed are to be obtained prior to issuance of guarantee.
1
Further, it should be ensured that guarantees in favour of court or to Govt. or
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any other person on behalf of party/borrower relating to payment of taxes,
excise duty, custom duty or other Govt. dues, in dispute should be issued
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only against 100% cash margin.
 Marking of lien in Cash Credit/Saving Fund/Current account is not permitted
for cash margin. FDR should be created as per the margin prescribed and lien
21
to be marked appropriately
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7- EXTENSION OF BANK GUARANTEE IN NPA ACCOUNTS

3
Bank has decided to delegate the power for extension of Bank Guarantees in NPA
accounts as under:
(i) In NPA accounts, Branch Heads may extend the period of bank guarantee,
already issued, within the limitation period of Bank Guarantee even in the
sanctions of higher authorities on existing terms and conditions, if the request is
05
received from the borrower.
(ii) Commission on the BGs shall be recovered in cash from the account holder at
the time of extension of Bank guarantee. If NPA a/c holder is not in a position to
pay the commission then it should be recorded in memorandum a/c.
(iii) Details of Bank Guarantees extended in NPA accounts, are to be submitted on

monthly basis in the limit sanctioned statement to the next higher authority.
8- Reversal of ILGs:
(i) For outstanding ILGs issued from 08.01.1997 onwards but before
18.01.2013/ outstanding ILGs issued from 18.01.2013 onwards having
claim period of less than one year:
In such cases securities and counter indemnities given against such ILGs

should not be discharged till the time original ILG duly discharged along with
no claim letter from beneficiary duly discharging Bank from its liability has
been received. On receipt of the same ILG shall be reversed.
However, instead of the prevalent practice of sending notice to the beneficiary

and reversing the guarantee after one month from the date of notice if no
reply is received, a registered acknowledgement due notice should be sent to
the beneficiary when the claim period has begun/when the ILG has expired (in
case no claim period is present). It should be incorporated in the notice that
the ILG has expired and the original Letter of Guarantee along with no claim
letter should be returned to the bank.
It is advised that ILGs issued to private beneficiaries prior to 18.01.2013 with

a claim period of less than 1 year shall be reversed having regard to terms on
which it was issued subject to the condition that three years have passed from
its date of expiry
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(ii) For ILGs issued from 18.01.2013 onwards with at least one year claim
period:
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Upon expiry of the ILG (including outstanding ILGs) i.e. when the claim period
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has begun a registered acknowledgement due notice should be sent to the
beneficiary informing that the ILG has expired and the original Letter of
Guarantee along with no claim letter should be returned to the bank. If the
21
same is received, ILG can be reversed within the claim period.

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In such a case, if no reply is received from the beneficiary of the guarantee

within the claim period, the entry should be reversed after the expiry of claim
3
period.
However, ILGs can be reversed within the validity/claim period on receipt of no claim
letter from the beneficiary thereby discharging Bank from its liability under ILG along
with original ILG.
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Account wise report of expired BGs is available at Non-CBS application >Home

page> MISD amalgamated EDW reports – PNB 2.0 reports IAD-(IAD-03) – List of
Bank Guarantees not reversed
9- GUARANTEE COMMISSION & DISCRETIONARY POWERS TO PERMIT

RELAXATION IN ILG COMMISSION
i. Commission on ILG shall be recovered as conveyed vide L&A Circular on
Service Charges issued from time to time. (Presently as per L&A circular
no.93/2020 dated 26.05.2020.
ii. The ILG commission should be rounded off to the next higher rupee and other
charges like out of pocket expenses etc. to be charged extra.
iii. The ILG commission shall be charged up front for the validity period of BG
including claim period quarter wise, for e.g.: If the validity plus claim period of
an ILG is 14 months, quarter wise commission should be recovered i.e.
commission should be recovered for 15 months.

iv. In case the commission for unexpired period was not charged earlier at the
time of issuance, it should be charged on monthly basis till the time ILG is
reversed. In such exceptional circumstances, powers for refund of
commission for unexpired period shall not be applicable.
v. It is also advised to ensure that at the time of issuance/extension of ILGs as
well as in existing ILGs, commission is recovered in terms of guidelines. Since
the commission on ILG is being recovered in CBS through the system, Branch
officials to ensure that the commission is recovered as per the guidelines
leaving no scope for revenue leakage.
vi. In case of extension of validity period of existing ILG, commission for the
extended validity period plus claim period should be charged upfront as
applicable for issuance of fresh guarantee. In such case, commission for
claim period should be charged if it has not been recovered earlier.
vii. An undertaking shall be obtained from the customer that he will be liable to
pay the guarantee commission for the claim period as and when demanded
by the Bank
viii. To ensure recovery of commission the margin/security shall be released only
1
after recovery of commission for claim period.
ix. In case of renewal of guarantees, same charges as applicable for issuance of
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fresh guarantee may be levied. However, in case renewal is affected before
the expiry date of original guarantee, commission may not be charged for the
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claim period.
x. Minimum charges for one Quarter and a part of a quarter to be treated as one
quarter.
21
xi. Once guarantee commission is charged for a minimum period of one Quarter
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or more, commission at the time of renewal/enhancement is to be charged in

steps of quarter or part thereof.
xii. For Discretionary powers to permit relaxation in ILG commission, circular
3
issued on Loaning Power from time to time shall be referred. (Presently as per
L&A circular no.100/2020 dated 02.06.2020)
xiii. In light of amendment in Indian Contract Act in 1997 and 2013,

guidelines on reversal of ILGs have been changed. Accordingly, ILG
commission shall be charged as under
05
S. No. Particulars Commission

1. Outstanding ILGs issued from Since the Bank‘s liability will remain in its
08.01.1997 onwards but book till the time the guarantee has not been
before 18.01.2013. reversed, the commission shall be charged
for guarantee period plus claim period and
Outstanding ILGs issued from even after expiry of claim period i.e. till the
18.01.2013 onwards having time ILG has been reversed.
claim period of less than one
year
2. ILGs issued w.e.f 18.01.2013 Commission shall be charged for guarantee
having at least one year claim period plus claim period.
period.
Rationale: ILGs issued from 18.01.2013
onwards having atleast one year claim
period have to be reversed after expiry of

claim period or on receipt of original Letter of
Guarantee along with no claim letter,
whichever is earlier.
REFUND OF COMMISSION FOR UNEXPIRED PERIOD
In case of Inland Guarantees, refund of guarantee commission is not permissible for

the unexpired period, even if purpose is fulfilled. However, in case of export
performance guarantees refund of guarantee for the unexpired period may be
permitted as per guidelines issued by IBD, HO, from time to time
Further, with a view to increase guarantee business especially in case of consortium/

Multiple Banking Arrangement and in selective and highly deserving cases, the
commission for unexpired period (for remaining full quarter only) may be refunded
subject to receipt of original ILG along with no claim letter duly discharging Bank
from its liability within the validity period/claim period, extant guidelines for refund of
commission will continue. The period less than a quarter be ignored. The minimum
commission for a period of one quarter will continue to be charged. Such relaxations/
refund of guarantee fee may be considered by the respective sanctioning authority
1
upto sanctions of ZM level. In case of HO sanctions, relaxations/refund of
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guarantee fee may be considered at the level of ZOCAC (Headed by ZM).
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The refund will be granted subject to compliance of certain terms as under: -
Commission to be refunded will be for full-unexpired quarters only.
However, Branch should recover commission for a minimum of two quarters.
If an existing guarantee is extended for a specific period and the guarantee
21
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is being cancelled (after original tenure), commission will be refunded for full
unexpired quarters.
If guarantee is invoked by the beneficiary, commission charged will not be
3
refunded.
PROCESSING FEES
As the bank has to keep a track of the performance of borrowing unit on ongoing
basis for all the facilities including specific BG limit of longer duration, the processing
fee is to be charged annually as per laid down guidelines in respect of all working
05
capital facilities including specific BG limits in line with working capital limits.
The processing fee is not be levied on Bank Guarantees issued against 100%
margin in the shape of Cash/FDR/other liquid securities, where no regular limit is
required to be set up/the regular limit of the borrower has already been exhausted
Issuance of Bank Guarantee favouring Customs Deptt.
The Public Notice issued by the Customs Department stipulates, inter alia, that all
bank guarantees furnished by an importer should contain a self-renewal clause
inbuilt in the guarantee itself. The stipulation in the Public Notice issued by the
Customs Department is akin to the notice in the tender form floated by the DGS&D.
Hence, the provision for automatic extension of the guarantee period in the bank
guarantees shall also be made applicable to bank guarantees issued favouring the
Customs Houses.

ICC Regulations for Bank Guarantee Issuance - Uniform Rules for Demand
Guarantee (URDG)
The International Chamber of Commerce (―ICC‖) published a new guide on
international standards for demand guarantee practice that came into effect on 1 July
2010. The ICC's new Uniform Rules for Demand Guarantees (―URDG758‖), which
comprise a set of contractual rules applicable to demand guarantees and counter
guarantees, supersede the first 1992 rules (―URDG458‖).
At present, issuance of the BG subjecting to ICC rule URDG 758 is in practice

(mostly in FLGs). Foreign Exchange Cir.No.88 dated 07.12.2012 on ICC URDG
revision 2010 publication no.758 issued by IBD may also be referred.
Based on communication received from IBA, MD & CEO has approved that issuance
of domestic BGs subjecting to ICC rule URDG 758 can be done as per the business
needs where consent of applicant and beneficiary both are available subject to
compliance of due diligence aspect and other laid down guidelines to ensure bank‘s
interest. In other cases existing process may be continued.
1
GUARANTEES FOR EXPORT ADVANCE
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RBI has advised that banks should adopt a flexible approach in the matter of
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obtaining cover and earmarking of assets/ credit limits, drawing power, while issuing
bid bonds and performance guarantees for export purposes. RBI has also advised
as under:
21
i) Export Performance Guarantee of Export Credit Guarantee Corporation of India

/04 58
Ltd. (ECGC) may be taken to safeguard bank‘s interest, wherever considered

necessary.
ii) ECGC would provide 90 percent cover for bid bonds, provided an undertaking
3
be given by bank not to insist on cash margins.

iii) Bank may not, therefore, ask for any cash margin in respect of bid bonds and
guarantees which are counter-guaranteed by ECGC.
iv) In other cases, where such counter-guarantees of ECGC are not available, for
whatever reasons, the bank may stipulate reasonable cash margin only if it is
considered absolutely necessary, for satisfaction about the capacity and
05
financial position of the exporter while issuing such bid bonds/ guarantees.
v) Separate limits for issuance of bid bonds may be sanctioned. Within the limits
so sanctioned, bid bonds against individual contracts may be issued, subject to
usual considerations.
RBI has also advised banks that while agreeing to give unconditional guarantee in
favour of overseas employers/ importers on behalf of Indian Exporters, an
undertaking should be obtained from the exporter to the effect that when the
guarantee is invoked, the bank would be entitled to make payment, notwithstanding
any dispute between the exporter and the importer.
Although, such an undertaking may not prevent the exporter from approaching the
Court for an injunction order, it might weigh with the Court in taking a view whether
injunction order should be issued. It is therefore advised to keep the above point in
view while issuing unconditional guarantee in future and incorporate suitable clause

in the agreement in consultation with legal advisor. Besides, the guidelines issued in
this regard by IBD, HO from time to time shall be adhered.
REVIVAL OF CONSTRUCTION SECTOR - Release of 75% of the arbitral award

amount to the contractors/ concessionaires against BG
A scheme for revival of construction sector has been announced by NITI Aayog.
Under this scheme, in case of claims where the Arbitration Tribunal has passed an
arbitral award and Govt. Department/ PSU has challenged the Arbitral Award, an
amount equal to 75% of the arbitral award awarded in favour of the Concessionaire/
Contractor may be paid to the Concessionaire/ Contractor against Bank Guarantee
along with interest amount for the tenure of the BG. The BG will be effective from the
date of deposit of the 75% of the Arbitral Award by the Govt. Department/PSU in the
Escrow Account. The Govt. Department/PSU shall deposit the Arbitral Award
Amount within 15 days of the receipt of the Bank Guarantee.
Further, such releases have to be made into a designated Escrow account to be
opened and established by the contractor/concessionaire with some stipulations.
1
The standard template for Bank Guarantee for payment of Arbitral Award Amount
issued by Department of Financial Services (DFS) is given as per Appendix XIV.
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In case the subsequent court order requires refund of money paid by Govt.
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Department/PSU into the Escrow Account, the amount shall be refunded by the
Concessionaire/Contractor along with appropriate interest to be decided at the time
of releasing funds into Escrow Account.
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The Bank Guarantee shall be valid for 1 (one) year or 2 (two) months from the date
of decision of the court, whichever is earlier. If required, the Concessionaire/
Contractor shall extend the validity of Guarantee for a period of at least 1 (one) year
3
and at least 60 days prior to the expiry. The BG will be revalidated as many times as
required till the time the Court has decided the appeal. For detailed guidelines,
L&A cir. No.13 dated 06.02.2017 and subsequent circulars issued on the
subject from time to time may be referred.
As in present case BG is being issued on account of dispute between the

05
Concessionaire/ Contractor and Govt. Department/ PSU, all the guidelines w.r.t.
issuance of BG in disputed cases should be strictly adhered to.
MARGIN ON DISPUTED BANK GUARANTEES

Guarantees in favour of Court or to Govt. or any other person on behalf of party/
borrower relating to payment of taxes, Excise Duty, Custom Duty or other Govt.
dues, in dispute should be issued only against 100% cash margin. As such, while
issuing guarantees in case of dispute/arbitration, the aforesaid guidelines on margin
requirement should be meticulously followed.
BANK GUARANTEES ISSUED IN JUDICIAL PROCEEDINGS

Bank Guarantees in favour of court under judicial proceeding to be issued against
100% cash margin, the following guidelines should be adhered to:
(i) If the Bank Guarantees issued in the Judicial Proceedings cases is open ended
and no time period has been stipulated the BG will be issued for a period of one year

and thereafter renewed yearly till the receipt of specific order from Hon‘ble Court for
discharging the bank guarantee.
(ii) An undertaking (as per Annexure-XXIV of the said circular) in this regard shall be
obtained from the applicant at the time of BG issuance that he shall submit the
request letter for renewal on or before the date of its expiry till specific order and
directions are received for discharging the Bank Guarantee from the concerned court
wherein such bank guarantee has been submitted as security. In addition, the
undertaking shall also state that in case the borrower fails to submit the request letter
for renewal of BG, then the bank shall have the right to automatically renew the BG
for a further period of one year and thereafter for same period.
(iii) At the time of renewal of BG, branches shall extend the bank guarantee for one
year and commission may be recovered annually either from the deposit account of
the applicant or from the interest earned on 100% FDR submitted by the borrower as
margin for issuance of such BGs. The FDR shall be opened with auto- renewal
facility, till discharge of BG by the court.
(iv) Fresh/ Existing Bank Guarantees issued in the Judicial Proceedings cases in
favour of ―The Registrar, Court‖ should not be reversed by the bank before the
1
disposal of the case without specific order of the Hon‘ble Court for discharging the
Bank Guarantee and without seeking directions from the Hon‘ble Court.
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(v) All new Judicial Proceeding Bank guarantees issued in favour of ―The Registrar,
Court‖ shall be issued in the format provided by court as given in Annexure- XXV of
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the said circular.
Issuance of Bank Guarantees- Capital Market Exposure

21
(LOANS & ADVANCES CIRCULAR NO. 16/2020 dated 15.02.2020)

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This has reference to IRMD Circular No. 53/2012 and ITD/CBS Circular No 31/2012,
wherein it is mentioned that during Issuance of fresh Guarantees forming part of
Capital Market Exposure, branch user is required to select Guarantee Type (Grnty
3
Type) as CME-1 whenever fresh guarantee is issued in favour of any stock

exchange on behalf of stock broker.
The field of Free Code 1 made mandatory for Guarantee Type (Grnty Type) CME-1.
Branch user is also required to enter code `CME‘ (Capital Market Exposure BG type
CME-1) already available in the list at Free Code1 (F2 help key). The steps to make
entry for bank guarantees for Capital Market Exposure are mentioned in Annexure.
05
It is further informed that bank guarantee opened without identifying it as capital

market exposure as mentioned above (Guarantee Type in CME-I), can‘t be modified
keeping in view of checks put in this field by ITD , HO. Accordingly Such omission
results in wrong reporting of Capital Market Exposure. All other guidelines in this
regard shall remain unchanged.
PARTIAL RELEASE OF BANK GUARANTEE WHERE BENEFICIARY IS

GOVERNMENT DEPARTMENT / AGENCY (L&A circular 12/2021 dated
12.01.2021)
It is advised that the cases where beneficiary is Government Department / Agency
and request for release of partial BG is received from the beneficiary, Bank‘s
guidelines for releasing partial amount of BG as outlined at Para 5 of IRMD L&A
Circular No. 129/2020 dated 17.07.2020 may be followed. T.Branch Head / Loan in-
Charge shall ensure the following before release of limit to the party: -

i. The Beneficiary should certify the level / percentage of work completed till
date in respect of the captioned project for which Bank guarantee was
issued.
ii. The Beneficiary should certify the residual liability of the borrower /
applicant in respect of the said contract as on date.
iii. The certificate from beneficiary in respect of completion as well as
outstanding liability should be sent directly to the Bank and Branch
Manager after verifying its authenticity may release the limit upon
reduction in Bank‘s liability.
iv. The underlying tender / contract should be scrutinized carefully so as to
ascertain the type of bank guarantee, percentage of bank guarantee to
the contract value, tenure of bank guarantee, claim period, if any after the
completion of project.
Upon carefully complying above four covenants and taking due approval from the
respective sanctioning authority for release of limit, the branch shall enter such details
1
in the system duly entering the authority for such reduction. A line of confirmation in this
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regard under registered / speed post may also be sent to the beneficiary. Charges for
unexpired period of released BG amount can be refunded as per Bank‘s guidelines.
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As per present setup in CBS, the branches are not authorized to modify guarantee
amount. It is clarified that after obtaining approval from sanctioning authority, branches
(GBB / MCC) through their controlling offices viz., Zonal Office and LCB / ELCB directly
21
shall take up with ITD, HO simultaneously making a copy of the same to IRMD, HO
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alongwith a copy of the sanction obtained. IRMD, HO shall thereafter give its consent to
ITD, HO for permitting branches to modify guarantee amount.
05 3

27. Letter of Credit
(L&A Cir. No.87 dated 07-08-2019)
Letter of Credit is issued by the Bank at the request of applicant in favour of a

beneficiary. The Bank undertakes to accept the bills drawn under the LC, subject to
the fulfillment of the conditions stipulated therein.Accordingly, when bank issues a
letter of credit, it assumes responsibility to pay its beneficiary on production of bills
drawn in accordance with the terms and conditions of the letter of credit.
Letter of credits are of various types and are broadly classified as under:
1. Revocable and Irrevocable Letter of Credit: An irrevocable letter of credit

cannot be revoked, cancelled or altered without the consent of all the parties
concerned. But in case of revocable letter of credit, the Bank reserves the right
to cancel or alter the credit unilaterally by giving notice to all the parties.
2. With or Without Recourse Letter of Credit:A letter of credit may be with or
1
without recourse. Where the beneficiary of a letter of credit is the drawer of a
bill who holds himself liable to the holder of a bill, if dishonoured, the credit is
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said to be 'with recourse'. In case he does not hold himself responsible, the
credit is said to be 'without recourse‘.
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3. Documentary and Clean Letter of Credit: Letter of credit which includes a
clause that bill drawn under the credit must accompany Railway Receipts/Motor
Transport Receipts/Bills of Lading, etc. is known as documentary letter of
21
credit. In fact, Bank's undertaking to honour the bills is made conditional on the
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submission of such documents by the beneficiary.If the letter of credit does not
contain any such clause, it is called clean letter of credit.
4. Sight & Acceptance Letter of Credit: A letter of credit ordinarily provides for
3
'sight' payment i.e. immediate payment against the beneficiary's bills (drawn at
sight). These are usually called sight credits. If the payment is to be made on
the maturity date in terms of a credit, it is an 'acceptance credit' or 'time credit'
or 'term credit' or ‗usance credit‘. An acceptance credit stipulates that the
beneficiary will draw a bill for a particular tenor. It becomes a clean credit
unless the goods purchased by the customer under the credit are charged in
05
favour of the Bank.

5. Revolving Letter of Credit: A letter of credit can be revolving letter of credit if
its text permits the amount of drawings once made under the credit to be again
available to the beneficiary during the currency of the credit, under certain
conditions mentioned therein.
Letters of credit established by the Bank on behalf of its customers are generally
irrevocable, without recourse and documentary.
Extant guidelines on Inland Letter of Credit, Pre-sanction credit appraisal & Post-
sanction monitoring of loan accounts, inter-alia, provide as under:
1. Assessment of Limit:In cases where actual Trade Cycle is less than the usance
period, the goods received under such LCs are consumed/sold off and the

proceeds thereof are diverted for other purposes during the intervening period
whereas the bank‘s liability under such LCs remains outstanding.
2. Before setting up LC limits, the trade cycle should be ascertained and utilization
of LC beyond such Trade Cycle should not be allowed.
3. Before establishing the credit, it should be satisfied that the customer would be
in a position to retire the bills when received under the credit and will not
approach the bank for credit facility in this regard. For this purpose, the
financial position of the customer and source of funds, which the customer
would draw upon to retire the bills should be inquired into.
4. While assessing the non-fund based limits, branches should ensure that
projections and cash flows submitted by the borrowers are realistic and in line
with the past trend.
5. Branches should open letters of credit only in respect of genuine, commercial
and trade transactions of their borrower constituents who have been sanctioned
regular credit facilities.
6. RBI has cautioned Banks that they should not discount bills drawn under LCs or
otherwise, for beneficiaries who are not their regular clients.
1
7. All messages pertaining to issue of ILCs including amendments,
reimbursement authorizations etc. should be sent by the branch through SFMS
:0
network only.
8. Only those bills be negotiated, where ILCs are of Public Sector Banks/Banks
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approved by CAD(O).
9. No such bills are to be negotiated under LCs of Cooperative Banks.
10. While negotiating bills under LC, bearing ‗without recourse‘ clause, it be
21
ensured that the bills are strictly as per the terms of LC and no discrepancy
/04 58
exists.
11. It is to be ensured that the bills negotiated relate to genuine commercial and
trade transactions.
3
12. In cases, where the negotiation of LC is restricted to our bank and beneficiary
of the LC is a borrower of another bank, branches may consider negotiation of
such bills, on merits, subject to the compliance of laid down guidelines and
condition that the proceeds be remitted to the regular banker of the beneficiary.
However, as advised by RBI, the prohibition regarding negotiation of
unrestricted LCs of non-constituents will continue to be in force.
05
13. Whenever the bills drawn under LC are not paid by the party from its own
resources or out of available DP in the CC account on its due date, the LC is
said to have devolved. Amount in default of devolved LC will be directly debited
to the main operating account of the customer (CC/OD/CA) in the transaction
system (CBS) itself w.e.f. 01.04.2016 and remittance made. The Controlling
Office will be apprised of it and follow up steps/remedial action for
regularization of such accounts will be taken.
14. In case two consecutive bills drawn under LCs opened previously were not
retired by the party from its own resources or out of available DP in the CC
account, further opening of Letter of Credit must not be allowed by the
Incumbents without clearance from their next higher authorities. (Refer LA Cir
72/2013 dt 25.06.2013)
However, Incumbents may allow further opening of LCs on the regularization of

account, if satisfied that there is no risk/little risk of default. In case the borrower is

not able to fully repay the amount of LCs devolved due to mismatch of cash flows
and party deposits the amount outstanding in Due Date Default, fresh LCs may be
opened upto 90% of the recovery made (10% tagging) without seeking prior
permission from the next higher authority. The incumbents have to record
justification for such a decision on the file.
INLAND LETTER OF CREDIT – FORMATS

(i) Application for Inland Irrevocable Confirmed Revolving Documentary Credit (To
be stamped as an Agreement) containing the Agreement also for borrowers
requesting LCs on one time basis. (PNB-1077)
(ii) Letter of request for Inland Documentary Credit to be given by borrowers every
time they avail sanctioned ILC limit. (PNB-1078)
(iii) Master Agreement for Inland Documentary Credit (To be Stamped as an
Agreement) for borrowers availing sanctioned ILC limit. (PNB-1079)
RELAXATION IN COMMISSION
COCAC/Branch Heads of LCBs & above are vested with powers for permitting
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relaxation in LC charges (negotiation, commitment & usance charges). In case a
relaxation is given to any borrower and upon review it is observed that the credit risk
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rating of account is downgraded below B1, Branches may withdraw the concessions
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SECURITY/MARGIN
Branches to obtain security by way of cash margin/fixed deposit/earmarking
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equivalent drawing power in Cash Credit account, as the case may be and/or a
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collateral security by way of charge on the immovable properties and/or

indemnity/guarantees from third person.
In addition, branches to obtain counter indemnity of the clients in order to protect
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bank's interest.
The cash margin should be credited to "Margin money on Letter of Credit" account
maintained as current account in CBS. Fixed Deposit Receipt duly discharged and
accompanied by a letter of lien may also be accepted in lieu of cash margin.
Where the Bank feels that it is sufficient to earmark funds/ drawing power (DP) in the
customer's account instead of taking cash margin, proper safeguards must be
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observed. The amount of margin should be earmarked in the account giving

reference to LC No. & date and authenticated.
Chief Managers & above may accept 100% margin in the shape of Govt. securities
like NSCs, KVPs, Relief Bonds, surrender value of LIC. Further, it should be ensured
that prior to opening of LCs, Bank‘s charge by way of pledge/assignment etc. on
these securities is properly created in favour of the Bank and the same is
enforceable.
CHARGES OF ILC
Charges and relaxation in charges has been advised vide L&A cir.no.89 dated
21.11.2016.
LETTER OF CREDIT – WITHOUT RECOURSE CLAUSE

Branches may permit opening of LCs bearing ‗without recourse‘ clause as
well as negotiate bills drawn under LCs bearing ‗without recourse‘ clause. However,

while negotiating such bills under LCs having ‗without recourse‘ clause, utmost care
need to be taken by the negotiating branch especially the following:-
Only those bills be negotiated, where ILCs are of Public Sector Banks/Banks
approved by Credit Division, HO. No such bills are to be negotiated under LCs of
Cooperative Banks.
While negotiating bills under LC, bearing ‗without recourse‘ clause, it be
ensured that the bills are strictly as per the terms of LC and no discrepancy exists. It
is to be ensured that the bills negotiated relate to genuine commercial and trade
transactions.
Besides above, all the existing guidelines stipulated with regard to
opening/negotiation of bills under LCs (other than ‗without recourse‘ clause) should
be followed.
In cases, where the negotiation of LC is restricted to our bank and beneficiary
of the LC is a borrower of another bank, branches may consider negotiation of such
bills, on merits, subject to the compliance of laid down guidelines and condition that
the proceeds be remitted to the regular banker of the beneficiary. However, as
advised by RBI, the prohibition regarding negotiation of unrestricted LCs of non-
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constituents will continue to be in force.
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AMENDMENTS
All requests for amendments must be in writing and when an amendment involves
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an increase in the amount of the credit, additional margin money, wherever
applicable, must be taken. Commission and other charges for amendments should
be charged in accordance with the rates prescribed by the Head Office. All
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amendments should be properly recorded. Amendments may necessitate an

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adjustment in the amounts in the contra accounts. It should be noted by branches

and explained to customers who ask for an irrevocable credit to be amended that
amendments to irrevocable credits cannot become effective unless all parties to the
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credit agree to that amendment. Thus, where an amendment is advised, it must be

understood that it will become effective only after it has been accepted by the
beneficiary and if it is not accepted, documents negotiated in accordance with the
previously existing terms of the letter of credit will have to be honoured.
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28. Consortium Financing & Joint Lending Arrangement
A. CONSORTIUM FINANCING
 RBI had withdrawn its earlier guidelines regarding mandatory formation of

consortium where working capital limits are Rs. 50 crores and above from the
banking system.
 As per our bank guidelines, in case of borrowers enjoying aggregate fund-
based limits of Rs.50 crore & above from more than one bank, consortium
arrangement should be considered. In such cases, bank which has extended
the largest share in the credit facilities should be contacted for finalizing the
consortium arrangement and for being the leader of the consortium for that
borrower.
 In case of borrowers enjoying aggregate fund-based credit limits below Rs. 50
crore from more than one bank, further enhancements, which would take the
aggregate limits to Rs.50 crore or more, should be considered jointly by the
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financing banks concerned and the bank, which takes up the largest share of
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the fund-based limits, shall be deemed to be the leader of the formalised
consortium arrangement.

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Borrowers having multi-division/multi-product companies to be treated as one
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single unit, unless there is more than one published balance sheet. Similarly, in
the cases of merger, the merged unit should be treated as a single unit. In case
of split, the separated units should be treated as separate borrowal accounts
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provided there is more than one published balance sheet.

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 It would not be in order, if there is more than one consortium financing each
division of a company with only one published balance sheet.
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SYNDICATION OF CREDIT
 In case of borrowers enjoying fund-based credit limits of Rs.50 crore and
above, the concerned single bank and/or the leader of the existing consortium
will be free to organise `syndication' of the credit limits. An outline of
syndication of credit is available at Appendix-I of L&A cir 31/2020.
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EXPOSURE NORMS/SHARING OF BANK CREDIT

 There will be no ceiling on number of Banks in a Consortium, however to
ensure meaningful participation of lender banks, as far as possible Minimum
10% share of the exposure should be taken by a lender in the consortium.
 In the case of consortium, member banks are normally expected to share the
―cash credit component‖ and the ―loan component‖ on pro rata basis of their
individual shares of MPBF without waiting for a formal meeting of the
consortium for the purpose of bifurcation.
 Banks participating in term loans extended to a borrower should normally also
provide working capital finance. However, if so warranted, other banks may
also provide working capital finance, subject to compliance with other
conditions.
 Total term loan exposure should not exceed 75% of the prudential exposure
norms for individual/group of borrowers. The balance of 25% should be kept for
meeting the working capital needs of the borrower.

Standard Operating Procedure (S.O.P) For Coordination Among
Participating Banks/ Institutions Under Consortium Lending
Pre-Sanction Stage:
1. Request for renewal/enhancement of working capital facilities should be given

4 months (or any other reasonable period) prior to due date of renewal along
with latest audited/provisional statements for the current year and other
necessary documents/information.
2. The request for credit facility either for project funding (new /expansion/
additional facility) and/or working capital (new/enhancement/renewal)
received from the existing borrower by the Lead Bank should be sent to all
participating/willing lenders for their observations/queries within a specified
timeframe (say 7 days) with directions to them to send in their comments
within a week.
3. The queries received from other lenders should be consolidated along with
the queries of Lead Bank and sent to the borrower within a week
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4. After receiving the additional information/clarifications/replies to the queries
from the borrower, initial consortium meeting should be called by the Lead
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Bank, where a Senior Officer in the rank of Scale-IV & above along with
operating level officials preferably who are well versed with the history of the
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account should be deputed for taking active participation in consortium
meetings
5. The forum should be utilized for firming of project cost, quantum of working
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capital requirement, engaging the services of TEV Consultant or CA Firm, if

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any, for any audit, providing further clarifications, etc. Necessary background
papers should be circulated at least 2 working days in advance.
6. Once the basic project parameters/details of the proposal and specific reports,
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if any, are in place, the Lead Bank/Core Group of Banks (as decided) should
appraise the proposal
7. Subsequent observations of all banks will be sent by the Lead Bank to the
borrower for clarifications, upon receipt of which, final proposal will be made
by the Lead Bank and sent to all participating lenders followed by
simultaneous call for consortium meeting within 7 days
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8. In the consortium meeting, members will finalize the terms and conditions as
also the share to be taken by each member. In case of any shortfall, the Lead
Bank will explore the possibility of increasing the exposure by member banks
or rope in some new bank.
9. After following the above process, Lead bank should convey to borrower its
final sanction within a maximum time period prescribed for formal disposal of
loan proposals:
Export Proposals Other Proposals
Proposals for sanction of 45 Days 45 Days
Fresh/enhanced credit limits
Proposals for renewal of existing 30 Days 45 Days
credit limits
Proposals for sanction of 15 Days 30 Days
Adhoc facilities

Post-Sanction/Disbursement Stage
1. Upon sanction/renewal/enhancement of limits, the Lead Bank would ensure

completion of joint documentation / creation of security/ registration of
charges/ legal audit if required. The Lead Bank of the consortium would also
ensure compliance of all the stipulated terms & conditions of sanction prior
to disbursement and issue confirmation to all consortium members.
2. The inspection/verification of securities should be done by the Lead Bank or
member banks in rotation as per the arrangement which should be finalized
in the consortium. Such report would be shared with all the member banks.
3. Lead Bank should calculate drawing power based on inspection of
stocks/book debts as per the stock statement submitted by the borrower or
any other method as decided and share the same with all member banks to
facilitate drawings in case of working capital
4. In case of project loans, Lead Bank would monitor the project progress
preferably on the basis of Lender‘s Engineer report and ensure periodic
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proportionate disbursement by the participating lenders in accordance with
the draw down schedule and actual requirement of the project during the
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period under consideration.
5. The release order/instructions should be issued by lead bank. The
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information regarding availment/release of limits should be shared among
member banks on weekly basis or as per the need. All participating banks
should share soft/hard copies of statement of accounts at monthly intervals
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6. In case of manufacturing unit/s, detailed technical inspection is to be carried

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out where additional limits or enhancement of the limits / renewal of limits

are sought.
7. Lead Bank will review financial covenants of the borrower in quarterly
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consortium meeting on the basis of Quarterly Progress Report (QPR

submitted by the borrower). In case of non-compliance of any of the
benchmark financial covenant, penal interest for breach to be charged by all
banks.
8. Valuation of properties/ securities should be obtained once in two years.
Where our bank is either a lead bank or 2nd largest participating bank,
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valuation report from two empaneled valuers to be obtained in case the

value of security is more than Rs.5.00 crore. Second valuation would be
obtained by member bank having second largest exposure from consortium.
Where our Bank is neither the Lead Bank nor the 2nd largest participating
bank, valuation report from two empaneled valuers of the Consortium Banks
to be obtained in case the value of security is more than Rs.50.00 crore or
any other limit asdecided by banks. Second valuation would be obtained by
member bank having second largest exposure from consortium.
9. Legal opinion from empaneled legal firms would be obtained in case of
properties mortgaged to consortium. Where our bank is either a lead bank
or 2nd largest participating bank and the value of immovable property to be
mortgaged/ charged is Rs. 1 crore & above, NEC from 2 different advocates
on panel, one before sanction and the 2nd after sanction, but before
disbursement to be taken. Where our bank is neither the Lead Bank nor the
2nd largest participating bank, Second such legal opinion should be

obtained for the property wherein the value of the property is Rs.25.00 crore
and above or as decided.
10. Confirmation from high value debtors would be obtained annually preferably
through Auditors covering at least 80% of value of debtors
11. Periodicity of stock audit and the stock auditor may be decided in advance.
Periodic rotation of stock auditor may be considered.
Monitoring
1. Regular calculation of Drawing Power by the Lead Bank and circulation to

all member banks.
2. Controlling and Monitoring of TRA/ Escrow/ Central account operations of
the company should be at one place i.e. with Lead Bank or as specified.
Lead Bank would ensure equitable distribution of surplus to serve interest
levied/installment due/fall in drawing power, etc.
3. Lead Bank in consultation with other lenders can also engage the services
of Project Management Consultant for monitoring the implementation and
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progress of the project.
4. Periodical exchange of Information (preferably online) among consortium
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banks on monthly/quarterly basis should be ensured.
5. Unsatisfactory features observed by the Lead Bank or any other member
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bank in the conduct of account, devolvement of LC/BG etc. should be
shared among all banks through the fastest communication mode and
discussed
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6. Temporary support extended in the form of additional finance over and

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above the sanctioned limits by any of the member bank should be apprised
to consortium. Borrower should not raise finance outside the consortium
without obtaining prior NOC from the consortium.
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7. All fresh developments impacting the account/company/unit, be it

stress/delays/mishaps/merger announcement etc., of any material interest
should be discussed by the Lead Bank/Core Group (if deemed necessary)
with the borrower and the same to be communicated within a week to all
consortium members.
8. Constant follow by Lead Bank on pending matters/issues raised by member
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banks. Member banks to bring to the notice of all others, any

developmentsthey have noticed in the operations seeking convening of
consortium meetings by Lead Bank.
9. Normally, Lead Bank will convene consortium meetings on its own or at the
request of member banks. If Lead Bank fails to do so, members jointly
having at least 20 - 25% of the total exposure can convene the consortium
meetings to discuss the matters
10. In case of RFA/fraud etc., the matter should be discussed in consortium and
a common view taken. All members should report about RED flagging/fraud
in CRILC
QUANTUM OF CREDIT
(a) Lead Bank in consultation with other member banks should finalise the
quantum of credit for all the participating banks and the same should be got

formally approved in the consortium meeting. The decision of the
consortium should be binding on all participating banks including lead bank.
(b) In order to ensure financial discipline on borrower and consortium discipline
on members, no bank should be permitted to allow additional/adhoc limit
beyond a pre-determined %age, say, 5 to 25% of its pro rata share under
advice to other banks. Any additional/ad hoc credit facility in totality should
be decided by consortium only.
(c) In a consortium, lead bank or the lead bank and the bank with the next
highest share will be the final authorities in cases of differences of opinion
and their views will prevail in all cases of disputes among the members
relating to terms and conditions
SANCTION OF TERM FINANCE
(a) Maximum time frame prescribed for formal disposal of loan proposals
should be followed for one-off term finance provided application/proposal is
received together with required details/ information supported by requisite
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financial and operating statements. Thereafter, the borrower will be free to
approach any other bank for sanction of such one-off term finance.
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(b) A bank, desirous of extending the one-off term loan, or opening a letter of
credit for the import of machinery/ equipment or executing guarantee on
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behalf of a borrower, who is not its regular customer, should, within seven
days from the date of sanction, write to the existing regular
bank/consortium/syndicate of the borrower seeking ‗No Objection
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Certificate‘ and no disbursement should be made pending receipt of the `No

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Objection Certificate'.
(c) In case, `No Objection Certificate' is not received from the regular
bank/ lead bank/ lead manager, the bank(s), desirous of extending the
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term loan/opening the letter of credit/executing the guarantee should

not disburse the amount/open the letter of credit or execute the
guarantee.
(d) The manner in which the bank extending the above facility should secure
itself as well as how it should rank for repayment of principal and interest
due on the term loan should be mutually settled in consultation with the
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regular bank/ consortium/ syndicate
EXTENSION OF CREDIT FACILITIES TO PARTIES ENJOYING REGULAR

LIMITS UNDER CONSORTIUM/SYNDICATION
(a) In case of borrowers enjoying fund-based credit limits of Rs.50 crore and
above from one bank and/or from a consortium of banks, and/or under
`syndication', as the case may be, no other bank shall extend any additional
banking facility or open current accounts, or extend bill limits, guarantees/
acceptance, letters of credit etc., without the concurrence of existing single
bank/consortium/syndicate, except in the manner mentioned under the
guidelines. This condition will also apply in case of consortia/syndication
formed on a voluntary basis.
(b) It is not permissible for any bank outside the consortium to extend
additional credit facilities to a borrower, however, certain banks continue to

provide fund based (bill limits) and/or non-fund based facilities to parties
who enjoy regular working capital limits with other banks.
CHARGING OF FEE BY LEAD BANK
(a) For various services rendered, lead bank may charge a suitable fee
(presently 0.25% per cent of the limits) per annum exclusive of GST, to be
borne by the borrower. The fee is to be reckoned with reference to the fund-
based working capital credit limits sanctioned by the consortium.
(b) Lead banks are free to negotiate the fee to be charged to the borrower
though such fee should not exceed the ceiling of 0.25% of the fund-based
working capital credit limits, in cases where our bank is the lead bank.
(c) In cases of regular enhancements of limits/sanction of incremental fund-
based working capital limits during a year, i.e. after sanction/renewal of
regular fund-based working capital credit limits, such fee/service charge
would have to reckonedvis-a-vis the amount of enhancement/incremental
limits.
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(d) The fee is applicable only to the fund-based working capital credit limits
sanctioned under a consortium arrangement and does not cover similar
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sanction through syndication.
(e) As regards negotiations for reduction of fee (as per item b) above, the
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deserving cases on merits can be considered as per the discretionary
powers to permit relaxations in service charges prescribed for credit related
services
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RATE OF INTEREST/OTHER TERMS & CONDITIONS
(a) Terms and conditions for different categories of credit facilities, as finalised
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by the consortium, should be uniformally applied by all member banks.

(b) In consortium accounts (irrespective of whether our bank is a
Leader/Member bank), interest for advances is to be charged as per the
credit risk rating of the borrower.
(c) In case our interest rates calculated on the basis of the credit risk rating are
lower than those of the Lead bank or the other Member Banks (including
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HO sanctions), recommendations for charging interest rate based upon

credit risk rating or higher rate of interest (charged by Lead Bank or other
Member Bank) be approved by Circle Head.
(d) In case our interest rates calculated on the basis of the credit risk rating are
higher than those of the Lead bank or the other Member bank and it is
considered necessary to charge lower rate of interest, the cases should be
referred to the competent authority for consideration on merits. However,
even in such cases the interest rate to be charged, as agreed upon by the
consortium should not fall below the MCLR of the bank.
(e) For syndication of loans, banks are free to negotiate different terms and
conditions including rates of interest (within the ambit of the RBI
directives/guidelines on interest rates).

DOCUMENTATION
(i) The borrower should be required to execute only one document, which
will be signed by the lead bank on its own behalf, as well as on behalf of
other members.
(ii) The sharing of security and rights & responsibilities of the banks,
including the lead bank, should be documented by means of an inter-se
agreement among the members of the consortium.
(iii) Such an inter-se agreement could be of the nature of an omnibus
agreement of all the consortia arrangement, executed only one time
among various banks participating in consortia arrangements.
(iv) When documents as above have been executed, it would be
responsibility of the lead bank to initiate legal/recovery proceedings,
wherever necessary and share the proceeds of realisation on the basis
of outstanding in accounts with different members as on the date of
determination for starting recovery proceedings, provided outstandings
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are within the sharing pattern agreed to initially and no bank has
exceeded its pre-determined share. Where, however, a bank has
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allowed drawings in excess of its share without the concurrence of other
members of consortium, such overdrawings will not be taken into
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account till the outstandings of all banks upto their respective shares,
adjusted.
(v) In certain cases where release of credit facilities on the basis of
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execution of individual documents pending execution of joint documents

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is considered necessary, in such cases it is advised that branches

participating in consortium should send a communication as per
Appendix-II of L&A cir No 31/2020 dt 26.03.2020 to the Lead Bank.
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VETTING OF DOCUMENT:
Branches should get all the loan documents with limits of Rs.2 crore and
above (both FB and NFB) vetted from the local approved advocate/ law
officer/law manager of administrative offices , first before their execution and
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again after execution but before disbursement of the loan. However, where the
documents are executed by the lead bank and a confirmation in having got the
same vetted has been sent by the lead bank to our bank, there is no need to
get the same vetted by the concerned branch of our bank.
HOLDING OF MEETINGS
(a) A Senior Officer in the rank of Scale-IV & above along with operating level
officials preferably, well versed with the history of account should be
deputed for taking active participation in consortium meetings in a
meaningful way and for the purpose they should do necessary ground work
like preparation of notes on assessment of credit needs of the borrower,
conduct of the account, outstanding issues, in principle approval/mandate
from the competent authority to accept the PBF assessment, sharing of
limits, take up proportionate share in the credit facilities, etc., before
attending the meeting.

(b) In order to ensure effective participation and also to increase our share in
good consortium advances, it is advised as under:
(i) Bank should participate in those new consortium advances in which bank
can have an effective say. Additional responsibilities have been cast on
second major member bank as well. We should, therefore, try to become
leader in good consortium advances and if the same is not possible, we
should be at least second largest member bank.
(ii) In case of all consortium advances, it must be ensured that:-
a) Consortium meetings are held regularly.
b) Intimation of the meeting alongwith agenda is sent in advance.
(c) In case of consortium in which we are the second largest bank it should be
ensured that we exercise our right/control as second largest bank in
accordance with Bank‘s guidelines.
(d) On receiving minutes of meeting, Circle Head/representative of the Bank
who attended the consortium meeting should ensure that our view point has
been incorporated/highlighted as also presented properly.
(e) Categorization of consortium advances/Participation of officials shall be as
1
per Appendix-III. Of L&A cir No 31/2020 dt 26.03.2020.
(f) In case consortium advance fall under HO power, Credit Division, HO, may
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also depute HO representative for the meetings in case Circle Office is of
the view that there are certain issues, such as to accept PBF
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assessment/other credit requirements, increase/decrease of sharing ratio of
the bank, allowing diversification, recall of advance and major adverse
features noticed etc.
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ENTRY INTO/EXIT FROM CONSORTIUM
(a) In cases, where banks/consortia/syndicates are unable to adhere to the

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recommended maximum time-frames for disposal of loan

applications/proposals, borrowers will be free to bring in a new bank or new
banks to form/to join a consortium/syndicate. Within seven days of sanction
of any credit facility, such new banks should inform the existing
consortium/syndicate/regular bank(s) and should not disburse the limit
without obtaining `no objection'. The credit facility should not be considered
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by any other bank if NOC is not received

(b) In the cases of existing consortia, if a member-bank is unable to take up its
enhanced share, such enhanced share in full or in part could be re-allocated
among the other existing willing members. In case other existing member-
banks are also unable to take up such enhanced share of an existing
member-bank, a new bank willing to take up the enhanced share may be
inducted into the consortium in consultation with the borrower.
(c) Since refusal to take up pro rata share by a member bank puts up pressure
on the other consortium members as well as the borrower, this should
normally not happen and may be permitted only in exceptional cases like
when the concerned bank is having a general credit squeeze or its
prudential exposure limits are being exceeded by taking up
incremental/enhanced share.
(d) In cases where the other existing member banks or a new bank are
unwilling to take over the entire outstanding of an existing member desirous

of moving out of the consortium, such bank may be permitted to leave the
consortium by selling its debt at a discount and/or furnishing an
unconditional undertaking that the repayment of its dues would be deferred
till the dues of other members are repaid in full.
NOTE:It would be open to a borrower to choose his bank(s) for obtaining

credit facilities as also for the bank/(s) to take a credit decision on the
borrower. However, once a consortium is formed, entry of a new member
into a consortium should be in consultation with the consortium
GENERAL GUIDELINES
(a) Lead bank will be responsible for preparation of appraisal note, its circulation,
arrangement for convening meetings, documentation etc. Lead Bank should be
vested with the responsibility of arranging for sanction and disbursal of credit,
monitoring of the borrowal account, advising shares of member-banks in the
monthly/ quarterly operative limits. Lead bank (lead manager) in a consortium
1
will also be responsible for submitting prescribed data/information to the RBI on
behalf of the consortium (syndicate).
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(b) Individual banks/consortia/syndicates should review the borrowal accounts during the
first quarter of the current year on the basis of audited statements for the year before
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last, the provisional statements (where audited statements are not available) for the
last accounting year, provisional estimates for the current accounting year and forecast
for the next year.
(c) With a view to expedite decisions by all member banks, lead bank should circulate the
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soft copy of appraisal note and utilise the services of couriers/ branch network of
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member banks to circulate the hard copy of appraisal notes to Regional/Zonal/Head or

Central Office of banks, as the case may be, instead of dispatching the papers by
normal post, besides the officials deputed to attend the consortium meetings should
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have the authority to convey `in principle' acceptance of the assessment, sharing of
limits, terms and conditions, etc. at the meeting itself.
(d) In case of Consortium/JLA where we are not the leader, copy of Valuation Reports,
NEC of primary/collateral securities, Search Report of ROC, Stock Audit Report and
any other document that are required for the processing of the proposal should be
obtained from the Lead Bank, analyzed and held on record. This should be confirmed
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in the Board format, while submitting the proposal.

(e) Officials participating the consortium meetings on behalf of the bank should make
commitment in the consortium only if the facility is within their vested powers. For any
facility beyond their vested powers, they should inform that the company‘s request for
any concession etc. shall be placed before the sanctioning authority for consideration.
(f) In case of borrowers enjoying aggregate fund-based credit limits of Rs.1 crore and
above but below Rs.50 crore from more than one bank, and where there is no formal
consortium arrangement, banks should obtain full details of the credit facilities
(including adhoc facilities) availed of by such borrowers from the banking system, duly
certified by their auditors, each time any fresh facility/enhancement is sought. Also the
banks should ensure timely exchange of information and coordinated approach in the
interest of overall health of advances made to such borrowers. Further, in the case of
borrowal accounts enjoying fund-based credit limits below Rs.50 crore from more than
one bank, the concerned banks will be free to enter into a consortium arrangement at
their option.
(g) There should be regular exchange of information between banks and participating
institutions.

(h) Borrowers availing credit facilities from consortium of banks should not be put to
inconvenience through delays for having to deal with several banks, execution of
varied types of documents, etc.
(i) For clean & effective post-sanction follow up on common engagement basis in case of
consortium arrangement with credit exposure more than ₹250 Crore, if a need is felt
for appointment of outside Agencies for specialized monitoring of the account, the
consortium members after deliberating may consider the same.
(j) In respect of consortium advances, each bank may classify the borrowal accounts as
standard/ NPA according to its own record of recovery and other aspects having a
bearing on the recoverability of the advances, as in the case of multiple banking
arrangement. RBI has also advised that where the remittances by the borrower under
consortium lending arrangements are pooled with one bank and/or where the bank
receiving remittances is not parting with the share of other member banks, the account
will be treated as not serviced in the books of other member banks, and therefore, be
treated as NPA.
In terms of L&A Cir. No. 27 dated 19.04.2018: Standard Operating Procedure

(SOP) for valuation process may be adopted before release of Drawing Power
(DP). As such, member banks should decide about the valuation process of
1
stock/ Book Debts with emphasis on following points:
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a) Periodicity of inspection of stock/book debts along with unit wise allocation of
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borrower‘s office/factory premises/godowns to member banks for inspection.
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b) After inspection the inspecting banks may submit the inspection report to the
lead bank and thereafter, the lead bank may calculate the DP and advise the
same to all the member banks.
21
c) In case a member bank fails to conduct the inspection within one month of
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allocation, the lead bank may not allocate further DP till submission of
inspection report by the said bank.
3
d) Periodicity of stock audit and the stock auditor may be decided in advance
and it may also be ensured that the same stock auditor is not being appointed
for consecutive audit.
e) In order to avoid overdrawing of limits by the borrower, it may be endeavoured
that the member banks share the information of limit availed and DP with the
lead bank so that the consolidated information can be made available to all
05
the member banks by the lead bank at regular intervals, at least at quarterly
intervals.
f) Also, necessary communication such as conduct of account, invocation of
LG/devolvement of LC etc. should be communicated to member banks
through the fastest electronic means available e.g. Email/fax, etc.
The above SOP may be got implemented where our bank is lead bank in
consultation with other member banks and where we are a member of the
consortium, the above methodology may be suggested to the lead bank for
implementation thereof.
Also, TEV study and Working Capital Assessment is to be discussed invariably in

consortium meetings & minutised prior to sanction of credit facility.
As per L&A Cir. No.124 dated 23.10.2019, Subsequently, some of the agencies
have indicated certain changes in their particulars such as Contact details, Location

served and Main areas of the activity. The updates are given in the Annexure to the
above mentioned circular for information and necessary action.
B. JOINT LENDING ARRANGEMENT
 With a view to inculcate the required financial discipline in the borrowers and
enable financing banks to take informed decision on credit matters and as a
risk mitigate, Ministry of Finance has come out with the policy on Joint Lending
Arrangement.
 The policy shall be applicable to all lending arrangements involving more than
one public sector bank with a single borrower with aggregate credit limits (both
fund based and non fund based) of Rs.150 crore and above. All non-investment
grade borrowers (External Commercial Rating below BBB or equivalent) under
multiple banking arrangements shall also come under this policy irrespective of
the amount of exposure.
 New Borrowers: Lending under joint arrangement shall be mandatory for
public sector banks for borrowers seeking credit limits of Rs.150 crore and
1
above by way of term loan, working capital and non fund based facilities from
multiple banks. The bank from which the borrower has sought the maximum
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credit or any other bank, as mutually agreed by member banks, will be
designated lead bank for the JLA. 22
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 There is no ceiling on number of banks in a JLA. It would be open to a borrower
to choose his bank(s) for obtaining credit facilities as also for the bank/(s) to
take a credit decision on the borrower.
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 In case of aggregate working capital exposure (both fund based and non fund
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based) upto Rs. 1000 crore, our share as a member of the JLA should be at
least 10% of the aggregate limit to ensure meaningful participation in JLA. For
working capital exposures of Rs. 1000 crore and above, the minimum
3
participation required shall be Rs. 100 crore.

 In capital intensive projects with large term loan component, it would be open to
the banks to have a separate consortium/JLA for term loan and working capital
requirements.
 The issues of entry and exit of member from JLA and sharing of enhanced
05
exposure are same as in case of consortium advances.

 Sub-committee: It is suggested that a sub-committee, comprising at least two
member banks having a combined exposure of not less than 50% of the total
exposure should be formed, for deciding all matters relating to appraisal,
sharing of income and monitoring of the accounts, at the time of initial creation/
formation of the JLA.
 The decisions of the Sub-committee will be binding on all JLA members.
 The existence and roles of Sub-committee is to be formalized in the inter-se
agreement at the time of documentation. The Inter-se Agreement is to be
stamped as an agreement and also as a general power of attorney.
 Issues referred to the Sub-committee must be decided upon in maximum 30
days (at Sub-committee level 10 days, and at a higher level 20 days).
 The Sub-committee shall be authorized to issue No Objection Certificate (NOC)
on behalf of the JLA for any purpose.

SHARING OF INFORMATION AND OBTAINMENT OF DUE DILIGENCE REPORT -
LENDING UNDER CONSORTIUM ARRANGEMENTS/ MULTIPLE BANKING
ARRANGEMENTS(L&A circular No 80/2020 dated 29.04.2020)
Consolidated operative guidelines on the subject along with the updated format of Due
Diligence Report (attuned with Companies Act 2013) has been conveyed. In terms of
guidelines:-
 Diligence Report shall be obtained for the borrowers with aggregate (fund and non
fund based) limits of Rs.20 Crores and above with our bank.Obtain regular
certification (Due Diligence Report) by a professional (i.e. Company Secretary/
Chartered Accountant/Cost Accountant) from the approved panel regarding
compliance of various statutory prescriptions that are in vogue, as per specimen given
in Appendix-III. Due Diligence Report shall also be obtained by the Branch Head in
existing accounts as per the prescribed procedure.
1
An Authorization Letter as per Appendix-IV be obtained from the borrower to seek his
consent for authorizing the firms or individual Company Secretary/Chartered
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Accountant/Cost Accountant for obtainment of Diligence Report.
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However, Public Sector Undertakings/ establishments (Govt. Undertakings) will be
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exempted from such Diligence Report, as they are under audit by Comptroller &
Auditor General of India.
21
The fee payable for issuance of diligence report may be charged @ 0.005% of the
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limit (i.e. Rs.500/- per Rs. 1 crore) with a maximum ceiling of Rs.50000/-. Further,
Branch Heads of LCBs/Circle Heads and above may consider payment of enhanced
fee upto 0.0075% of the limit (i.e. Rs.750/- per Rs.1.00 crore) with a maximum of Rs.
3
1 lac in exceptional cases (depending upon the volume of work).
 At the time of granting fresh facilities, declaration is to be obtained from the borrowers
about the credit facilities already enjoyed by them from other banks in Appendix - I. This
declaration is also to be obtained in case of existing borrowers availing sanctioned
05
limits of Rs.5.00 Crores and above OR wherever it is in knowledge that borrowers are
availing credit facilities from other banks and introduce a system of exchange of
information with other banks.
 Subsequently, information should be exchanged about the conduct of the borrowers'
accounts with other banks in the format given in Appendix-II at regular intervals, at least
at quarterly intervals.
For detailed guidelines kindly refer above mentioned circular.

29. Post Sanction Follow Up and Monitoring
A. DOCUMENTATION (LA 98/2014, 85/2020, 157/2020 ) :-
Documentation of Loans & advances is a critical and important area as the liability of
a borrower/guarantor can be enforced in a court of law mainly on the basis of
documents executed by them and entries made in the Books of Accounts and the
Registers of Bank.
Thus all documents prescribed for various facilities should be correctly executed.
Loan agreements of the Bank have been revised by uniform addition of Bank‘s Logo,
necessary changes to terms/stipulations, addition of cross default clause etc., to
meet present day requirements and the same have been approved by the competent
authority.
One of the important aspects of proper and accurate documentation is proper filling
1
up of blank spaces provided in the documents and scoring off the alternatives, which
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are not applicable under proper authentication.
It is, therefore, imperative that while executing a loan document, care has to be
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taken to ensure that alternatives are scored off retaining only that which is
applicable.
21
All blanks in the documents should be appropriately filled up. All scorings, cuttings
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and deletions etc. should also be properly authenticated by the executants (s). Non-
observance of the instructions/guidelines can result in loss to the bank.
3
In the matter of documentation, there are five essential points to be noted:-

1) The person(s) executing the documents should have the legal capacity to do so.
2) The document should be in the prescribed forms of the bank.
3) The document should be properly stamped.
4) The documents are properly witnessed wherever required.
5) The documents are registered wherever required.
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Loan agreements of the Bank have been revised by uniform addition of Bank‘s Logo,
necessary changes to terms/stipulations, addition of cross default clause etc., to
meet present day requirements and the same have been approved by the
competent authority.
The list of updated forms is provided in Annexure I. The list of newly added forms
has been provided in Annexure II. The forms are available in the Knowledge Centre
portal under Knowledge Repository tab -> Forms-> All forms.
It is to be ensured that the latest forms are being used at the time of documentation.
The revised forms along with the date of upload have been provided in this respect
in the forms portal.
Manual on Loan documentation is also available in the Knowledge Centre portal
under Knowledge Repository tab -> Manuals->Law Division

WHO IS COMPETENT TO CONTRACT
According to section 11 of the contract Act, 1872: Every person is competent to
contract who is of the age of majority according to the law to which he is subject, and
who is of sound mind, and is not disqualified from contracting by any law to which he
is subject.
It should be ensured that not only the documents are correctly executed but also that
the persons signing the documents have the legal capacity to do it. A minor, lunatic
or an insolvent has no contractual capacity. The contractual powers of a joint stock
company are determined by its Memorandum and Articles of Association; the
company cannot transgress or overstep these powers.
The following documents, if unstamped or insufficiently stamped, are invalid ab-initio:
(a) promissory note
(b) bill of exchange
(c) acknowledgement of a debt.
The bank‘s suit, if based on such unstamped/under stamped promissory note, bill of
1
exchange or an acknowledgement of debt would, therefore, fail in law.
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DOCUMENTS REQUIRED TO BE WITNESSED;
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1. Assignment on the instrument itself, e.g. a life Insurance policy.
2. Assignment by a separate instrument.
3. Mortgage Deed.
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4. Guarantee Deed
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5. Power of Attorney
6. Conveyance Deed
7. Gift Deed
3
8. Will.
DOCUMENTS NOT BE WITNESSED:
1. Demand Pronote
2. Usance Pronote or Bill of Exchange
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3. Letter of lien.
4. Letter of continuity
5. Letter of set off.
6. Cash Credit/Over Draft Agreement.
7. Letter/Agreement of Hypothecation:
 Hypothecation of merchandise Goods/Book debts
 Hypothecation of goods covered by bill
 Hypothecation of plant & machinery.
7. Agreement of Pledge.
8. Letter of Assignment.
9. Letter of Guarantee.
Information Utility (IU) for Bankruptcy Cases under the Insolvency and Bankruptcy
Code 2016
IBA has advised Model Clauses for incorporating in Bank‘s Loan/ Guarantee/

Security Agreements etc. for giving consent for submitting and authenticating
financial information to Information Utilities (IUs). Accordingly, Law Division, HO has
drafted the following Supplementary Agreements/Letter incorporating aforesaid
clauses which are to be obtained from the concerned parties in all existing & fresh
borrowal accounts. (L&A Cir. No. 41/2018)
i Supplementary loan agreement of the Borrower Annexure I

ii Supplementary guarantee agreements executed by the Annexure II
Guarantors
iii Supplementary security creation agreements executed by any Annexure III
person who has not given his guarantee for securing the credit
facilities availed by the Borrower
Iv Letter to be given by Third Party creating Security Interest without Annexure IV
giving guarantee when Security is created by way of Equitable
Mortgage (where no other document is executed)
Bank has entered into an agreement with the first information utility called National e-
1
Governance Services Ltd. (NeSL) for submission of financial information of borrowers as
part of obligation under IBC, 2016. The submission of financial information of borrower
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shall be accompanied by a fee to be paid to NeSL as per LA Cir 50/2019 dated
25.04.2019. An undertaking for debiting fee from the accounts to be obtained in each
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account as per Annexure of LA Cir 50/2019 dated 25.04.2019.
A. Central Registry of Securitisation Asset Reconstruction and Security Interest in

21
India (CERSAI) (LA 157/2020, MISD 04/2020)

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Central Registry of Securitization Asset, Reconstruction and Security Interest of

India (CERSAI) is an online platform for filing of transactions of securitization,
3
reconstruction and Security Interest. It can be used as search engine for finding
out detail of such transactions by any person on payment of prescribed fee. The
search can be made on the basis of asset details as well as Debtor‘s details .
Types of security interest that is required to be filed on the CERSAI portal are as
under:
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a) Particulars of creation, modification or satisfaction of security interest in

immovable property by all types of mortgages.
b) Particulars of creation, modification or satisfaction of security interest in
hypothecation of plant and machinery, stocks, debt including book debt or
receivables, whether existing or future.
c) Particulars of creation, modification or satisfaction of security interest in
intangible assets being knowhow, patent, copyright, trade mark, license,
franchise or any other business or commercial right of similar nature.
d) Particulars of creation, modification or satisfaction of security interest in any
‗under construction‘ residential or commercial or a part thereof by an agreement
or instrument other than mortgage
All types of charges (irrespective of the mortgage creation date and charges filled
by banks with any other public registration authority like – Companies act, Patent
act, Motor Vehicle act etc.) are required to be registered with CERSAI.

Registration of charges relating to motor vehicles are to be made ONLY on the VAHAN
registry and not on the Central Registry (CERSAI). Any vehicle registered with the
VAHAN registry shall be deemed to be registered with the Central Registry for the
purposes of the SARFAESI Act, 2002.(IRMD L&A 121/2019)
In terms of the amendment in the Securitization and Reconstruction of Financial

Assets and Enforcement of Security Interest (Central Registry) Rules, 2011, vide
Gazette notification dated 24.01.2020, the procedure for filing of attachment
orders (by Government Departments and also by private parties) with CERSAI is
prescribed. The stated notification also deletes Rule 5 which had earlier provided
a time limit of 30 days for filing particulars of transaction with CERSAI and also
consequential condonation process. After verification, branch has to invariably note
down the Asset ID/Security Interest ID created by the system.
Henceforth, unless the attachment order is filed with CERSAI, the same would
neither be recognized nor be enforceable under the law. Deletion of rule 5 implies
clearly that charges should be registered at the earliest possible instance so that
priority of charge, remains with the bank.
1
In view of the foregoing, it is advised that particulars of the security interest must
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be entered in the CERSAI on the date of creation, modification or satisfaction
without waiting for 30 days period specified under the Act in order to safeguard
22
Bank‘s interest
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On verification of entry, system gives option for downloading the Challan. Branch should
immediately download the challan and keep it with loan documents.
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At branches, Checkers are required to verify records entered in CERSAI by Maker with
the application of Digital Signature. For procurement of Digital Signature, users are
required to send request on prescribed application form to Information Technology
3
Division, HO through their respective Circle Office.
CREATION OF RECORD OF CHARGE DETAILS IN CBS (SRM – ‗C‘ details) AND

BRANCH RECORDS (TITLE DEED REGISTER)
 While filing particulars of mortgages with Central Registry an

05
acknowledgement /receipt is generated containing Asset ID. Asset ID so

generated is to be recorded in Title deed register along with name &
signatures of the officials filing particulars of IP with Central Registry, so that
inspecting officials during branch inspection can verify that all EMs are filed
with Central Registry and Asset ID & Security Interest ID is recorded in the
title deed register.
 Asset ID number generated as above should also be mentioned in Legal
compliance certificate, column 4 (e) of schedule- I under details of mortgages
created (property wise) sent by branches to circle office.
 The collateral security detail be captured in CBS vide LA 14/2017 & 21/2017
In order to ensure compliance of registration of EMs in CERSAI and to facilitate its
monitoring at the appropriate level, dealing officials have to create record of securities,
primary as well as collateral, charged to the bank, in CBS system through Menu option
‗SRM – Security Register Maintenance‘.( ITD-CBS circular No. 88/2011 dated
17.10.2011)

CERSAI portal is now being upgraded to version 2.0 and system related
guidelines have been conveyed vide MISD circular 04/2020 dated 27.07.2020
SCHEDULE OF CERSAI FEE PAYMENT:

Please refer MISD 03/2019 dated 18.03.2019, IRMD LA circular 93/2020 dated
26.05.2020 Point 11.4 page 14)
Nature of Transaction to be Amount of Fee payable to Central
Registered Registry
Particulars of creation or modification 1) Upto ₹5 Lakh – ₹50/-

of Security Interest in favour of 2) Above ₹5 Lakh – ₹100/-
Secured Creditors
Exclusive of GST
Satisfaction of any existing Security NIL
Interest
Any application for information Rs 10.00
recorded / maintained in the Register
1
by any person including online search Exclusive of GST
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of records.
Any application for condonation of 22 Not exceeding 10 times of the basic
delay up to 30 days fee, as applicable
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As per MISD 12/2017 dt 18.12.2017, CERSAI Recovery menu is as under:

21
1 CERSAI Recovery Menu MCHRG

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2 Income Head 2081002

3 Income Invoice to Customer through Menu CGSTRPT
3
4 Detail of How to use MCHRG ( Flow Chart given Finance Div. Cir.
and Invoice Printing) 24/2017 Dt 06.10.2017
CERSAI ADDITIONAL FEE CHARGES FOR DELAYED FILING BEYOND 30 DAYS

SARFAESI Act 2002 has enumerated penalty in committing default in compliance of the
requirements as per the Act. Additional fee is charged for delayed filing in the staggered
05
manner given below:
S.N Registration on CERSAI No. of Additional Fee to be charged if the loan

o after the date of times amount is: (GST Extra)
transaction i.e. after 30 additional
days fee on
Normal fee
Upto Rs. 5 Lac Above Rs. 5 Lac
1 From 31st to 40th day 2 Rs.100/- Rs.200/-
CERSAI has decided to charge fine (w.e.f. 1.4.2015) on delay in filing of Satisfaction
of Charge with CERSAI beyond the stipulated period of 30 days from the date of
satisfaction in full of its charge. Thus,
a) Ensure accuracy of data while filing with CERSAI and undertake a data cleansing
exercise of the data already filed.
b) File satisfaction of charge on CERSAI promptly within 30 days of satisfaction of charge.

c) Create provision for the other members of the consortium / other lenders to register their
charge on the asset in case of Consortium finance / Multiple lending.
d) Quickly handover the title deeds of the property mortgaged to the other bank
which has taken over the loan to enable them to file their charge over the property
with CERSAI within the stipulated period.
e) In terms of Sec-27 of the SARFAESI Act, in case of any default in filing of
satisfaction of charge, the appropriate Authority can impose fine on every secured
creditors and every officer of the secured creditors who is in default, which may
extend to Rs.5000/- (Rupees Five Thousand only) for every day during which
default continues.
In order to curb the frauds due to the gap in entering the particulars of mortgages of
deposit of title deeds, it has been decided that particulars of the mortgages created by
deposit of title deeds must be entered in the CERSAI on date of creation of equitable
mortgage of IPs without waiting for 30 days period specified under the Act. Further, the
Incumbent must ensure that in no case disbursement shall be made without entering the
particulars of equitable mortgages by deposit of title deeds in CERSAI site. (LA 53/2016
dt 31.07.2016)
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Guidelines as contained in LA Cir 29/2019 as well as LA Cir 64/2019 must be
adhered to. 22
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B. VETTING OF LOAN DOCUMENTS (LA 157/2020, 98/2014)
All the loan documents in respect of sanctioned limits of Rs.2 crore &above (both
21
FB and NFB) vetted from the local approved advocate/solicitor, first before their
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execution and again after execution but before disbursement of the loans.
C. LEGAL COMPLIANCE CERTIFICATE (LA Cir 157/2020, 185/2020)

3
Branch to ensure compliance of instructions regarding Legal Compliance Certificate

to be submitted to Controlling Authorities, in guidelines on Control Measures issued
by IRMD from time to time.Vide LA circular 185/2020 it has been advised that
with the introduction of system of Pre Disbursement Audit (PDA), the Legal
05
Compliance Certificate is dispensed with.
D. ENSURING END-USE OF FUNDS (LA Cir. 157/2020 )
End use of bank‘s fund should be verified properly.There should be effective post
disbursement monitoring to ensure end use of funds/prevent diversion of funds and
checking on transactions-cash payment, cheque payment. These transactions
should be related to the trade/business in which the party is engaged The GST
Returns and E-way Bill can be used as an additional document for verification of end
use of funds in specific purpose loans.
As a matter of prudence, Bank needs to ensure end-use of funds it has lent. It is

necessary to ensure that the Bank does not depend entirely on the end-use
certificates issued by Chartered Accountants but strengthens its internal controls and
the Credit Risk Management System to ensure end-use of funds which would
enhance the quality of the loan portfolio. Some of the illustrative measures that could

be taken by the branches to ensure end-use of funds are:-
i. Meaningful scrutiny of quarterly progress reports/operating statements,

balance sheets of the borrowers;
ii. Regular inspection of borrowers‘ assets (factory/business premises/IP etc.)
charged to the Bank as security;
iii. Periodical scrutiny of borrowers‘ books of accounts:;
iv. Periodical visits to the assisted units, periodical stock audit in case of working
capital finance;
v. The appraising office, should conduct pre-sanction visit of borrower‘s
factory/business premises/IP offered as security in the loan
account/borrower‘s place of work/residence as part of appraisal and annex
the copy of visit report with the proposal
vi. In order to minimize the instances of selling off of mortgaged IP/multiple
mortgages, etc. a well defined system for periodic visit to the mortgaged site
already in place to ensure that the security remains charged to the bank
during the currency of the loan should be followed
1
vii. Obtainment of necessary certificates from the borrowers, particularly in case
of Corporate Loans, Working Capital Finance, Project Finance, Short Term
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Loans etc., certifying that the funds have been used for the purpose for which
these were obtained and are not diverted to Capital Market/some other use.
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viii. Ministry of Finance has advised that Public Sector banks must be vigilant as
regards to the end use of loans & advances granted to its customers and the
cases where the customer utilized the loans for the purpose of repaying debt
21
with other entities (without prior approval of the bank), should be placed
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before the Board of Directors in the ensuing meeting with its salient details as
soon as it comes to the notice
ix. RBI has advised that in case of incorrect certification by the borrowers,
3
prompt action as may be warranted, may be initiated which may include

withdrawal of the facilities sanctioned and legal recourse as well. In case a
specific certification regarding diversion/siphoning of funds is desired from the
auditors of the borrowers, a separate mandate may be awarded to them and
appropriate covenants incorporated in the loan agreements.In cases where
standard loan documents do not contain clause to cover the above issues,
05
Supplemental Agreement as per Appendix XIII (LA 157/2020) may be

obtained to safeguard bank‘s interest.
 In any case the report containing all the transactions at a non base branch
should be generated by the base branch at the end of the day and scrutinize
thoroughly for ensuring end use of funds in the borrowal account. In case of
deviation, the base branch may take appropriate action including withdrawal
of multicity cheque book facility. There are instances of heavy cash
withdrawals from certain borrowal accounts, which needs immediate attention.
Branches should take necessary steps as per guidelines issued by Insp. &
Audit Division from time to time, to curb this tendency as it may lead to
avoidable diversion of funds by the borrowers
 In cases where borrowers are enjoying only NFB facilities of ₹1 crore & above
and do not require working capital assistance in normal course of business
requirement from any Bank/FI, QMS Forms, which includes operating and
fund flow statement should be obtained to keep track of the borrowers

performance/progress and at the same time ensuring end use of funds. While
scrutinizing QMS Forms in case of standalone NFB facilities, the Branch
Heads should take extra care.
 Projected figures submitted by the borrowers in the project report should
reveal the sources and basis of projections. In some cases, these figures
have been found to be unrealistic resulting in quick deterioration of quality of
asset.
 The system of Pre Disbursement Audit (PDA) has been put in place to ensure
end use of funds.
E. Limit Sanctioned Statement – LSS (LA cir135/2020 dated 27.07.2020, Revised

guidelines vide L&A 223/2020 dated 17.12./2020) :-
Sanctioning Authorities are required to submit all limits sanctioned, whether

Fresh/Renewal/Reduction/Enhancement/Adhoc/Refund of excess charges /any
other issue to be reported etc in the prescribed format of Limits Sanctioned
Statement as on the last day of the month to the next higher authority for monitoring
1
as under :-
 Branch Heads/Concerned Official to submit the Statement of Limits
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Sanctioned to the respective Circle Offices/Zonal Offices (to whom they are
reporting). 22
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 The designated officials shall exercise their vested powers and such cases
shall be reported every month to respective controlling Offices along with
facilities sanctioned by the Branch Head.
 The Monthly Statement of Limits Sanctioned is to be submitted in the
21
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Performa (PNB207) as given in Part I & II of Appendix I. However, it should be

ensured that the LSS generated from the CBS system only is to be submitted,
after making necessary additions/deletions in it wherever required.
3
Submission of manual statements should be avoided.LSS report is also

available in the EDW Server, which could be utilized by Branch Offices and
the Controlling Authorities for preparation as well as scrutiny of the
LSS.Branches/ offices may extract the LSS report from the EDW Server and
submit the same to controlling office after making necessary modification in it
wherever required along with required Annexure/Appendix.
05
 In case where the LSS is not received within 10 days of the close of the
month to which it relates, the Controlling Offices to generate the LSS report
from the EDW Server for overview and thorough scrutiny.
 LSS from EDW Server may be drawn from following folder:
PNBEDW_CAD_Monthly_Monthly Statement of Limit Sanctioned
All the updated Annexure (in Word Format) are available at PNB Knowledge
Centre (Circulars>>Division wise Circulars >>Select Division >> IRMD>> Select
Sub Division >> IRMD Loan & Advances >> Special Links >> Click on Plus
Button)
F. STOCK STATEMENT & INSPECTION OF STOCKS (L&A Cir. 44/2020 dated

27.03.2020)
Stock Statement:Form PNB 938(Appendix-I) is to be used for obtaining Stock

Statement from all borrowers enjoying Cash Credit (Hypothecation) and Packing

Credit limits. In case such limits have also been sanctioned against Book Debts,
position of the Book Debts is to be obtained from the borrowers in the Form PNB
939 (Appendix-II).
Guidelines :-
i. Inventories of stocks submitted by the borrowers should be thoroughly
scrutinized and checked along with the books of the borrowers to ensure that
the stocks hypothecated to the Bank are in accordance with the inventory.
ii. Unpaid for goods are not to be included by the borrowers in the inventories.
iii. Once inventory has been submitted, no increase in drawing power be
permitted prior to the due date of the next inventory.
iv. The bales, boxes and bags should be properly stacked in the godowns to
ensure ready verification of quantity of stocks.
v. The value of the stocks should be verified from the invoices and ensured that
the same are properly valued.
vi. Old stocks aren't included in the inventories without obtaining necessary
permission from the competent authority.
1
vii. The parties should exclusively deal with our Bank in terms of the sanction
unless otherwise permitted in the sanction to guard against availing of double
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finance.
viii. The entire stocks pledged/hypothecated to the Bank must be got fully
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insured with agreed bank clause and policies held on the records of the Bank
even though the limit is lower.
ix. Description of the goods pledged/hypothecated and their place of storage
21
should be correctly mentioned in the policies to avoid any difficulty in the

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event of making claim from the insurance company.

x. In case of CC Hypothecation accounts, Bank's name-plates reading as under
must normally be displayed on the hypothecated goods and/ or at the places
3
of storage of hypothecated goods:- "Hypothecated to Punjab National Bank".

xi. In case of pledge accounts, Bank's name plates reading as under must be
displayed conspicuously both outside and inside the godown where the
goods pledged to the bank are stored ;- "IN POSSESSION OF PUNJAB
NATIONAL BANK GODOWN NO____________".
05
Drawing Power: ( L&A 44/2020 Dated 26.03.2020)

Drawing Power is to be calculated and recorded in the Drawing Power Sheet on
Form PNB 1062 (Appendix III) in case of Cash Credit (H) and Packing Credit
accounts with limits of Rs.10 lacs and above. However, for accounts below Rs.10
lacs, drawing power should be calculated and recorded in Drawing Power Register
on Form PNB 1061(Appendix – IV).
METHODOLOGY FOR CALCULATION OF DRAWING POWER:
IBA has enumerated guidelines on methodology to be adopted for calculation of
Drawing Power (DP) based on the method approved by RBI under the MPBF
methodology as under:-
Total Value of Stocks (Closing balance of A

stocks, their value as per market rates or cost
price, whichever is lower)
Less: Excess of Sundry Creditors (Stocks) B

Excess of Other Sundry Creditors C
Over the level assumed at the time of
assessment
New Value of Stocks D=A-B-C
Add: Eligible Trade Debtors including advance E
for stocks and expenses as envisaged at the
time of assessment
Add:-Advances made to suppliers up to 180 F
days
Less: Outstanding under Bills discounted BD
Net Value of Debtors G=E+F-BD
Total eligible Current Assets H= D+G
Less: Stipulated Margin I
Drawing Power H-I
The allocation among the consortium members shall be done by the consortium
leader pro-rata to the exposure assumed by these banks under consortium. The DP
1
allocation advised to the consortium members will be binding on them for conduct of
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borrower‘s account. This methodology will also apply in case of facilities under
Multiple banking arrangement as well as in case of standalone credit facilities.
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Further, at the time of assessment, sundry creditors should be scrutinized with
utmost care and no DP should be allowed on goods received under LC unless such
stocks are paid for/till the documents are retired. As such, value of devolved LC/BG
21
remaining unpaid to the bank and value of other LC/BGs outstanding as at the month
end as well as the value of goods received under Buyers Credit should not be
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included in DP.
3
Nevertheless, provisional DP to be worked out by the branch every month on the

basis of stock statement which should be revised/finalized after verification of stocks.
No Drawing Power shall be allowed against:
a) Old, deteriorated and unsaleable stocks.
b) Spares of more than 1 year old.
c) Stocks which are unpaid for (including those received under DA-LCs) after netting
05
with Book Debt as per Bank‘s guidelines.

d) Stocks which are more than 6 months old
In order to arrive at accurate level of drawing power sundry debtors and creditors
have been made part of stock statement along with sales and purchases of stock
which may be used for comparing the movement of stock. Sales/Purchase and
position of debtors(ageing) should be cross checked through GST returns and E way
bills. Branches should generate Appendix C on monthly basis and compare the
same with sales and purchases reported by the borrower in the stock statement
Stock Inspection :
1. Stocks charged to the Bank by way of pledge/hypothecation in various loan
accounts are required to be inspected and physically checked/verified by the
Incumbents once in a month or more often if so required in a particular case
or subject to the stipulations, if any, made by a Competent Authority in the
letter of sanction.

2. The inventories should be submitted by the borrowers at fixed intervals
according to the terms of the sanction subject to:
i. Periodicity of stock statement for advances up to Rs.50.00 lac on
quarterly basis. However, sanctioning authority may fix lower period
depending upon the business, nature of security etc
ii. For advances above Rs.50.00 Lac, On Monthly basis in all cases
without any exception.
3. Further, Borrower shall submit stock reports giving a complete list of all
stocks, as on the last day of each month, within 10 days of the following
month invariably along with GST returns of the previous month/quarter as
applicable under GST to facilitate.
4. Monthly inspection/checking may be carried out alternatively by the
Incumbent Incharge, Manager and the Assistant Manager/Officer.
5. Whereas checking may be entrusted to the Assistant Manager/Officer as
permitted under the instructions, it shall continue to be the personal
responsibility of the Incumbent Incharge to ensure that the checking has been
done in all cases every month or as per stipulations made in the letter of
1
sanction.
6. During periodical inspections, the Incumbents should satisfy themselves that
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the security is intact both qualitatively and quantitatively, is readily marketable,
has not become old or obsolete and has not deteriorated in any way.
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7. A report of physical inspection/verification of stocks is to be submitted as per
Inspection Report Form PNB 941 (Appendix-V) in case of all C/C(H) and P/C
accounts with limit of Rs.5 Lacs and above.
21
8. For accounts below Rs.5 Lacs, there is no need to submit this report and the
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existing practice of recording the necessary information about inspection in

the Stock Statement should be recorded on Form PNB 938 (Appendix I)
itself.
3
9. The reports must not be signed as a matter of routine or mere formality, but
they should be based on inspections actually carried out.
10. Also See Circular FRMD 17/2017 for more details.
11. It is advised that along with the stock statement copy of GST returns
(containing invoice wise/party wise details) shall also be obtained from the
borrower. (See LA 95/2018 dt 04.10.2018)
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12. GSTIN Number can also be verified from GST site and it can be ensured
whether upto date GST returns have been filed by the borrower.
(See LA 95/2018 dt 04.10.2018)
13. System of E-way bill has been made mandatory for inter-state movement of
goods of more than ₹50,000 in value throughout India, it can be used as an
additional tool to cross check & verify the genuineness of the bills/invoices
received in term loan accounts. Branches are advised to make use of E-way Bill
as a monitoring tool for aforesaid purpose along with bills/invoices, end-use
certificates issued by Chartered Accountants etc.It is also reiterated that GSTIN
Number can be verified from GST site. Similarly, a QR Code printed on each E
Way Bill and validity of the E-way bill along with all other details can be
authenticated by scanning the code from a Smart Phone.
(See LA 38/2019 Dt 08.04.2019)
14. In terms of L&A Cir. No. 104 dated 18.10.2018 confirmation has to be
provided in the appraisal note that GSTIN of the borrower is active and up to

date GST return has been filed as checked from GST website. If not, the
details along with reason should be given in the note. (LA 59/2019)
15. In respect of borrower who is relative of any staff member of the Bank, the
unit visit, stock verification, property inspection etc. shall be done by the staff
members other than the staff who is relative of the borrower. (LA 177/ 2020)
G. GUIDELINES REGARDING STOCK AUDIT OF LARGE BORROWAL

ACCOUNTS (L&A circular 148/2020)
Applicability
a. Annual Stock Audit should be got compulsorily done in respect of all borrowal
accounts enjoying Fund Based & Non Fund Based (NFB) working capital limits of
Rs.5 crores and above from our Bank. All NFB limits, which are being used for
Working Capital Funding like LC, SBLC, BG for purchase of goods for sale and
BGs for mobilization Advances are to be included within threshold limit of Rs.5
crore for stock audit, but Capex LCs, Bid Bond Guarantees etc. need not be
included in NFB limits for the purpose of conducting stock audit.
1
b. In case of borrowers enjoying fund based working capital limits less than Rs.5
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Crore also, Stock Audit may be got done in exceptional cases and/or where
bank‘s interests demand. 22
c. Annual Stock Audit should be compulsorily conducted in all ‗B2‘ to ‗C3‘ rated
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accounts and NPA accounts enjoying fund based and non-fund based working
capital limits of Rs. 3 crore and above.
21
d. In exceptional circumstances where certain adverse features are observed by

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the branch in the operation of account which may be like Abnormal increase or
decrease (30% or more on a monthly basis without due justification) in Stock
receivables/Sundry debtors / sundry creditors Decline (20% or more) in credit
3
summation in Working Capital facility continuously for 3 months without due

justification Account remains overdrawn continuously for more than 2 months.In
such cases Branch Head should seek immediate approval from Zonal Office to
get the stock audit conducted within one year also.
Frequency of conducting Stock Audit in NPA Accounts :

05
i. Immediately after an account gets classified as NPA and normal cooling

period of 3 months for up-gradation/rectification of default is over, Stock
Audit be made mandatory within next 3 months.
ii. After the 1st Stock Audit during the first year of NPA, subsequent annual
Stock Audits should also be carried out as usual, till such time the Stock
Audit Reports show substantial depletion in value of Stock/Book Debts.
iii. When substantial depletions in the value of Stocks/Book Debts is noticed,
the decision for not conducting Stock Audit subsequently, should be got
approved from the NPA Monitoring Authority of the said account.
Applicability in Case of Consortium/Multiple Banking Accounts
In case of Consortium/Multiple Financing, where the borrower is enjoying

working capital limits (fund based) of less than Rs.5 crore from our Bank and
Rs.20 crore and above in aggregate from the banking system, branches should

take up with lead bank/major share-holder banks in multiple banking
arrangement for getting the stock audit conducted.
In respect of consortium advances, where we are the leader, the stock audit
may be got conducted with the consent of the member banks and in cases
where we are not the leader, we may take up the matter with the Lead Bank for
getting the stock audited of the borrowal account. The final decision regarding
stock audit in the account shall, however, be based on the consensus amongst
the member banks
Exemption from Annual Stock Audit :
Accounts falling under the category ‗A1‘ to ‗A4‘ under the risk rating module
signifying lower risk, may be exempted from annual stock audit, if required,
based on merits and business considerations of each case, facts should
invariably be incorporated at the time of fresh sanction/renewal/review of the
working capital limits. However, in existing accounts where exemption from
annual stock audit has been already permitted by the sanctioning authority, the
1
same shall continue
Time schedule:
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Maximum time taken for such audit varies from 2-4 weeks except in case of
noncooperation by borrowers where it may take some more time. Time frame for
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completion of such audit should be clearly spelt out. It should be ensured that
the agency conducting Stock Audit submits its report on the prescribed format
(Appendix-I) immediately after completion of audit but in no case later than two
21
weeks of completion of audit.

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Time schedule for completion of stock audit every year is as under:

3
Stock Audit exercise may be staggered throughout the year so that whole
available in the succeeding months of January/February/ March, which will help
the Bank to take an appropriate view while finalizing the accounts. Time
schedule for completion of stock audit every year is as under
S. Activity Time schedule

05
No.
1. Completion of the process of appointment of stock 31stAugust

auditors
2. Completion of stock audit and submission of the 30thNovember

report
3. Compliance of the observations of the stock audit 31stDecember

report and its closure
The overall time limit for closure of stock audit shall be 3 months. However, in
cases where stock/receivables audit is conducted more than one time in a
year, the time limit for closure of stock audit shall be 2 months

The observations/deficiencies pointed out by the Stock Auditors should be
removed/rectified maximum within 90 days.
Charges:
The fee for Stock/ Receivables verification by independent Chartered
Accountant is as under:
WC LIMIT (FB+NFB) FEE PAYABLE
Up to Rs 10 Cr Rs 15,000/-
Above Rs 10 Cr upto Rs 25 Cr Rs 20,000/-
Above Rs 25 Cr upto Rs 50 Cr Rs 30,000/-
Above rs 50 Cr upto Rs 100 Cr Rs 40,000/-
Above Rs 100 Cr Rs 50,000/-
The above fee structure shall be inclusive of all expenses to be incurred by
Auditors on travelling, Boarding, Lodging and other Misc. Expenses etc. The fee
payable to the stock auditors would be borne by the borrowers
1
(L&A circular 148 dated 11.08.2020)
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H. INSURANCE:
(LA 157 dated 17.08.2020, 46 dated 23.04.2014, 113 dt. 26.11.15)
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1. All the securities mortgaged or hypothecated to the Bank should be kept fully
insured against fire and other risks, which may be considered necessary. The
21
insurance policies should be in the joint names of the borrower and the Bank with
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the agreed Bank clause and remain in the custody of the Bank.
Under CBS system, the report relating to insurance of securities PNBRPT 3/2
can be generated and monitored on day to day basis. It should be ensured that
3
the policies are renewed at an appropriate time.

2. The property charged to the bank as security is to be kept fully insured for fire,
riots and wherever required against other appropriate hazards, such as
earthquake, flood, cyclone, etc. by the borrower with usual bank clause as under:
a) Where IP is mortgaged to the Bank as Primary Security

05
In respect of IP mortgaged to the bank as primary security, Risk Coverage

Policy equivalent to reconstruction cost of the property excluding land cost
instead of full market value should be obtained.
b) Where IP is mortgaged to the Bank as Collateral Security
In respect of IP mortgaged to the bank as collateral security, Risk Coverage
Policy equivalent to full market value excluding land cost should be obtained.
BMs should ascertain by reviewing on an ongoing basis that the adequate

coverage of insurance is available for reconstruction cost/ market value (as the
case may be) at all times as the cost may increase during the period of
insurance policy. The value of property for arriving at insurance premium is to be
based on rate of construction of the building as per PWD rates for that particular
region and the same is suitably loaded for extra fittings and fixtures, superior
construction and other relevant details. In fire insurance, building above the
plinth and foundation is covered. However, when the policy is extended to cover

the risk of earthquake, then the cost of plinth and foundation can be included in
the sum insured.
 In order to ensure that all assets/securities are got insured and in no account
assets/securities are left uninsured, all insurance policies in respect of assets
th
charged to the bank shall be renewed on a common date i.e. 15 May,
th th th
15 August, 15 November and 15 February.
 In case, common date falls on Sunday/Holiday, insurance policies shall be
renewed on the preceding working day.
 In addition to Life Policies issued by LIC of India and Non-Life Policies issued
by Public Sector General Insurance Companies, Insurance Policies (Life &
Non-Life) issued by Private Sector Insurance Companies registered with IRDA
as per list given in Appendix of the circular (LA 46/2014 dated 03.04.2014)
may be accepted.
 The insurance of the stocks should be arranged by the borrowers themselves
with an Insurance Co. In cases where the parties concerned neglect or refuse to
effect the insurance, the bank has to exercise the right to insure the stocks.
1
Ordinarily, therefore, the parties should themselves arrange for insurance with
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the usual bank clause and advances against particular stocks should only be
allowed after the insurance has been effected and the necessary cover note or
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the insurance policy has been deposited with the bank.
 The entire stock must be insured and not to the extant sufficient to cover our
outstanding/limit.
21
 In order to safeguard bank‘s interest, it is further advised that whenever the

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stocks are shifted from one place to another, the same should be duly intimated
to the bank and insurance cover in respect of new premises should be taken. A
stipulation to this effect should be incorporated in the terms of sanction. Further,
3
the bank should also take cognizance of the stock at the new officially intimated
address.
I. PENAL INTEREST (LA 157/2020 dated 17.08.2020 chapter 9)

In order to instill a sense of credit discipline among the borrowers, RBI has
permitted banks to levy penal interest over and above the sanctioned rate of
05
interest in case of non compliance of various terms and conditions

The broad areas of non compliance where bank charges penal interest are:
(a) Default in repayment of loans;
(b) Irregularities in cash credit accounts;
(c) Non-submission of stock statements & other financial data; (penal interest is to
be charged on the outstanding after 10 days till submission of next
statement.)
(d) Default in adhering to borrowing covenants;
(e) Non-payment of demand bills on presentation and non- acceptance/non-payment
of usance bills on due dates;
(f) Excess borrowings arising out of excess current assets and
(g) Non-submission of information under the Quarterly Information System/ Quarterly
Monitoring System (QIS/QMS).
It is clarified that penal rate of interest for the period of default is to be charged:
On the amount of:

- Default in instalments;
- Excess drawals/ borrowings;
- Irregularities in account;
- Overdue bills either not debited in case of ODD or where DP is not reduced in case
of ABC bills.
On the total outstanding for:

- Non-submission of stock statement & other financial data;
- Default in adhering to borrowing covenants;
- Non-submission of information in QIS/QMS discipline.
EXEMPTIONS FROM CHARGING OF PENAL INTEREST
Penal rates of interest should not be levied in the following areas:

(a) All advances up to Rs.25,000/-.
(b) Advances by way of reconstruction or nursing assistance to sick units for item 1(a) to
1(f) above. Thus, non-submission of QIS/ QMS statements would attract penal
interest.
(c) Sick industrial units which remain closed.
1
(d) Advances against deposits, life insurance policies & Government securities/gold and
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jewellery where the drawings are within the available value of the security.
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RATE OF PENAL INTEREST/ADDITIONAL INTEREST
(a) In borrowal accounts, where one or more 2% above the normal rate of interest
21
default/ Irregularity as mentioned above applicable to the respective borrower.

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(b) In borrowal accounts, where 2% above the normal rate of interest

adhoc/temporary limits are sanctioned. applicable to the respective borrower.
3
(c) In borrowal accounts, where 3% above the normal rate of interest

adhoc/temporary limits are sanctioned and applicable to the respective borrower.
one or more default/ Irregularity as
mentioned at Item 1 exists.
J. MONITORING THROUGH QUARTERLY REVIEW SHEETS (QRS):

05
(LA Cir. 02/2011, 108/ 2011 , 107/2012& 157/2020 )

The review sheets are to be prepared as under:
(i) For the borrowers enjoying credit facilities below Rs. 20 Lac, as per
format given at Appendix-I of the circular.
(ii) For the borrowers enjoying credit facilities of Rs. 20 Lac& above, on PNB
664, format given at Appendix-II of the circular.
For borrowal accounts sanctioned by Incumbents within their vested powers, QRS
shall be prepared and kept on record whereas for sanctions by higher authorities, the
same shall be prepared in duplicate/triplicate/quadruplicate, as the case may be, for
sending the original one to the Sanctioning Authority and copies to the intermediate
controlling offices within 10 days of the close of the quarter. One copy shall be
retained at the Branch for record.

QRS is not applicable in following cases :
A. Where sanction is accorded by the Incumbent In-charge in following
cases:
 Advances to small borrower(s) upto Rs. 25000/-.
 Advances against bullion and jewellery.
 Advances against Govt. Securities, units of UTI,
 Advances to staff members,
 Advances against shares.
B. In following cases irrespective of the Sanctioning Authority:
 Advances to the members of staff in respect of housing loan conveyance
loan, consumer loan and festival loan.
 Advances against insurance policies
 Advances against bank's own deposits.
 Protested Advances/sick/rehabilitated accounts. (In such cases
instructions issued by Recovery Division and Industrial Rehabilitation
Deptt., HO should be followed).
1
In order to make QRS a more effective tool of monitoring, bank has introduced Score
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based QRS in respect of accounts with limit of Rs. 20 Lac and above and upto Rs. 1
Crore, which is in line with PMS report , so as to determine the health of the account.
22
Branches shall assign score for 14 important parameters as per Annexure III of the
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circular LA 107/2012. Total score of 14 parameters will decide the rank of the
account ranging from 1 to 4, based on the seriousness of the irregularities:
21
Rank Category
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1 Healthy
2 Early Warning
3
3 Warning
4 Critical
After preparation of QRS in all eligible accounts of Rs. 20 Lac and above and upto
Rs. 1 crore and assigning score as per Annexure III, branch shall prepare two
statements as per Annexure II & Annexure II A in circular
05
• Annexure II depicts QRS Rank-Wise credit portfolio of the branch for

the current quarter and movement of the same during last 4 (four)
quarters.
• Annexure IIA depicts Account-wise analysis of QRS rank 2 and above,
reasons for High QRS rank / Slippage in QRS rank along with actions taken
/ proposed to be taken.
Branches are to prepare both the above statements (Annexure II & Annexure
IIA ) for all sanctions (including BM Powers) and submit to Circle Office. LCBs
are to submit a copy of Annexure II to FGMO and HO. Accounts under Annexure
IIA are to be monitored at branch level.
Objective of the introduction of Score Based monitoring of QRS and two

statements (Annexure II & Annexure II A) are:

 To make QRS objective and categorizing the accounts health wise.
 To ensure that Branches prepare QRS reports of all eligible accounts of Rs.
20 Lac up to Rs. 1 crore.
 Branches/Circle Offices will have an idea of QRS Rank wise (Health Wise)
credit portfolio for the quarter as well as movement of the same from quarter
to quarter.
Account wise analysis of the reasons for High QRS Rank/slippage in QRS Rank will
help to identify the specific problems and to initiate suitable remedial actions
immediately to improve the health of the account and the same can be monitored at
Circle Office.
K. QUARTERLY MONITORING SYSTEM (QMS) :-

IRMD L&A circular no 45/2019, 157/2020, 25/21)
The QMS system consists of two sets of formats namely QMS I and QMS II given in
Annexure I & II respectively and provides different set of formats for following
categories of borrowers:
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(i) General category
(ii) Traders/Merchant Exporters 22
 The QMS-I, is to be submitted on quarterly basis within six weeks from the
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close of the quarter to which it relates and QMS-II is to be submitted on half

yearly basis within 2 months from the close of the half year to which it relates.
21
1. Applicability:
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 If the aggregate limits under FB and NFB facilities put together exceed Rs. 1
crore. (Page 1 of LA 45/2019 dated 18.04.2019 stipulates applicability of
3
QMS-I and QMS-II for 1 Crore and above, where as page 2 stipulates
applicability if exceeds Rs.1 Crore)
 In accounts where borrower is enjoying credit facilities (FB & NFB) under
Multiple Banking arrangement and availing only NFB facilities of Rs.1 crore &
above from our Bank, QMS Forms should be obtained to monitor the
company‘s operating and cash generating position on regular basis.
05
 In cases where borrowers are enjoying only NFB facilities of Rs.1 crore &
above and do not require working capital assistance in normal course of
business requirement from any Bank/FI, QMS Forms, which includes
operating and fund flow statement should be obtained to keep track of the
borrowers performance/progress and at the same time ensuring end use of
funds. While scrutinizing QMS Forms in case of standalone NFB facilities, the
Branch Heads should take extra care.
 If financial/performance guarantee, ILC/FLC is sanctioned on standalone
basis for fulfillment/specific performance of commitments for project
implementation (new/existing), the similar monitoring as applicable for term
loan accounts is required. Accordingly:
 For NFB limits of Rs. 25 crore and above the information as per PERT Chart II
should be submitted alongwith the QMS Forms.
 For limits of Rs. 1 crore & above but less than Rs. 25 crore, the monitoring
shall be done as per the simplified format for monitoring of term loan as per

Appendix III in circular alongwith the QMS Forms.
2. In case of accounts enjoying aggregate fund based and non fund based working capital
limits of Rs. 1 crore & above from entire banking system and where PBF is computed on
the basis of Simplified Turnover Method, instead of QMS I & II forms, the simplified
QMS Form as per Appendix IV in circular is to be obtained from the borrower within six
weeks of close of every quarter.
3 The borrowers in Tea Industry are exempted from the purview of QMS.
However, the borrowers in tea industry shall submit Cash Flow Statement
showing month wise actuals vis-à-vis projections and Stock Statements on
monthly basis. Further, to safeguard Bank‘s interest, physical inspection of
stocks should be conducted by the Officers/ Agricultural Officers and stocks be
checked with Excise Register.
4. In case of borrowers engaged in Leasing & Hire Purchase/Sugar Industry/ Film
Industry/Service Sector the existing Cash Budget System and formats will
continue.
5. In case of consortium advances, system followed by Lead bank may be different
1
from the system adopted by member banks. In such cases it is advised that
:0
where we are member of consortium, monitoring system, as adopted by Lead
Bank, may be followed. However, where we are the Lead bank, the Monitoring
22
System, as applicable in our bank, may be followed.
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Vide IRMD LA circular 25/21, It is clarified that QMS shall be applicable if the
aggregate Fund Based and Non Fund Based Working Capital limits exceed Rs. 1.00
21
crore.
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However obtainment of QMS in case of project financing, where Term Loan is

sanctioned for project implementation (new/existing), following annexures will be
3
obtained for borrower during implementation period:-

i. If the limit is above Rs.1 crore but less than Rs.25 crore, the monitoring shall be
done as per the simplified format for monitoring of term loan as per Appendix-I
ii. If the limits sanctioned is Rs.25 crore and above, along with Appendix-I, the
information in PERT Chart as per Appendix-II should be submitted.
05
6. Quarterly Information System (QIS) Form-I for fixing Operative Limits
In order to enable the bank to manage its funds position more effectively and
economically, the following system of fixing quarterly operative limits especially in
big borrowal accounts is in vogue:
- For all borrowal accounts availing fund based working capital credit limits of
Rs. 5 crore & above from our bank, Quarterly Information System (QIS) Form-
I may be obtained for fixing up of quarterly operative limits in addition to the
QMS Forms. The QIS Form-I as per Appendix Vin circular is to be submitted
in the week preceding the commencement of the quarter to which it
relates.
- In case of consortium advances, where our Bank is leader, the above system

may be followed. In cases where we are member of the consortium, we may
insist for setting up of quarterly operative limits. However, the supervision
system, as adopted by the Lead Bank, may continue to be followed.
- The QIS-I shall be applicable both for general category borrowers as
well as traders and merchant exporters.
In case of new borrowers with aggregate limit of Rs. 25 crore & above, the cash flow
statement should be obtained at half yearly basis duly verified by the Chartered
Accountants as under:(LA Cir.122/ 2011)
 Till the first review of limits in case of working capital, and

 During the currency of the loan in case of term loan.
In case of sugar industry, Cash Flow Statement (monthly basis) is to be obtained

from the borrowing unit, for proper follow up & to ascertain as to how far the
estimates given in Form C-II (of production, sales, stock levels, cash flows etc. for
the current year as given at the time of assessment of the limits) are realised. This
1
should be done by calling for the actuals every month and then comparing it with the
estimates.
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In case of tea industry, Cash Flow Statement showing month-wise actuals vis-à-vis
22
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projections and stock statements on monthly basis is to be submitted.
L. Post-sanction periodicity of visits to the site of mortgaged property

21
(L&A circular No 157/2020)

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In order to minimise the instances of selling off of mortgaged IP/multiple mortgages,

etc., the following system for periodic visit to the mortgaged (IP) accepted as security
3
should be adopted:
Particulars Primary Security Collateral Security
Value of property mortgaged/ At least on yearly basis At least once in three

charged is upto Rs.20 lac or credit or as per terms of years or as per terms of
facilities are upto Rs.1 crore sanction, whichever is sanction, whichever is
05
earlier. earlier.
Value of property mortgaged/ At least on half yearly At least on yearly basis
charged is above Rs.20 lac or the basis or as per terms of or as per terms of
credit facilities are of above Rs.1 sanction, whichever is sanction, whichever is
crore, earlier. earlier.
Besides the above, the following guidelines should also be followed:

 The visit to the site of mortgaged property should also be done at the time of
granting additional facilities/enhancement of limits against the extension of
EM on the existing property.
 As regards periodic visits to IPs mortgaged as security for loans under retail
lending schemes, the periodicity as envisaged in the relative scheme should
be followed. In case no periodicity is prescribed for visiting the mortgaged IP,

the above guidelines should be followed for retail loans as well where IP is
accepted as primary/collateral security.
 The official visiting the site of property, should enquire about the possession,
tenancy, construction, dispute if any, ownership of IP, valuation etc. These
are only indicative parameters. As such, in case some change is observed in
respect of aforesaid parameters as well as any other issue relating to
mortgaged IP since the date of last inspection/visit of the site, the proper
enquiries should be made locally/from the borrower to ascertain that the
mortgaged IP is properly charged to the bank.
 In case of any doubt further remedial measures such as obtention of fresh
NEC/valuation report/copy of approved map/mutation etc. may be obtained to
 Record of all such visits should be maintained in the Unit Inspection Register
as advised at Appendix IB.
 The compliance of the aforesaid instructions should be ensured by the
inspectors/concurrent auditors/higher officials from controlling office during
their visit to the branch.
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 In case of any post-sanction visit by Senior Official, the officer
accompanying the Senior Official shall prepare a brief visit report and the
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same shall be held on record at Branch/CO/ZO.
In addition to above, FRMD vide Circular No. 18/2017 has also issued guidelines
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regarding Independent verifications by the bank officials for carrying out the site visit/
IP verifications which may also be referred by the field at the time of pre sanction
appraisal and post sanction follow up.
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M. ANNUAL RENEWAL/ REVIEW OF WORKING CAPITAL LIMITS (LA Cir 157/2020)
 The system of Annual Review and Renewal enables the Bank to have a look
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at the borrower's performance and the end-use of funds granted to him. It

also capacitates the bank to judge whether the conduct of the account has
been satisfactory and whether the funds made available by the Bank to the
borrower are safe.
 Timely Renewal/Review of borrowal accounts is very important. Such
exercise enables the bank to take stock of the situation and arrive at a
05
conscious decision about the continued credit worthiness of the borrower and
whether need-based credit facilities can continue to be granted to the
borrower.
 It is, therefore, advised to ensure that working capital limits are positively
renewed/reviewed at least once a year without fail. Branches are also
advised to treat borrowers continuing on lapsed sanction as high risk
borrowers and should monitor the operations in such accounts closely for
safeguarding bank's interest.
 Since the system of annual renewal of loan accounts enables the bank to
review the borrower‘s performance and monitor end-use of bank finance, it is
advised that the laid down guidelines for timely renewal of limits should be
strictly adhered to.
 A report is available under PNBRPT 3/6 - Accounts where the Limits are
going to fall due/ overdue for Renewal during next 6 months. The SMS alert
is also sent 15 days prior to limit expiry for renewal of Limit. The SMS is

configured on weekly basis i.e. it is deliver on every Monday for accounts
whose Limit is going to expire in next 15 days. The Pop-up displays at the
time of A/c inquiry in case Limit is going to Expire
 At the time of review/renewal/enhancement of existing cash credit limits, it is
to be ensured that the credit summations in CC account are in proportion to
sale. It has been observed that borrowers resort to transfer funds between
CC and current account to increase the credit summations which also results
in diversion of funds and increase the chances of escaping borrowal account
from slippage to NPA category
 In order to avoid such instances, it is advised that Bank shall not open any
new current account of a customer who are availing CC/OD from the banking
system. However, current account of prospective customers who have not
availed any credit facilities from the Banking System can be open, subject to
necessary due diligence as advised by concerned division (s) from time to
time
 The non-submission or delayed submission of the latest financials and other
information required for renewal of limits is also viewed seriously by the
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authorities. In order that the renewal proposals with complete financial
information are completed in time by the Branch Managers, they should
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adopt the following procedure :-
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a) All renewal cases should be diarized at least 4 months in advance and
followed up by Branch / Circle Offices as the case may be so that all the
sanctions are renewed in time.
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b) Remind the borrowers four months ahead of the due date and collect all
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relevant data and information.

c) The proposals, after scrutiny at the branches, should be sent to Controlling
Offices so as to reach them at least two months ahead of due dates.
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d) The proposal should be scrutinized speedily at Controlling Offices and must

be sent to Head Office, wherever necessary so as to reach Head Office one
month prior to the expiry of the sanction date.
The relaxation in service charges/ROI is valid maximum for a year from the date of
sanction of relaxation or due date of renewal of the facilities, whichever is earlier.
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N. AUTHORIZATION FROM BORROWER/ GUARANTOR TO ACCESS

INFORMATION FROM INCOME TAX DEPARTMENT AND OTHER
AUTHORITIES (LA circular 157/2020)
i. In the process of credit decision, banks are required to verify financial
documents such as IT returns, GST Returns, Audited Financials etc.
submitted by the borrower/guarantor.
ii. IBA has suggested that the banks to obtain, an authorization from
borrower/ guarantor to enable the bank to approach Income Tax and other
authorities to access the information submitted to these authorities by
borrower/guarantor. This authorisation will be useful for providing it
separately to appropriate authority, if need be, while cross verifying the
authenticity of information.
iii. Accordingly, it is advised that an Authority Letter as per Appendix VII along
with other documents shall be obtained from the borrowers and guarantors
in all fresh cases as well as in case o

iv. f renewals. In case of existing accounts the same may be obtained at time
of review / renewal of credit facilities. This authorisation should become
part of loan application and loan documents which shall cover fresh
sanction and further renewals
O. ANNUAL REVIEW OF TERM LOANS (L&A Cir. 157/2020)
 In order to ensure effective monitoring specially in case of project financing

having longer gestation period, a system of annual review of Term Loans is in
vogue. Accordingly, all Term Loans, other than retail loans, with sanctioned
limit of ₹2crore & above needs to be reviewed annually.
 The annual review of term loans is to be carried out during implementation
stage and also after implementation as per the prescribed format. After
implementation period, it is necessary that the position of regular repayment is
monitored by reviewing the achievement of production/sales vis-à-vis
projections given for production/sales. Also, any diversification/expansion of
the company, which affects its debt serving capacity, needs to be reviewed.
Such a review should incorporate the position of other banks‟ exposure.
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 The review of Term Loans will have no bearing on asset classification and
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income recognition of the accounts.
 The annual fee for review of Term Loans shall be as per IRMD L&A circular
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no 93/2020 and subsequent modifications thereupon
 However, in deserving cases, sanctioning authority may consider concession
in the annual fee up to 50% whereas MD & CEO/ED may allow 100%
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concession
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 It is advised that in case where disbursement is being made in stages, the

annual review fee is to be charged on the sanctioned limit whereas in case
the sanctioned amount has been fully disbursed and the repayment has been
3
started, the review charges shall be levied on the outstanding amount till the
account is fully adjusted. Further, the annual review fee should be charged on
the anniversary date.
 The position of eligible Term Loan limits overdue for review as on the last day
of each quarter be prepared by the branches as per the format at Appendix-
XV and submitted to their controlling offices within 7 days of close of the
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quarter. Zonal Offices/LCBs shall submit consolidated statement in this regard

to CRMD within 15 days of close of the quarter
The details of eligible Term Loan sanctions overdue for review above three months
should be submitted to the controlling offices alongwith the statement and reasons/
present status/proposed action plan should invariably be mentioned therein.
Q Green Renewal: Simplified Procedure For Renewal/Review Of Credit

Facilities(L&A circular 55/2021 dated 26.03.2021)
LOANS AND ADVANCES CIRCULAR NO 55 dated 26.3.2021 : GREEN RENEWAL:

SIMPLIFIED PROCEDURE FOR RENEWAL/ REVIEW OF CREDIT FACILITIES -
MODIFICATION IN GUIDELINES :-
It supersedes the IRMD L&A Circular No. 38 dated 26.03.2020 & Circular letter no.

15 dated 05.09.2020, wherein guidelines regarding simplified procedure for review /
renewal of credit facilities i.e. Green Renewal were circulated.
The gist of modifications are as under: -

 Simplified categorization of accounts under Green Renewal: Irrespective
of the nature of facility, the limits for green renewal shall be (i) Above Rs 10
Lakh and up to Rs 1 Cr (ii) Above Rs 1 Cr and up to Rs 10 Cr.
 For Limits upto Rs 1.00 crore: compliance of triggers dispensed with
 IRR should be B2 and above (or equivalent to PNB Score). Earlier it
was B1 and above
 Rationalization of Triggers: Triggers prescribed under green renewal have
been reviewed and rationalised to ensure simplicity and timely renewal
 Single Unified Format combining Term Loan and Working Capital limits: For
combined Term Loan and Working Capital limits subject to overall limits of
Rs 10 Crore, unified format for Green Renewal format is to be used
R. CONSOLIDATED GUIDELINES FOR EXTENSION IN VALIDITY OF SANCTION
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If the reasons for delay are genuine & beyond the control of the borrower, on request of
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the borrower competent authorities (as advised vide the circular) can permit extension in
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validity of sanction upto three months from the due date of renewal of limits subject to
following conditions: a) Validity is extended at existing level of exposure as per terms of
last regular sanction b) No change in existing terms and conditions of last regular sanction
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c) No security dilution. The extension in validity of sanction of the borrowal accounts shall
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be undertaken by the competent authority prior to the expiry of the regular sanction.
In case of constraints such as non-availability of financial statements and other data from
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the borrowers, the branch should furnish evidence to show that renewal/ review of credit
limits is already on and would be completed soon. The authorities (as per Table-2) , may
permit extension in validity of sanction for further three months form the due date of 1st
validity extension subject to conditions mentioned.
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At the time of extension of validity of sanction, a separate note for continuation of

concession (if any) permitted in the account as per the enclosed format (Appendix II) shall
be prepared. The note shall be placed before the authority, competent to permit such
concession. Continuation of concessional facilities is to be co-terminus (i.e., upto) the
period for which extension is permitted. Concession shall be effected in the system only
after the approval of concession permitting authority. In cases where permission is not
obtained or not approved by concession permitting authority, concessions enjoyed by the
borrower shall be withdrawn for the period for which validity has been extended. Approval
for allowing such concessions should be obtained within three months of review. Further,
the continuation in concession can be permitted for first three months of validity extension
only. Concession should be withdrawn, if second validity extension is done in the account.
The condition in this regard shall be stipulated in the sanction. The period for which the
relaxation in service charges/ ROI is provided, shall be specified in terms and conditions
of sanction.
Mechanism to be followed in Finacle has also been conveyed vide the circular.

S. MONITORING OF TERM LOANS UNDER PROJECT FINANCING [L&A Cir. 23/2007]
The aspect of project implementation, commencement of commercial production are

of vital importance at the time of appraisal as well as after disbursement to ensure
that viability of project is intact and also the asset quality of the loan asset is
maintained. Accordingly, for term loans of Rs. 25 crore and above (fresh loans as
well as where project is under implementation), two Project Evaluation and
Review Technique (PERT) charts have been devised. The PERT Chart-I covers the
following activities:
 Conveying terms and conditions of sanction. Zero date to be reckoned from

the date of conveying terms and conditions of the sanction to the borrower.
 Acceptance of terms and conditions.
 Sanction of loan facilities by other banks/term lending institutions (under
consortium/multiple banking arrangement) and complete tie up.
 Financial closure.
 Preparation of document viz. preparation of draft copy, execution of
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documents and subsequently vetting thereof.

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Compliance of all terms and conditions of sanction.
 Execution of documents as per sanction.
 Creation of primary security.
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 Creation of secondary security.

 Disbursement schedule planned.
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PERT Chart-II covers the post-sanction follow up & various stages of

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implementation of project as:

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Acquisition of land Site, development, finalisation of drawings, Construction of

building
 Placement of orders for plant & machinery
 Installation of plant & machinery
 Obtention of various statutory approvals
 Trial commissioning of the project
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 Commencement of the commercial production

 Overall stage of completion of project
 Position of account along with the disbursement schedule for the remaining
amount of the loan.
Each activity mentioned in PERT Charts will be monitored on monthly basis from
Zero date i.e. date of acceptance of sanction. The monitoring shall continue in
individual account till full disbursement of loan/start of commercial production,
whichever is later.
For effective monitoring of term loan accounts of Rs. 1 crore but less than Rs. 25
crore, simplified format as per Annexure to L&A Cir. 103/2011 is required to be
submitted alongwith QRS/QMS.
T.PNB SAJAG - Early Warning Signal+ Preventive Monitoring System

(EWS+PMS)IRMD circular No 30/2019, L&A circular No 157/2020, IRMD
31/2020 dated 15.10.2020)
Now the PMS has been revamped comprehensively to cover 127 early warning
signals which shall also include 42 early warning signals as prescribed by RBI,
emanating from various internal data sources and renamed as PNB-SAJAG
(EWS+PMS) system.
PNB-SAJAG (EWS+PMS) shall be applicable to all corporate borrowers having

sanctioned limits (FB plus NFB) above ₹ 1 crore and OD against IPs except for the
following:-
i. NPA Accounts. ii. Advances against Life Insurance Policies. iii. Advances against
Bank‘s own deposit. iv. Advances against Shares. v. Advances against Deposits,
Govt. Securities, Units of UTI. vi. Advances against bullion and jewellery.
After verification, following 3 reports shall be auto generated:- a) PMS Report. b)
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EWS Comprehensive Report. c) EWS Report based on RBI prescribed signals
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On successful verification of EWS+PMS, all three above mentioned reports shall be
mailed to respective sanctioning authority and concerned BO/ZO/HO. In addition
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user can also parameterize mail id on which user desire to send the generated
reports. These reports shall also be placed under reports section of EWS+PMS.
PNB-SAJAG (EWS+PMS) Reports are to be prepared by the BOs on monthly basis.
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The data for preparation of EWS+PMS report for a month will be available in the
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system within 3-7 days of next month. Accordingly, the BOs shall prepare the reports
within 15 days from the close of the month and after verification, auto generated
reports shall be sent to concerned offices.
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Vide IRMD circular 31/2020 dated 15.10.2020 It has been conveyed that w.e.f
15.10.2020 PNB-SAJAG (EWS+PMS) system has been made live for amalgamated
entity and shall capture EWS & PMS of borrowers of all three banks in the system
from September 2020 onwards. The system is accessible through Non CBS Page of
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IRMD at IRMD (EWS+PMS)
Keeping in view the revised credit delivery structure and implementation of PNB
SAJAG in amalgamated entity, certain changes have been done in operational
guidelines of PNB SAJAG (EWS+PMS) circulated through IRMD circular 30/2019
dated 27th Sept 2019
U.Use of Legal Entity Identifier (LEI) -(L&A circular 34/2020 dated 26.03.2020)
RBI has make it mandatory for corporate borrowers having aggregate fund-based
and non-fund based exposure of Rs. 5 crore and above (introduced in a phased
manner) from any bank to obtain Legal Entity Identifier (LEI) registration and
capture the same in the Central Repository of Information on Large Credits
(CRILC).
ITD has made the provision in CRM module of Finacle for capturing the 20 digit LEI
code.

Borrowers who do not obtain LEI as per the schedule are not to be granted
renewal/enhancement of credit facilities.
V. MONITORING OF WEAK/ IRREGULAR ACCOUNTS/ Special Mention Accounts in

EDW (MISD 4 dated 01.01.2015, L&A Cir. 52 dt. 20.06.15)
Based on RBI guidelines on Special Mention Accounts, the concept of weak

accounts was introduced to capture early warning signals in the borrowal accounts.
An account is considered as ‗weak‘ if (i) It is irregular/overdrawn (except where
irregularity is due to interest) for more than 60 days, and (ii) If PMS rank is 6 & above
(in cases where preventive monitoring system is applicable). For identification of
‗weak accounts‘ under standard category, adverse features as under should also be
kept in view:
Identification of Weak Accounts
 Poor financial performance in terms of declining profits, erosion of net

worth, etc.
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 Delay in completion of documentation resulting in non-creation/
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registration of charge/mortgage etc.
 Non-compliance of important terms and conditions of sanction.
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Identification of Irregular Accounts

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An account is to be treated irregular, where any of the following irregularity

persists in the fund based limits for period of one month and above:
a) Monthly interest and/or installment of principal remains overdue,
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b) Overdraft/Cash Credit account remains ‗ out of order ‘,

c) Bill remains overdue in case of bill purchased/discounted,
d) Any amount to be received remains overdue in respect of other
accounts.
Credit Division, HO monitors all weak and irregular loan accounts under standard
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category having outstanding of above Rs.10 Lac on monthly basis. Besides, the
position of all weak accounts under standard category with outstanding of above Rs.
10 Lac having weaknesses such as units incurring operating/cash losses and
accounts with ‗C‘ & ‗D‘ risk rating etc. is also monitored at corporate level on
quarterly basis.
At field level, monitoring of all such accounts is done as under:
Irregular Accounts with Monitoring Authority

outstanding balance
Upto Rs. 1 Lac Incumbent Incharge of Small / Medium/ Large
Branch/VLB
Above Rs. 1 Lac& upto Rs. 10 Lac Circle Heads/Incumbent of ELBs/ MCBs/LCBs
Above Rs.10 Lac& upto Rs. 50 Lac Committee of GMs
Above Rs. 50 Lac ED/CMD

Bank has implemented the Enterprise-wide Data Warehouse (EDW) to facilitate
timely reporting, informed decision making, enhanced statutory compliances and
improved productivity. Data Warehouse is independent of the operational databases
maintained in the respective source systems.
User log-in ID & Password - The EDW Users ID has been created centrally for all
Bank employees. The EDW User ID is their PF number (without any initials) and for
password, users may take up matter with their Circle Office or submit their request
through banks e-mail at edw@pnb.co.in. In case your user-id/ password is not
working, contact MIS Division on 011-23705933, 23766782 or email: edw@pnb.co.in
Irregular Account Dashboard
Irregular Accounts Dash board has been created with the objective of providing standardised
MIS, meaningful visualisation through charts / graphical representation at various levels, on
Irregular accounts. This dash board provides comprehensive details of every irregular
account including recovery data up to previous day. The main purpose of Irregular Accounts
Dash board is to facilitate field functionaries to take timely corrective steps and arrest fresh
1
slippage to NPA.
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The irregular Dash Board has many features and provides single point access to
manage the irregular accounts. The major features are:
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 Summary of irregular accounts, amount-wise, age-wise, non-financial reason
wise and sector-wise.
 Irregular accounts with irregularity of one day and above.
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 Graphic representation to easily identify this critical area and sector.

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 Account-wise detail of irregular accounts with colour coding.

 Daily recoveries updated and accounts are highlighted with green band if the
recovery covers the irregular portion.
3
 Every data can be exported to Excel
It has three parts :
Part I has the summary position of irregular accounts with number of accounts,
outstanding amount and irregular amount. This data can be viewed through 4 tabs:
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a) Amount wise (up to 10 Lacs, 10 Lacs to 50 Lacs, 50 Lacs to 1 cr. & above 1
cr)
b) Age wise (viz. 1-30days, 31-60days, 61-90 days, etc.),
c) Non financial reason (like SRM not renewed) summary view.
d) Another tab with an option to view summary report, i.e the FGM wise, Circle
wise summary for any given combination (single page report) with an option to
view amount wise, age wise, sector wise &non financial reason wise is made
available for assessing the impact.
Part II provides graphical view of the summary data. The charts provide the
percentage of various segments of irregular accounts in terms of age, amount,
sector and non financial reasons based on number and amount of irregular
accounts. This facilitates the teams to identify the critical area and draw plan of
action for recovery.

Part III provides the list of accounts, which are otherwise regular but is part of one of
the irregular account of the same customer ID. These are referred as percolation
accounts. This feature facilitates the monitoring group to focus on such accounts,
which may cause more impact on fresh slippage.
Advantages: The major benefit of this Irregular Dash board is ―monitoring made
easy‖. The progress in regularisation of irregular accounts can be monitored on daily
basis. The analytics view of dashboard enhances the viewer‘s perceptions of
situations and enables to take faster decision. The data can be exported into the
user‘s PC in excel format with an options to Save and Print. Further, Daily Account-
wise detailed master report may be viewed by FGM/CH in their My Inbox available
at Home page of EDW MIS
Access to Irregular Account Dashboard has been provided to all GM‟s at HO,
Field General Managers, Circle Heads, other Senior Officials at FGMO and Circle
Offices.
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Ad-hoc Data – Apart from pre-published MIS reports, EDW is also facilitating HO
Divisions/FGMOs/COs/Branches by providing ad-hoc data for various activities and
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business development. HO Divisions/FGMOs/COs are requesting ad-hoc data from
EDW, which is being provided on demand basis. To demand ad-hoc data, request
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must be submitted at email id datarequest@pnb.co.in. The ad-hoc data request
should contain following:
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 Format for required data

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Time period of data

 Business logic for the data elements
The name, designation, office name and mobile no. of the concerned person
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Data Clean - Since, this is a decision support system and the decision may go
wrong if it is based on faulty data. The role of branches is to ensure that proper
code/data is updated in CBS system. The reports relating to data clean are available
under folder Data Clean in EDW which helps the branches in identifying the
flawed fields/data and make necessary corrections in source system.
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Monitoring of Cash Credit Accounts through EDW:
A report has been devised „Credit Summation in Cash Credit Accounts‟ and
made available under folder MISD > Cash Credit of EDW on monthly basis. It
displays list of all CC A/Cs (>Rs. 1 Lacs), extracts their limit, credit summations
during the month, compares the actual credit summation in the a/c against a pre-
fixed benchmark and grade the account as per the appropriateness of the credit
summation (different grades denoted by different colors - lowest Credit summations
are represented by RED colour). Thus branches, simply by mouse clicks, get a pre-
published report of credit summation activities of their All CC A/Cs in One Single
Screen. The actionable accounts are immediately identified through the Red colour.
These are the A/Cs with least Credit summations. FGMOs/ COs/ Branches to sort
out the red coloured accounts and take suitable remedial actions. The report is a
quick identifier of early illness, based on CBS transaction only for CC a/cs.

Monitoring of Overdue in Standard Term Loan:
Term Loans (Standard asset category) A/Cs amounts about 50% of Bank‘s credit
portfolio. For maintaining asset quality of Bank‘s credit portfolio, monitoring of Term
Loans forms a major task. For monitoring of any Loan portfolio, a pre-requisite is
measuring its delinquency.
To monitor and measure the Overdue of the Standard Term Loan A/cs, a report
has been customized „ Monthly TL Overdue – Summary Position‘ under folder
Recovery > Monthly folder of EDW.
This report shows:

a) Amount of Standard TL Overdues
b) In each business unit wise (Branch/Circle/FGMO/Bank)
c) At each month end
d) In a portfolio level (i.e., not in account level).
Small/Medium/Large Branches to Statement of irregular accounts with outstanding of

Circle Offices above Rs. 1
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ELBs/VLBs/MCBs to Circle Lac by 7th of
Statement of irregular
the closeaccounts
of monthwith outstanding of
Offices
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above
Rs.1 0 Lac by 7th of the close of month
Circle Offices/LCBs to CPMRD
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Statement of irregular accounts with outstanding of
above
Rs. 50 Lac by 10th of the close of month
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Monitoring of weak accounts:
i) The first Quarterly Statement of all Weak Accounts, in a financial year shall be
3
submitted to CPMRD after finalization of Annual Accounts, with reference to

the position of accounts as on 31st March, on the prescribed format.
(ii) The Quarterly Statements are to be submitted to CPMRD, HO within one
month of the close of the quarter.
(iii) If the accounts identified as ‗Weak‘ during 4 quarters continue to be so at the
end of the financial year, fresh Review Report will be again submitted with
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reference to the position as at the end of the financial year.
Setting up of Task Force
With the monitoring of irregular and weak accounts above Rs. 50 Lac at HO,
constitution /scope/functions of Task Force at HO have been revised as under:
Level Constitution Scope
HO GM (CPMRD) All irregular accounts and weak
DGM/AGM/Chief (Credit Monitoring accounts under standard category
Division) with outstanding of above Rs. 50
GM/DGM & AGM/Chief (Recovery Lac.
Division).
CGM/GM/DGM (Credit)

Consolidated position of irregular accounts and weak accounts with outstanding
of above Rs. 50 Lac thereof shall be placed to CMD/ EDs.
Navigation of Irregular Dash Board:
1. Open CBS PAGE &

2. Click on ―Non CBS Application‖ Link.
3. Click on MISD/ EDW under MISD
4. Click on ―EDW Login‖ to open login page of EDW.
5. Login page will open. Enter your user id and password
6. You will be directed to a screen where you are required to double Click on
Irregular Dashboard .
7. Click on irregular reports 7 choose the type of report to be extracted.
8. Report will take some time to open and following screen will appear for all
kind of reports. Report can also be downloaded in Excel format by clicking on
―Export Current report as -> - >Excel 2007‖ link.
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PNB MTOUCH – MOBILE APPLICATION & WEB PORTAL FOR CREDIT
MONITORING & FOLLOW UP (LA 157/2020)
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A Digital Mobile Application cum Web Portal has been developed to capture the
records of all field visits made by the Branch Officials for recovery of overdue amoun.
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The Mobile APP, PNB M Touch is linked to our existing monitoring mechanism to
access the data regarding SMAs / Likely Degradations with functionalities to upload
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the visit details on real time basis and to download the reports by controlling offices.
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Objective of the Application is to strengthen the system of monitoring and

maintaining proper records of field visits of Officials to the Borrower / Guarantor‘s
3
office / premises for recovery of overdue amount..
The App / Web Portal consist of following functionalities

At BO Level –
Details of loan accounts can be accessed through Mobile App anytime /anywhere.
User will have calling facility to the mobile no.(s) listed in A/c details
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Flash Message / Follow up Reminder Reports for due date / promise date made by
Borrower in the Portal / App.
Search Record Functionality (like Search the Borrowers of same location by using
Pin Code, Irregular for more than 60 days etc.)
Coverage of credit audit: All standard risk rated accounts except:
W. LOAN REVIEW MECHANISM/CREDIT AUDIT POLICY (CARD Cir. No. 02/2020 dated
26.03.2020)
Eligibility of accounts for credit audit:
The cut off limit for the purpose of credit audit of risk rated standard accounts shall be as
under:
 All Standard Risk Rated Borrowal accounts (fresh proposals and proposals for
renewal /enhancement of limits within 3 months from the end of quarter,
during which loan was sanctioned/first disbursed) of the bank with aggregate
Credit facilities with exposure of Rs. 10.00 Crore& above (FB+NFB)

 All S t a n d a r d Restructured Accounts having limits (FB+NFB) Rs. 10.00
Crore& above.
 In case of Taken Over borrowal accounts, credit audit/LRM to be conducted
for accounts with exposure (FB+NFB) of Rs.1 crore and above. The first such
audit is to be got done within 3 months from the end of quarter, during which
loan was sanctioned/first disbursed and the next audit is to be carried out
within three months after completion of one year of first credit audit. Data of
taken over accounts will be collected from MIS/CBS. Branches have to feed
the details of taken over accounts in CBS invariably irrespective of amoun
 5-10% randomly selected sanctions having exposure (FB+NFB) Rs.5 crore
and above from the rest of the rated portfolio including those Circle Offices
where total Number of accounts with aggregate exposure of Rs.10 crore&
above (FB+NFB) are less than 10 in a Financial Year.
 The LRM audit shall not cover accounts under (a) Retail Banking segments (i)
Schematic Lending (housing, vehicles & personal loan) (ii) Advances against
consumer durables, (b) Advances against (Bank Deposits, LIC policies, Govt
securities, Gold/silver jewellery & ornaments, advance against shares,
1
debentures & Mutual Fund ) (c) Accounts which are exempted from Internal
Rating.
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Frequency:
The frequency of credit audit will be as under : -
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All eligible Accounts shall be subjected to credit audit annually. The frequency of
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review should vary depending on the magnitude of risk (say, for the high risk
accounts - 6 months, for the Medium risk & low risk accounts- 1 year).
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Frequency of Audit:-
Low Risk Medium Risk High Risk
Yearly Yearly Half-Yearly
A-1 to A-4* B-1 to B-3 C-1 to C-3
*Classification of accounts as per Internal Rating of the borrowal account:-
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Low Risk- A1 to A4, Medium Risk – B1 to B3, High Risk – C1 to C3
However in following cases half yearly audit shall be conducted in respect of

accounts with aggregate exposure of Rs.5 or 10 crore and above (FB+NFB), as the
case may be.
 where there is decline in Credit Risk Rating (Internal as well as
External) by two notches and/or
 Decline in PMS Rank by 2 notches (constantly in the PMS Rank 3 and
above for the last 3 months) and /or
 Account is persistently in SMA-II category for 2 quarters continuously
FINANCIAL APPRAISAL
On receipt of a loan application with financial information the banker begins the
process of financial appraisal. To analyze the financial statements, an understanding

of these financial statements is important for the appraiser.
Credit audit for eligible accounts will be conducted as under:
‗All eligible rated standard accounts with exposure of Rs.5 cr. Or Rs.10 cr. & above,
as the case may be.
By Concurrent Auditor------------------ Upto Rs.20 crores

By CARD/ Outsourced Auditor---------Above Rs.20 crores
I. WILFUL DEFAULTERS :( Sastra Division circular No 16/2020 dated 27.03.2020)-
A "wilful default" would be deemed to have occurred if any of the following events
is noted:-
(a) The unit has defaulted in meeting its payment / repayment obligations to the
lender even when it has the capacity to honour the said obligations.
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(b) The unit has defaulted in meeting its payment / repayment obligations to the
lender and has not utilised the finance from the lender for the specific purposes for
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which finance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment / repayment obligations to the
21
lender and has siphoned off the funds so that the funds have not been utilised for the
specific purpose for which finance was availed of, nor are the funds available with
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the unit in the form of other assets.

3
(d) The unit has defaulted in meeting its payment / repayment obligations to the
lender and has also disposed off or removed the movable fixed assets or immovable
property given by him or it for the purpose of securing a term loan without the
knowledge of the bank/lender.
Mechanism for identification of Willful Defaulters

05
The transparent mechanism generally includes the following:
(a) The evidence of willful default on the part of the borrowing company and its
promoter/whole-time director at the relevant time should be examined by a
Committee headed by an Executive Director and consisting of two other senior
officers of the rank of GM/DGM.
(b) If the Committee concludes that an event of willful default has occurred, it shall
issue a Show Cause Notice to the concerned borrower and the promoter/whole-time
director and call for their submissions and after considering their submissions issue
an order recording the fact of willful default and the reasons for the same. An
opportunity should be given to the borrower and the promoter/whole-time director for
a personal hearing if the Committee feels such an opportunity is necessary.
(c) The Order of the Committee should be reviewed by another Committee headed

by the Chairman / CEO and MD and consisting, in addition, of two independent
directors of the Bank and the Order shall become final only after it is confirmed by
the said Review Committee.
Guidelines on Publication of Photographs:
1. Branches/Offices may consider publishing of photographs of Wilful Defaulters

with balance outstanding of Rs. 25 Lacs& above, in the Newspapers, in the
States/Union Territories (UTs) where the branch (having the concerned loan
account) is located, subject to the exemption given below.
2. For publication of photographs in the newspapers, the administrative sanction
will be given by the respective Circle Heads and in case of LCBs by the
concerned FGM.
Exceptions to the above guidelines
The photographs of willful defaulters are not to be published in the newspapers in
1
the following cases:
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(a) Education Loans
(b) In case the concerned branch is located in the States/UTs listed herein below:
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1. Andhra Pradesh
2. Andman & Nicobar Islands
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3. Arunachal Pradesh
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4. Assam
5. Karnataka
6. Kerala Note:
3
7. Lakshdeep
8. Mizoram
9. Nagaland
10. Telengana
11. West Bengal
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The above list may change from time to time. Before according sanction to publish
the photographs, the Circle Office to check up the status in consultation with the Law
Officer/Panel Lawyer of the respective area, so as to ensure that no adverse order
has been passed by the Court in their area.
3. Once Notice as per para herein below is issued, Circle Head may also permit
publishing of photographs of Wilful Defaulters in the Possession/Sale Notice
itself, instead of publishing separately, depending upon the requirement and on
case to case basis.
―As a precautionary measure, branches should send a Notice through Registered
Post and Speed Post as per the format given in Annexure A/B to the Wilful
Defaulters (borrower/guarantor), in the local language, intimating that in case of non-
repayment of outstanding amount in the loan account, within a month‘s time from the
date of Notice, their names and photographs will be published in the newspapers.‖

II. UPDATED GUIDELINES NON COOPERATIVE BORROWER
(L&A 197/2020 dated 16.10.2020):
With a view to discourage borrowers/defaulters from being unreasonable and non-

cooperative with lenders in their bonafide resolution/recovery efforts, on the advice of RBI,
the bank may classify such borrowers as non-cooperative borrowers, after giving them due
notice, if satisfactory clarifications are not furnished.
RBI has setup a Central Repository of Information on Large Credits (CRILC) to collect,
store and disseminate credit data of borrowers having Aggregate Exposure (AE) of
Rs.5 crore and above and the Banks are to report classification of such borrowers to
CRILC.
Definition of Non Cooperative Borrower (NCB):

 A non-cooperative borrower is one who does not engage constructively with his
lender by
 Defaulting in timely repayment of dues while having ability to pay,
 Thwarting lenders‘ efforts for recovery of their dues by not providing necessary
information sought,
 Denying access to assets financed / collateral securities,
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 Obstructing sale of securities, etc.
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 In effect, a non-cooperative borrower is a defaulter who deliberately stone walls
22
legitimate efforts of the lenders to recover their dues.
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• A non-cooperative borrower in case of a company will include, besides the company,
its promoters and directors (excluding independent directors and directors nominated
by the Government and the lending institutions).
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• In case of business enterprises (other than companies), non-cooperative borrowers

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would include persons who are in-charge and responsible for the management of the
affairs of the business enterprise.
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Cut-off Limit for NCB: The cut off limit for classifying borrowers as non-cooperative shall be
those borrowers having aggregate fund-based and non-fund based facilities of Rs. 5 crore
and above from our bank.
Identification and Reporting of NCB:
 In terms of definition of non-cooperative borrower as above, the borrower shall be
05
identified as non-cooperative borrower if the borrower is defaulting in timely

repayment of dues while having ability to pay or non-cooperating with bank by
way of not providing necessary information sought, denying access to assets
financed/ collateral securities, obstructing sale of securities and any other
tactics to delay the efforts of bank etc. Head of the Branch (linked with PLP)/
MCC/LCB/ELCB shall review the account to ascertain whether the borrower
should be identified as noncooperative borrower. However, a solitary or
isolated instance should not be the basis for such identification.
 Head of Branch (linked with PLP) / MCC / LCB/ ELCB shall inform the
identified borrower and other persons about the Bank‘s intention to classify
them as NCB and shall send the letter as per draft format given in Annexure-I
by registered post with AD as well as E-mail, if available, giving them 10 days‘
time to clarify their stand and pay the dues or show their cooperation
 If no response is received within 10 days or the response of borrower is not
satisfactory, Branch linked with PLP/ MCC shall submit a proposal to Zonal
Office (ZO) with their recommendation. Zonal Office, after proper scrutiny of

the case, if agrees, shall submit the same with their recommendations to
Credit Review & Monitoring Division (CRMD), HO with their
recommendations.
 LCBs/ELCBs shall send their proposals directly to CRMD, HO for onward with
their recommendations.
CRMD, HO shall scrutinize the proposal and place the same to a committee
named ‗NCB Classification Committee‘ with their recommendation
ANALYSIS OF FRAUDS IN THE BANKING INDUSTRY (LA 73/2018 Dt

09.08.2018)
Some of the major loopholes/lapses detected by CVC are in the following areas:
 No proper pre sanction Due Diligence of borrowers including KYC
verification.
 No visit by banks officials of borrower place/factories/project site/security.
 Authenticity of Financial Statements/Information submitted by the borrowers
not ensured.
 No proper scrutiny/study of stock/debtors statements. No confirmation from
1
the debtors for ensuring the genuineness of transactions.
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 No proper sharing of information amongst consortium members.
 No check on transactions between associates/ related parties.
22
 Extensive reliance on information given by outside agencies/professional etc.
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 No end use verification of funds.

For Details, See Circular LA 73/2018 & FRMD 80/2018
21
This has been further analysed Vide LA 99/2018 dt 08.10.2018 on 5 different sectors
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namely Trading, Information & Technology, Export Business, Demand Loan and
Letter of Comfort under three captions i.e. Modus operandi, Loopholes/lapses and
suggestion for systemic improvement.
3
Some of the major loopholes/lapses detected by CVC are in the following areas:
 Many related parties/subsidiaries/associates/key management dealings.
 Cross transactions of sale/purchase from the same party.
 No record of movement of goods.
05
 Wrongly certified balance sheets by Chartered Accountants.

 Diversion/siphoning of funds.
 Incorrect and inflated data i.e. sales, stock holding levels, debtors etc.
 Loan liabilities from banks/FIs not reflected in financial statements.
 Discounting of bills against the terms of sanction.
 Withdrawal of proceeds of packing credits, FBPs and export bills.
 SWIFT transactions not linked to CBS of the bank.
 Anti money laundering provisions not adhered.
 Fictitious demand loan, saving bank accounts allowed.
 Large value transactions disproportionate to known source of income allowed.
For Details, See Circular LA 99 dt. 08.10.2018
Freezing of Operation of Bank Accounts of Companies Struck off from the

Register of Companies u/s 248(5) of the Companies Act, 2013(L&A Circular No
86/2020 dated 08.05.2020
Attention is invited to L&A Circular Nos. 118 dated 15.12.2017 and 116 dated
26.11.2018 which inter-alia, advising guidelines regarding identification and operation in
accounts of companies struck off from the Register of Companies.
The list of companies struck off from Register of Companies is available on knowledge
centre website (Knowledge Repository > Strike off companies). The RoC-wise list of
struck off companies are also available on the website of the Ministry of Corporate Affairs
at the following link: http://www.mca.gov.in/MinistryV2/companies_stuckoff_248.html
In case any Company‘s account is frozen in CBS and the Company is not appearing in
the struck off list nor is its status appearing as ‗Strike off‘ on MCA website or the
Company has been subsequently removed from the struck off list by MCA and the status
of the Company has been restored to Active, Branch Heads, after satisfying themselves
about the status of the Company, may unfreeze the operations in the account under
intimation to us duly routed through their respective Zonal Office.
It is advised to ensure that the status of all loan accounts under standard category
1
including SMA accounts (having constitution as Company / LLP) is checked on MCA
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website under Company / LLP master data. The information regarding accounts, if any
identified as struck off in MCA records along with action taken should be submitted by
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branches to respective ZOs within one week. The printout of each search shall also be
kept on record.
In case of struck off Companies / LLPs, operations in the loan account shall be frozen
21
and the borrower be conveyed about the freezing of operations in the account and the
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reason thereof. In case of any outstanding dues, efforts should be taken for immediate
realisation of the same.
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Kindly refer captioned circular for detail guidelines.
CONTROL MEASURES – OPENING/ MAINTAINING CURRENT ACCOUNT IN

RESPECT OF BORROWER ENJOYING WORKING CAPITAL FACILITIES (L&A
circular 157 dated 17.08.2020 and 162 dated 28.08.2020)
In terms of the extant bank guidelines, in cases where CC limit has been sanctioned,
05
maintaining/ continuance of current accounts is not to be permitted unless specifically

mentioned in the terms of sanction or subsequently allowed by the Competent Authority
on merits of the case, in order to avoid diversion of funds resulting in increased
probability of account slippage. RBI has further advised has under:-
 No bank shall open current accounts for customers who have availed credit facilities in
the form of cash credit (CC)/ overdraft (OD) from the banking system and all
transactions shall be routed through the CC/OD account.
 In case of customers who have not availed CC/OD facility from any bank, banks may
open current accounts as under:
a) In case of borrowers where exposure (other than CC/OD) of the banking system is
₹50 crore or more, banks shall be required to put in place an escrow mechanism.
Accordingly, current accounts of such borrowers can only be opened/ maintained by
the escrow managing bank. However, there is no restriction on opening of ‗collection
accounts‘ by lending banks subject to the condition that funds will be remitted from

these accounts to the said escrow account at the frequency agreed between the bank
and the borrower.
b) In case of borrowers where exposure of the banking system is ₹5 crore or more but
less than ₹50 crore, there is no restriction on opening of current accounts by the
lending banks. However, non-lending banks may open only collection accounts as
defined at (a) above
c) In case of borrowers where exposure of the banking system is less than ₹5 crore,
banks may open current accounts subject to obtaining an undertaking from such
customers to the effect that customers shall inform the bank(s), if and when the credit
facilities availed by them from the banking system becomes ₹5 crore or more.
d) Banks are free to open current accounts of prospective customers who have not
availed any credit facilities from the banking system, subject to necessary due
diligence.
It has been advised to scrutinize complete credit portfolio of each branch for ensuring the
compliance of latest advisory of RBI. In case any borrower is availing CC/OD facilities
from our Bank, the matter shall immediately be taken up with the borrower and other
1
bank for closer of such accounts at the earliest for compliance of the RBI advisory within
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a timeline of 3 months from the date of the RBI notification i.e. 06.08.2020 i.e. by
06.11.2020. (CRMD 17/2020) 22
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CONTROL MEASURES – OPENING OF CURRENT ACCOUNTS BY BANKS NEED
FOR DISCIPLINE (L&A Advance circular 220/2020 dated 16.12.2020)
21
It has reference to IRMD L&A Cir. No. 162 dated 28.08.2020 inter-alia advising revised
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instructions on opening of current accounts by Banks. Reference may also be made to

L&A Cir. No. 206 dated 21.11.2020 advising the timeline to ensure compliance RBI‘s
instructions in this regard.
3
Now RBI has permitted banks to open specific accounts which are stipulated under
various statutes and instructions of other regulators/ regulatory departments, without any
restrictions placed in terms of the existing guidelines. An indicative list of such accounts
is as given below :-
i. Accounts for real estate projects mandated under Section 4 (2) l (D) of the
05
Real Estate (Regulation and Development) Act, 2016 for the purpose of
maintaining 70% of advance payments collected from the home buyers.
ii. Nodal or escrow accounts of payment aggregators/prepaid payment
instrument issuers for specific activities as permitted by Department of
Payments and Settlement Systems (DPSS), Reserve Bank of India under
Payment and Settlement Systems Act, 2007.
iii. Accounts for settlement of dues related to debit card/ATM card/credit card
issuers/acquirers.
iv. . Accounts permitted under FEMA, 1999.
v. Accounts for the purpose of IPO / NFO /FPO/ share buyback /dividend
payment / issuance of commercial papers/allotment of debentures/gratuity, etc.
which are mandated by respective statutes or regulators and are meant for
specific/limited transactions only.

vi. Accounts for payment of taxes, duties, statutory dues, etc. opened with banks
authorized to collect the same, for borrowers of such banks which are not
authorized to collect such taxes, duties, statutory dues, etc.
vii. Accounts of White Label ATM Operators and their agents for sourcing of
currency
The above permission is subject to the condition that the bank shall ensure that these
accounts are used for permitted/specified transactions only. Further, banks shall flag
these accounts in the CBS for easy monitoring. Lenders to such borrowers may also
enter into agreements/arrangements with the borrowers for monitoring of cash
flows/periodic transfer of funds (if permissible) in these current accounts.
Bank shall monitor all current accounts and CC/ODs regularly, at least on a half-yearly
basis, specifically with respect to the exposure of the banking system to the borrower,
to ensure compliance with instructions.
Agencies for Specialized Monitoring (ASM): (CRMD CIRCULAR NO. 16/2020)
1
For large borrowal accounts with overall credit exposure (FB and NFB from the banking
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industry) of more than Rs.250 Crore, appointment of outside Agencies for specialized
monitoring of the account is required. Policy guidelines for appointment of ASMs
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(Agencies for Specialized Monitoring) whose services are to be utilized for monitoring of
large value loans/ (may or may not be of specialized nature by bank) under Sole/
multiple/ consortium banking arrangement is given in the above circular.
21
Presently IBA has empanelled 328 ASMs with validity up to 30.06.2022. The ASM audit
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is to be assigned to IBA empanelled agency only. Further, it is advised to carry out an

independent and necessary due diligence/ background check before engaging them
from this list for monitoring large accounts.
05 3

30. Loan System for Delivery of Bank Credit
L&A Circular 126/2019

L&A Circular No. 32 dated 28.03.2019 and subsequent circulars related to Loan system
for delivery of bank credit for borrowers having aggregate fund based working capital
limit of ₹150 crore and above from the banking system.
IBA has informed that RBI has decided to exempt following from the purview of the Loan
System for Delivery of Bank Credit guidelines:-
a) Credit facilities extended to State Government/ Union Territory agencies and Food
Corporation of India for procurement /price support activities;
b) Credit facilities extended to Central Counterparties;
c) Credit facilities extended by overseas branches of Indian banks.
L&A Circular 129/2019:
1
It has been observed by the Statutory Central Auditors (SCAs) that guideline requiring
the working capital loan to be divided in two separate components as WCL and Cash
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Credit has not been properly complied with by branches wherever the borrower is
availing aggregate fund based working capital limit of ₹150 crore and above which has
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been effective from 01.04.2019. Further, it has also been observed that commitment
charges have not been levied in certain cases.
In this regard, it is advised that the guidelines issued vide aforesaid circular requiring the
21
working capital loan to be divided in two separate components as WCL and Cash Credit
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should be strictly followed in all applicable cases. Further commitment charges

conveyed vide L&A Cir. no 41 dt 10.04.2019 are to be levied in all eligible accounts.
3
Standard Operating Procedure (SOP) - Loan System for Delivery of Bank

Credit:
1. Applicability: Borrowers having aggregate fund based working capital (FBWC)
limit of ₹150 crore and above from the banking system.
2. Exempted Categories: Following are exempted from the purview of Loan System
05
for Delivery of Bank Credit:

a) Credit facilities extended to State Government/ Union Territory agencies and Food
Corporation of India for procurement /price support activities;
b) Credit facilities extended to Central Counterparties;
c) Credit facilities extended by overseas branches of Indian banks.
3. Modus Operandi: The FBWC limit to be bifurcated into Working Capital Demand
loan (WCDL) and cash credit components after excluding the export credit limits
(pre-shipment and post-shipment) and bills limit for inland sales. The %age of
Working Capital Demand Loan (WCDL) shall be as under:
60% of the sanctioned FBWC limit in the form of WCDL. It includes adhoc limits &
TODs and investment by the bank in the commercial papers issued by the borrower,
provided the investment is sanctioned as part of the working capital limit.
Outstanding in existing WCDL facility, if any, shall also be part of WCDL.
Drawings up to 60% of the total FBWC limits shall only be allowed from the WCDL
and excess may be allowed in the form of cash credit facility subject to availability of
DP.

4. Amount of the loan: Amount may be fixed in consultation with the borrower
subject to fulfillment of 60% of the facility in the form of WCDL.
5. Tenor of the loan:
 Minimum Period – Seven Days
 The tenor of WCDL should be within the validity period of sanction
 Branch Heads & above may also consider rollover of the WCDLs within the
validity period of sanction at the request of the borrower, subject to
compliance with the extant IRAC norms.
 If rollover of WCDL is undertaken within the overall limit and tenor or sanction
in terms of the stipulations of the guidelines on loan system for delivery of
bank credit, and if the same is not in view of financial constraints faced by the
borrower, then the rollover will not be treated as restructuring.
 The interest on WCDL shall be debited to the Cash Credit Account as and
when applied.
6. Repayment of WCDL:
It can be in installments or by way of a "bullet" repayment, subject to IRAC
norms.
1
7. Pre-payment of WCDL: Where a borrower intends to pre-pay WCDL before the
:0
due date, branches may accept the same subject to compliance of 60% of the facility
in the form of WCDL. At the time of pre-payment it should be ensured that the tenor
22
of the loan component is not less than seven days.
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8. Commitment charges:
 Commitment charges on undrawn portion of FBWC limits sanctioned should
be levied on quarterly basis. In case of credit balance in Cash Credit account,
21
the commitment charge on the entire FBWC (CC) limits shall be

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recovered.
 Undrawn portion of sanctioned limit - The difference between the average
utilization during the quarter and the sanctioned limit. The average utilization
3
during the quarter to be considered after excluding the utilization in excess of

the sanctioned limit.
 This charge should not be levied in respect of drawings in excess of the
sanctioned limit. In case of allocated credit limits, commitment charge should
be charged by branch having main account after taking into account the
05
undrawn portion of allocated limits at the branches where sub-limits have

been allocated.
 The commitment charge should be exclusive of overall ceiling of
penal/additional interest as advised from time to time.
 Branches while conveying sanction to the borrowers should also mention
about levy of commitment charges in the sanction letter itself. Branches to
ensure that the loan documents/agreements should also contain consent of
the borrower to the above effect.
 Powers to relax/waive aforesaid commitment charges have been vested
with HOCAC-II & above for proposals falling within their vested power.
9. Rate of Interest: The interest rate on loan component will be same as the
interest rate charged on Cash Credit limit irrespective of the tenor of the loan
component.
10. Security/Documentation: Security should be obtained depending upon the
nature and type of advance as per the extant guidelines. As regards fresh
documentation, the same shall be done after getting the documents drafted/vetted

from respective Law departments/ Law Division, HO.
 WCDL (to be obtained in case of fresh sanctions).
 Supplementary agreement, Letter of consent from
Guarantor/Mortgagor/Pledgor (to be obtained in existing accounts) and Letter
to be sent to borrower are enclosed as Appendix-I/II/III and IV of L&A Cir. 32
dt. 28.03.2019
 The terms and conditions stated in these agreements/letters be verified and in
case any other clause / term is required to be incorporated, the same may be
suitably added.
 Extant guidelines on documentation relating of drafting/vetting of documents,
etc should also be complied with. However, in case of consortium advances,
the security and creation of charge & documentation etc. may be done as per
extant guidelines on consortium advances.
11. Right to Recall: The Loan Branches to ensure that suitable clause has been
incorporated in the document to provide for a right to recall Working Capital Credit
Facility including the ―Loan Component‖.
12. Loans under Consortium Arrangement:
1
a) Where our Bank is leader : While sharing the DP, WCDL component on overall
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consortium level limits shall also be shared. A confirmation in this regard should be
obtained from member banks and kept on record.
However, all lenders in the consortium shall be individually and jointly responsible to
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ensure that at the aggregate level, the „Loan component‟ meets the above
mentioned requirements. Information regarding repayment of WCDL, availment of
CC limit etc. to be shared by member banks at regular intervals.
21
b) Where our Bank is a member : Our Bank shall ensure WCDL component out of
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the limits enjoyed by the borrower from our Bank is always met (though our stand-
alone exposure is less than Rs.150 crore). In consortium advances, the commitment
charge should be determined with reference to the sanctioned limit allocated to each
3
member.
13. Loans under Multiple Banking Arrangement: Under Multiple Banking
Arrangements (MBAs), each Bank shall ensure adherence to these guidelines at
individual bank level. The level of individual bank's share shall continue to be
governed by the exposure norms.
In multiple banking arrangements, the commitment charges should be determined by
05
each bank based on the limits sanctioned by it.

For more details/clarifications kindly refer the circular

31. Miscellaneous
INDUSTRY WISE EXPOSURE LIMITS:

Bank has developed a model for fixing industry wise internal credit exposure limits.
The model evaluates external factors like rating score of an industry by external
agency, nature of industry and its importance in economy as well as internal factors
like level and trend of asset impairment, exposure concentration and quality of
exposure in the industry. As the ceilings proposed are internal ceilings to achieve
diversified growth of portfolio and reduce portfolio concentration, it is provided that
the monitoring against such limits would be based on actual outstanding and
undisbursed term loan amounts in any industry. Bank vide L&A Cir. No.105 dated
31.12.2016 has reviewed industry wise credit exposure ceiling for various industries
and has also consolidated it in LA Cir 57 dated 06.07.2017 and further explained
vide L&A Cir. 40 dated 26.3.2020.
CONSOLIDATED CIRCULAR - INTEREST RATE ON ADVANCES
1
Rate of Interest pertaining to Retail Advances, Agriculture Advances, MSME
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Advances, Other Advances (not specified elsewhere), Specified Categories, various
Concessions and Mapping of Rating Grades & score bands applicable from
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01.04.2020 have been consolidated/ updated.
The Interest rates for all MSME advances (Except Scheme specific rates) and the
21
corresponding Interest rate codes w.e.f. 01.04.2020 has been provided with the
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circular. (L&A circular No. 58/2020 dated 31.03.2020)

3
CONSOLIDATED CIRCULAR –ADVANCE TO HINDU UNDIVIDED FAMILY (HUF)

Operative detailed guidelines in respect of advance to Hindu Undivided Families
(HUF) have been consolidated and duly updated.
05

32. COVID-19 Related Issues
Revised PNB Covid-19 Emergency Credit Facility And Operational Guidelines
On Devolvement Of Non-Fund Based Facilities
Bank has made available additional credit facilities to the eligible existing borrowers
by way of add-on facilities in form of Demand Loan/ Over Draft under PNB COVID
19 EMERGENCY CREDIT FACILITY (PNB-CECF) to tide over the current crisis
situation. Guidelines in this regard has been issued vide L & A circular no 25 / 2020
dated 25.03.2020.
Now, the modified/revised scheme, valid till 30.06.2020, has been advised. Any
loans sanctioned prior to issuance of the modified scheme shall abide by the old
scheme. Subsequent to the issuance of these revised guidelines on modified
scheme, all loans shall be sanctioned in accordance with the modified scheme.
Modified/ revised scheme is placed in two parts – Section A:-Revised PNB COVID-
19 Emergency Credit Facility (CECF) and Section B:- Operational Guidelines on
Devolvement of Non-Fund Based Facilities which is enclosed as Appendix I.
1
Undertaking from borrower (Annexure I), Application to be filled by the Borrower
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(Annexure II)and Simplified Appraisal Format (Annexure III) to aid the field
functionaries and improve TAT have also been enclose. For detailed guidelines of
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the scheme kindly refer circular. (L&A circular 68/2020 dated 15.04.2020)
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In continuation to guidelines conveyed vide L&A circular 68/2020 dated 15.04.2020,

it is advised that the interest table codes to be used, under the scheme are as
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under:-
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Nature of Facility Scheme Code Benchmark Lending Rate Interest Table Code
Demand Loan DLCOV MCLR DLCOM
3
RLLR DLCOR
Overdraft ODCOV MCLR ODCOM
RLLR ODCOR
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Timely Credit To Business In The Context Of The Covid-19 Pandemic:

In pursuant the instructions of DFS, following indicative timeframes from processing to
disbursement: has been advised:
Credit Support Time Frame
COVID-19 Emergency Credit Line
A. Within 3 to 6
(i) Working capital demand loans for working days
existing MSME, Corporate and agriculture
borrowers
(ii) Financial assistance to SHG borrowers
Working capital reassessment upto ₹5 Crore
B Within 6 to 9
for existing borrowers working days
Working capital reassessment above ₹5 Crore
C Within 12 to 15
for existing borrowers working days

Presently the bank is having the following schemes to cater to MSME, Corporate and
agriculture borrowers, circulated vide different divisions as per need of different
borrowers:-
SN Issuer Name of the Scheme Circular No.
Division
i MSME PNB Stand by Line of Credit (PNB SLC)for 49/2020
MSMEs to fund Temporary Liquidity Dt.27.03.2020
Mismatch: For MSME Borrowers
ii PSFID PNB Kisan Tatkal Rin Yojana 37/2020 Dt.
09.04.2020
iii PSFID Financing under COVID Schemes: For SHG 38/2020
Members Dt.13.04.2020
iv IRMD PNB COVID-19 Emergency Credit Facility 68/2020
(Fund and Non Fund based) and Operational Dt.15.04.2020
guidelines on Devolvement of Non-Fund
1
Based Facilities
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MSME Division vide their circular 49/2020 dated 27.03.2020 issued guidelines to ease
22
the liquidity position and meet-out the temporary requirement of MSME sector under
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the PNB Stand by Line of Credit scheme. MSME borrowers can avail credit facility
either under PNB Stand by Line of Credit or PNB COVID-19 Emergency Credit Facility
circulated by IRMD vide Circular no. 68/2020 dated 15.04.2020 as per their need.
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Since formats and undertaking for advances under PNB Standby line of Credit were
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not provided in MSME Circular, the same are enclosed at Appendix-I, Appendix II,
Appendix II-A and Appendix II-B with the circular.
3
Now Board has approved schemes for reassessment of working capital requirement
of MSME borrowers upto ₹5 Crore and above ₹ 5 Crore have been formulated and
salient features of the scheme/s are appended below:-
1- Liberalised Working Capital Assessment (LWCA) model for MSME borrowers-

Max limits upto ₹5 Crore (Including Revised Limits)
05
2- Liberalised Working Capital assessment (LWCA) model for MSME borrowers

having Limits above ₹ 5.00 Crore
Kindly refer the circular for detailed guidelines.
MODIFICATION IN PNB COVID-19 EMERGENCY CREDIT FACILITY and

GUIDELINES ON DEVOLVEMENT OF NON-FUND BASED FACILITIES
This has reference to LA circular LA Circular No. 68 dated 15.04.2020 conveying

―Revised PNB COVID-19 Emergency Credit Facility (PNB-CECF) and Operational
Guidelines on Devolvement of Non-Fund Based Facilities‖
Now, relaxations for calculation of drawing power can be permitted by Branch Head
for borrowers availing above mentioned PNB-CECF scheme after satisfying himself of

genuineness of COVID circumstances. The relaxations proposed above should be
permitted by Branch Head after analyzing the difficulties faced by the borrower due to
COVID-19 pandemic
In case of regular fund based working capital facilities availed by the borrower, the
margin for stock and receivables shall be reduced by 10% from margin as per existing
sanction subject to minimum of 10% in case of stock and 15% in case of receivables
and Relaxation in receivable period by upto maximum 90 days over and above the
approved period of the last sanction shall be permitted. However Margin on facility
availed under PNB-CECF scheme shall continue as per existing guidelines i.e., Nil
margin.
The timeline for permitting dispensations shall be in line with COVID-19 regulatory
Package of RBI dated 23.05.2020 i.e., upto 31.08.2020. In all such cases where such
dispensation is permitted, the margins shall be restored to the original levels by March
31, 2021.
1
EASING OF WORKING CAPITAL FINANCING - REVISED MARGIN NORMS AND
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REASSESSMENT OF WORKING CAPITAL CYCLE
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This has reference to L&A Cir. No. 73 dated 20.04.2020 on timely credit to business in
the context of the Covid-19 pandemic wherein Bank has made available various credit
measures to cater to MSME, Corporate and agriculture borrowers.
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Now,the Banks have to review the working capital sanctioned limits upto March 31,
2021, based on a reassessment of the working capital cycle and the banks to assess
working capital limits sanctioned in the form of CC/OD to borrowers on the basis of
3
computation of the ‗drawing power‘ by reducing the margins till August 31, 2020. In all
such cases where such a temporary enhancement in drawing power is considered, the
margins shall be restored to the original levels by March 31, 2021

05
Prudential Norms on Income Recognition, Asset Classification and

provisioning – RBI Statement on Developmental and Regulatory
Policies - Moratorium on Term Loans :-
In reference to Sastra Division circular No 12 dated 27.03.2020 (conveying certain
relaxations), it has been advised to send the letter to all Term Loan borrowers (Annx.
A) and obtain their consent in writing, (Annx. B) on the formats enclosed, in order to
shift the repayment schedule and subsequent due date to give effect to the
regulatory dispensation of Moratorium of 3 months on payment of instalments of all
Term Loans falling due between 01.03.2020 & 31.05.2020 in our CBS system.
Branches are required to enter in CBS at Free_Code_1 in MIS Tab ―COV19‖, at
each account level, so as to permit the regulatory relaxation in Term Loan
accounts.This job is to be completed latest by 15.05.2020.

It is further advised that in view of COVID19 impact on operating Cycle of our
Working Capital facilities sanctioned in form of CC/OD , DP in these limits to the
extent of interest levied in these accounts for the month ending on 31.03.2020 be
allowed, keeping in view interest for the month has already been charged. Branch
Incumbents are empowered to allow overdraft for working Capital limits to the extant
interest levied for the month of 31.03.2020 as a onetime remedial measure.Such
increased DP shall be restored on 01.06.2020.
However, the interest for the month of April, 2020 and May, 2020 will be kept in
partitioned account, to defer actual charging of interest in the accounts. Such
accumulated accrued interest shall be recovered immediately after the completion of
this period.
NPA CC/ OD account may be upgraded after recovery of interest up to 29.02.2020.

Similarly NPA Term loans may also be upgraded after recovery of EMI/ Instalments
up to 29.02.2020.
1
Since Bank is extending deferment to all borrowers the consent letter (in term loan
account as advised vide LA circular 57/2020) to be taken to form part of borrower
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record and such deferment should be allowed to all borrowers.
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RBI STATEMENT ON DEVELOPMENTAL AND REGULATORY POLICIES -

MORATORIUM ON TERM LOANS & DEFERMENT OF INTEREST ON WORKING
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CAPITAL FACILITIES
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This is in continuation and reference to Sastra Division Cir. No.12 dated

27.03.2020. LA Cir. No.57 dated 31.03.2020 & 63 dated 07.04.2020 advising
3
therein moratorium on payment of Interest/ instalments of CC-OD & Term Loan

accounts for 3 months upto 31.05.2020 in view of RBI announcement of measures
for easing financial stress caused by COVID19 disruptions by relaxing repayment
pressures.
Now, RBI has extended moratorium on payment of Interest/ instalments of CC-OD
05
& Term Loan accounts for another 3 months up to 31.08.2020.However, borrowers

who are willing to repay the instalments /interest regularly even during the period of
moratorium are free to continue to pay the instalments/interest. It has been decided
that effective from 01.03.2020 the monthly Interest is to be debited in all accounts
across the bank, but it shall not be demanded upto 31.08.2020 and shall be
serviced through FITL.(The detailed guidelines regarding FITL creation shall be
issued separately)
A concession in Rate of Interest (ROI) upto 25 basis points per annum shall be
provided, for the month the account remains regular/SMA-0, subject to the
applicable rate does not fall below benchmark rate – RLLR (Repo Rate + Mark
Up+0.35)/MCLR in the accounts falling under Retail, MSME and Food processing
belonging to Regular and/ or SMA-0 category, which does not slip into NPA till
31.3.2021. This concession in rate of Interest shall be available upto 31.03.2021
only.
(L&A Circular No 104 dated 03.06.2020)

PRUDENTIAL FRAMEWORK FOR RESOLUTION OF STRESSED ASSETS -
EXTENSION OF RESOLUTION TIMELINE
This has reference to L&A Cir. No. 67 dt. 10.06.2019 on Prudential Framework for
resolution of stressed assets (issued in compliance with RBI notification dated
07.06.2019) interalia prescribes lending institutions to review the borrower account
within 30 days from date of default (Review period) and a resolution plan to be
implemented within 180 days from the end of review period.
Now it has been informed vide the captioned circular that RBI has reviewed and
extended the timelines under Prudential Framework for Resolution of Stressed
Assets. Guidelines are as under :-
i) In respect of accounts which were within the Review Period as on March 1, 2020,
the period from March 1, 2020 to August 31, 2020 shall be excluded from the
calculation of the 30-day timeline for the Review Period. In respect of all such
accounts, the residual Review Period shall resume from September 1, 2020, upon
1
expiry of which the Bank shall have the usual 180 days for resolution.
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ii) In respect of accounts where the Review Period was over, but the 180-day
resolution period had not expired as on March 1, 2020, the timeline for resolution
22
shall get extended by 180 days from the date on which the 180-day period was
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originally set to expire.

iii) Subsequently, the requirement of making additional provisions as per the
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Prudential Framework shall be applicable as and when the extended resolution

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period, as stated above, expires
(L&A Circular No 107/ 2020 dated 04.06.2020)

3
Standard Operating Procedure for Allowing Funded Interest Term Loan (CFITL)
This is in continuation and reference to Sastra Division Cir. No.12 dated 27.03.2020,
LA Cir. No.57 dated 31.03.2020, 63 dated 07.04.2020 & 104/2020 dated 03.06.2020,
05
advising therein moratorium on payment of Interest/ instalments of CC-OD & Term

Loan accounts for upto 31.08.2020 in view of RBI announcement of measures for
easing financial stress caused by COVID19 disruptions by relaxing repayment
pressures.
Vide LA 104/2020, conversion of the accumulated Interest on Working Capital

facilities during the deferment period (March - August 2020) into a Funded Interest
Term Loan (FITL), which shall be repayable not later than 31.03.2021, has been
conveyed.
Now standard operating Procedure for allowing Funded Interest Term has been
conveyed as under:-
i) Approach on treatment of Interest in Working Capital (―CC/OD‖) non agriculture

accounts:

 With effective from 01.03.2020, the monthly interest is to be debited in
all accounts across the bank but shall not be demanded.
 Limit in the account shall be increased to the extent of interest debited in
the account. Clean TOD (Adhoc) will be granted centrally to the extent of
interest debited in the account with expiry date as 31-08-2020
 The accrued interest shall be recovered immediately from the borrowers
with effect from 01.09.2020 (where borrower opts out of FITL) or may be
converted into a Covid FITL Account i.e. CFITL Account in a Centralised
manner, which shall be repayable not later than 31.03.2021
 In line with RBI Regulatory package, Overdraft was permitted to the
extent of Interest levied for the month March 2020 (in PNB 1.0
&eUNI).After opening of FITL and subsequent transfer of Interest
accrued from March-August 2020, the enhancement given for March
2020 has to be restored back to the original limits or Drawing Power
whichever is lower.

1
The outstanding balance in CFITL account, if any, as on 01.04.2021
shall be debited to the linked CC/OD account.
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Detail guidelines in respect of exposure wise process in opening of FITL account
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is advised in the circular.
(L&A Circular No 115 dated 25.06.2020)

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RBI STATEMENT ON DEVELOPMENTAL AND REGULATORY POLICIES -

MORATORIUM ON TERM LOANS & DEFERMENT OF INTEREST ON WORKING
CAPITAL FACILITIES WEF 01.03.2020 to 31.08.2020
3
Bank guidelines regarding Moratorium on Term Loan Instalments, including interest and
Deferment of Interest on Working Capital Facilities were conveyed vide SASTRA
Division Cir. No.12 dated 27.03.2020, LA Cir. No.57 dated 31.03.2020, LA Cir. No.63
dated 07.04.2020 & LA Cir. No. 104 dated 03.06.2020. Guidelines for conversion of
interest accumulated on CC/OD accounts into FITL stand conveyed vide LA Cir.
05
No.115 dated 25.06.2020.
It is clarified that WCDL accounts, being carved out of existing Working Capital limits,
even if such accounts are opened on or after 01.03.2020, are part and parcel of FBWL
limits and are eligible for all relaxations announced by RBI in this regard, viz. deferment
of interest and conversion of accumulated interest charged in the accounts from
01.03.2020 till 31.08.2020 into a separate FITL account, as per guidelines already
issued vide LA Cir. No. 115 dated 25.06.2020, provided the main FBWC account was
opened on or before 29.02.2020 & is getting COVID19 relaxations.
(L&A Circular No 142/ 2020 dated 29.07.2020)
Guaranteed Emergency Credit Line – Revision in Rate of Interest

Bank has revised Rate of Interest under ―Guaranteed Emergency Credit Line‖ as under:

i. For MSME Borrowers: RLLR + 0.85 % (presently7.50%) subject to maximum of
9.25%
ii. For Non-MSME Borrowers: 1 year MCLR (presently 7.60%) subject to maximum of
9.25 % (L&A Circular No 116/ 2020 dated 26.06.2020)
Amendment in Loaning Powers and Sanctioning Authority – CECF and GECL

Schemes:
In the backdrop of COVID-19 pandemic, amalgamation and implementation of new

organization structure, it is observed that the turn-around time of the above
mentioned schemes have increased. In view of the above competent authority has
approved to amend the loaning powers and sanctioning authority in respect of PNB-
CECF and GECL for temporary period up to 30.9.2020
i. PNB-CECF
1
The scheme has been launched as a Standby Line of Credit with maximum limit
:0
upto 10% of existing Fund Based Working Capital Limits (FBWC) subject to
maximum of ₹100 Crore to existing borrowers by way of Demand Loan/ Overdraft
22
with loan tenor of 2 years vide IRMD L&A Circular No.68/ 2020 dated 15.4.2020.
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 To avoid inherent delay in sanction, the Credit Approval Committee has been
remodelled for this specific limited purpose with two member committee i.e
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recommending authority-sanctioning authority model at COs, ZOs and MCCs

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 Circle Head shall sanction limits above ₹10 Lakhs and upto ₹1.5 Crore
(AGM) and ₹3.0 Crore (DGM) in accounts, where files have not been shifted
3
to MCCs before the cut-off date i.e., 26.06.2020 (date of this circular). This
shall ensure that both MCC and Circle Office can sanction loans thereby
ensuring lesser pendency in processing the loans.
 To address the operational issues in MCCs such as MCC have not started
functioning / MCC Head yet to join etc., the proposal shall be sanctioned by
05
CO as per powers given in Annexure I.

 To address the operational issues such as Circle Offices have not started
functioning / Circle Head yet to join etc., the Zonal Office shall sanction limits
above ₹10 lakh and up to ₹50 Crore.
 LCBs headed by DGM shall also sanction loans upto ₹2 Crore wherein files
is in LCBs and account may/ may not shifted from LCB.
 Proposals beyond the power of LCBs shall be sanctioned at Zonal Offices
and proposals beyond the power of Zonal offices shall be directly submitted
for sanction by LCB to HOCAC-II irrespective of the existing sanctioning
authority.
 E-LCBs headed by GM shall sanction proposals upto ₹50 Crore. The
proposals beyond ₹50 Crore shall be submitted for sanction at HOCAC-II by
E-LCBs.

 The post sanction monitoring and follow up shall also be done by disbursing
branches till the account is shifted under new structure.
 The captioned arrangement shall be specifically valid only up to 30.09.2020.
The Bank reserves the right to review the validity, keeping the stabilisation of
the new organizational structure in view.
 In respect of operative guidelines on devolvement of non-fund based facilities
under PNB-CECF Scheme, the loaning power shall continue to be with the
Branch Heads as per extant guidelines
ii. GECL scheme
The scheme has been formulated as a pre-approved loan with limits up to 20% of
total outstanding loans as on 29th February, 2020 with a maximum loan amount of
₹5 Crore in the form of Working Capital Term loan to existing borrowers with total
loan tenor of 4 years vide MSME Circular No. 72/2020 dated 27.5.2020.
 To avoid inherent delay in sanction, the Credit Approval Committee has been
1
remodelled for this specific limited purpose with two member committee i.e.,
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recommending authority-sanctioning authority model at COs, MCCS and
ZOs. 22
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 GBBs shall sanction proposal up to ₹10 lac, and Circle Head shall sanction
limits above ₹10 lac and upto ₹5 Crore in accounts, where files have not
been shifted to MCCs before the cut-off date i.e. 26.06.2020 (date of this
21
circular). This shall ensure that both MCC and Circle Office can sanction
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loans thereby ensuring lesser pendency in processing the loans.

 To address the operational issues in MCCs such as MCC have not started
3
functioning/ MCC Head yet to join etc., the proposal shall be sanctioned by
CO as per powers given in Annexure II.
 To address the operational issues such as Circle Offices have not started
functioning/ Circle Head yet to join etc., the Zonal Office shall sanction limits
above ₹10 lakh and upto ₹5 Crore.
05
 LCBs headed by DGM shall also sanction loans above ₹10 Lakh and upto
₹5 Crore wherein file is in LCBs and account may/ may not be shifted from
LCB.
 Turn Around Time (TAT) for sanction under GECL shall be one day at the
level of sanctioning authority.
 Pre Disbursement Audit shall be waived for loans sanctioned under GECL as
the limits are backed by government guarantee and risk weighted is 0%.
 The post sanction monitoring and follow up shall also be done by disbursing
branches till the account is shifted under new structure.
 The captioned arrangement shall be specifically valid only up to 30.9.2020.
After lapse of this period, the powers shall be restored back to the original
level. Further, Bank reserves the right to review the validity, keeping the
stabilization of the new organizational structure in view.

All the extant bank guidelines applicable shall be remain unchanged
Standard Operating Procedure- Refund of 0.25% interest to Retail, MSME and

Food Processing borrowers adhering to Credit Discipline
RBI has permitted banks to allow repayment moratorium in Term loan accounts and
deferment of interest in case of Working Capital limits for the period March-August
2020. In order to encourage the Retail/MSME/Food Processing borrowers who are
adhering to credit discipline even during such difficult circumstances it is proposed to
give some financial incentive in the form of interest refund upto 0.25% in the
applicable Rate of Interest as under :- .
―In order to support borrowers adhering to credit discipline, a concession in Rate of
Interest (ROI) in term loan and working capital facilities (―CC/OD‖) upto 25 basis
points per annum shall be provided, for the month the account remains regular/SMA-
0, subject to the applicable rate does not fall below benchmark rate – RLLR (Repo
1
Rate + Mark Up+0.35)/MCLR in the accounts falling under Retail, MSME and Food
processing belonging to Regular and / or SMA-0 category, which does not slip into
:0
NPA till 31.3.2021.‖
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Refund of 0.25%1 in ROI shall be considered for Retail, MSME and Food processing
borrowers as per the cut-offs suggested by the respective business divisions :-
SEGMENT CUT-OFF AMOUNT
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Scheme Cut-off Amount

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PNB Home Loan all All Housing Loan borrower

variants having sanction limit upto
Retail Rs. 50.00 lakh
3
PNB Car Loan/ Two All Car Loan /Two wheeler

Wheeler Loan Loan borrower having
sanction limit up to Rs.
10.00 lakh
MSME Maximum outstanding of Rs 25.00 Crores (Other than
Govt. Guaranteed Accounts)
05
Food Processing Sanction Limit up to Rs 10.00 Crores
The eligibility criteria for the accounts mentioned in para 5.1 shall be as under:
i. Account is standard regular/SMA-0/SMA-1 as on 29.02.2020 and

A The borrowers who have refused to take benefit of moratorium shall get the
benefit of refund, if the account remains standard regular from 01.03.2020 to
31.03.2021 at close of every month Or
B. The borrowers who have availed moratorium benefit but make payment of
due instalment/interest by 31.08.2020 i.e. account is standard regular as on
31.08.2020 and keep the account standard regular till 31.03.2021 at the close
of every month

ii. No FITL conversion in Working Capital Limits (―Cash Credit/Overdraft‖)
should have happened.
For detail guidelines kindly refer the circular

(IRMD L&A circular 131/2020 dated 21.07.2020)
CONTROL MEASURES – APPROACH FOR ISSUES RELATED TO ASSESSMENT

AND RENEWAL OF WORKING CAPITAL AND COVENANTS COMPLIANCE IN THE
BACKDROP OF COVID-19 (Loan and Advance circular 143/2020 dated 04.08.2020)
Considering the current challenges on account COVID-19 , it is advised as under :-
a) Stock Statements may be obtained in the form of scanned copies from the
registered mail id of the customers. Further, no penal interest should be charged
for delayed submission upto 25th day of following month for genuine reasons in
respect of units affected by COVID-19 on account disruption for the period
1
01.03.2020 to 31.10.2020
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b) Delay in submission of renewal documents by the borrower for genuine reasons
should not lead to imposition of penalty in respect of units affected by COVID till
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31.10.2020
c) At the time of review/renewal, Covenant breaches should be appropriately
highlighted and any condonement should factor if the same has happened due
21
to COVID related issue or due to a general deterioration in the credit profile

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which was evident before COVID.

d) In view the anticipated credit rating down grade during the period when unit
3
impacted on account of Covid 19, Competent Authority may examine increase in

applicable ROI on account of rating downgrade specifically because of Covid
related issue. It is advised that rating rationale should be carefully examined to
ascertain the reason for downgrade. Wherever necessary, the issue to be taken
up with competent authority, for permitting concessional ROI, to negate the
increase in applicable ROI
05
e) In order to curtail undue hardship on borrower, Sanctioning Authority should

thoroughly assess the financial performance at time of review/renewal ignoring
performance during ―Black out‖ period i.e from 1.03.2020 to 30.06.2020 on case
to case basis. Further, to reduce the impact of lockdown, while analysing
financial performance of the borrower for FY 21, turnover ratios, holding period
etc. may be considered 1.25 times higher than existing levels on merits of the
case.
f) The CMA data accepted from borrower for FY 2020-21 may be accepted
factoring the impact of pandemic. The following factors should be considered
while accepting the projections:
 The geographic locations of borrowers target business and customer

base
 The industry / industries in which the borrower operates.

 Temporary impacts such as decline in discretionary spends, disruptions
in supply chain, restrictions on travel, delayed availability of migrant
labourers, changes in exchange rate and commodity prices, fiscal
stimulus provided by government etc.
 Fundamental changes like changes in business models resulting cost
reduction / increase, changes in market share due to loss of customers,
impact on companies engaged in hospitality and tourism etc.
IMPLEMENTATION OF COVID FITL IN CASH CREDIT/ OVERDRAFT ACCOUNTS

Detailed Standard operating procedure (SOP) for allowing Funded Interest Term Loan
(CFITL) in working capital (CC/OD) accounts (non agricultural) for interest charged
during the Period March 2020 to August 2020 was circulated vide L & A Circular
No.115/2020 dated 25.06.2020. As per the above guidelines exposure wise process for
opening of CFITL accounts were defined as under:
1
(1) Borrowers having CC/OD limit upto Rs 50 Lacs (Automatic Opt-in): All such
:0
borrowers are considered as willing to avail FITL conversion option and if they do not
want to avail they have to submit an undertaking on or before 29.08.2020 and details
22
regarding the same to be captured in CBS system through separate menu option.
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(2) Borrowers having CC/OD limit above Rs 50 Lacs (Borrower to Opt-in): All the
borrowers having CC/OD limit Rs.50 lac and above shall not be provided FITL
21
conversion by default but they have to submit an application cum undertaking letter on
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or before 29.08.2020 and details regarding the same to be captured in CBS system
through separate menu option.
3
On the basis of data captured of CC/OD Borrowers regarding Opt In/ Opt Out in CBS
system, the interest applied in the account during the period March 2020 to August
2020 shall be converted into Covid FITL account centrally during the period 01.09.2020
to 15.09.2020 having tenor upto 31.03.2021 through value dated transaction and
repayment in 3 equal instalments from January to March 2021.
05
Vide the captioned circular detail procedure for capturing the opt In/ opt out for CFITL
account in CBS system in all the 03 amalgamated entities has been conveyed.
GUIDELINES IN RESPECT OF CFITL HAVE BEEN CONVEYED VIDE L&A circular
115/2020 AND FURTHER VIDE CRMD CIRCULAR NO 02/20,
03/20,04/20,07/20,08/20.
RESOLUTION FRAMEWORK FOR COVID-19-RELATED STRESS

The Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets)
Directions 2019, dated June 7, 2019 (―Prudential Framework‖) provides a principle-
based resolution framework for addressing borrower defaults under a normal scenario.
The same is detailed vide L&A circular no. 93/2019 dated 17.08.2019. Any resolution
plan implemented under guidelines of ―Prudential Framework‖ which involves granting
of any concession on account of financial difficulty of the borrower entails an asset

classification downgrade, except when it is accompanied by a change in ownership,
which allows the asset classification to be retained as or upgraded to Standard, subject
to the prescribed conditions.
Considering the above, with the intent to facilitate revival of real sector activities and
mitigate the impact on the ultimate borrowers, RBI has issued guidelines for providing a
window under the Prudential Framework to enable the lenders to implement a
resolution plan in respect of eligible corporate exposures without change in ownership,
and personal loans, while classifying such exposures as Standard, subject to specified
conditions.
Vide the circular policy for Resolution Framework for COVID-19-related Stress has
been conveyed. (Loans and advance circular 172/2020 dated 07.09.2020)
Further modifications and amendments in the above resolution framework has been
conveyed vide LA 180 dated 3.10.2020 and 184/2020 dated 06.10.2020.
1
FAQs on Resolution Framework for COVID-19-related Stress, as published by RBI,
have been conveyed for needful guidance in the matter vide LA circular 195/2020 dated
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17.10.2020.Now RBI has updated the FAQs on its website on December 12, 2020,
which have been annexed with the circular L&A 221/2020 dated 16.12.2020.
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Further, vide L&A circular 218/2020 dated 10.12.2020, certain modification in the
existing guidelines have been conveyed.
21
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RBI has clarified that signing of an Inter-Creditor Agreement (ICA) is a mandatory

requirement for all Lending Institutions in all cases involving Multiple Lending
Institutions, where the resolution process under the August 6, 2020 Framework is
3
invoked. To facilitate the process a draft Inter Creditor Agreement, as provided by IBA ,
has been annexed with the circular that may be adopted by field functionaries for the
aforementioned purpose. The model agreement may be broadly used with suitable
modifications on case to case basis after getting the same vetted by Legal counsel to
safeguard Bank‘s interest. (IRMD L&A circular 5 dated 06.01.2021)
05

CHANGES DURING THE LAST WEEK
For the week ended 3.4.2021
(upto 17:00 Hrs. uploads)
1) LOANS AND ADVANCES CIRCULAR NO 50 dated 26.3.2021: REJECTION OF

CREDIT PROPOSAL :-
Bank‘s guidelines on rejecting credit proposal have been circulated vide L&A Circular
no. 97 dated 01.06.2020. Now, vide this circular, modification in guidelines for
rejection of credit proposals has been conveyed.
2) LOANS AND ADVANCES CIRCULAR NO 51 dated 26.3.2021 : LIST OF

APPROVED TRANSPORT OPERATORS - ADDITION, RENEWAL, WITHDRAWAL/
NON-RENEWAL AND CHANGE OF ADDRESSES WITH RENEWAL :-
The consolidated list of approved transport companies has been circulated vide L&A
1
Circular No.72 dated 18.06.2019 and other circulars issued on the subject from time to
:0
time. IBA has advised details of additions/ renewals & change of constitution/ address
with renewal to be incorporated in the list of approved transport operators, for the
22
period from 1st February to 28th February 2021 as per Annexure of the circular.
/20 963
3) LOANS AND ADVANCES CIRCULAR NO 52 dated 26.3.2021 : PERIODIC REVIEW

OF TRANSPORT OPERATORS BY IBA :-
21
/04 58
IBA has informed Banks that they are in the process of reviewing the recommendation
accorded to transport operators provided in Annexure I. In this regard, IBA has
requested banks to report to them in case of any adverse observation/ complaint has
3
been received on the transport operators.
4) LOANS AND ADVANCES CIRCULAR NO 53 dated 26.3.2021 : COUNTRY RISK

PREMIUM – (INCLUSION IN INTEREST RATES OF SPECIFIC EXPOSURES) :-
05
The Country Risk premium is to be charged on sanction of fresh limits or renewal of

limits in case of existing parties for exposure in Loans & Advances, Trade Credit &
Receivables, Overdraft in Vostro Account, Indirect Exposures and Non-Fund
Exposures as provided in ANNEXURE-I of the circular.
The same shall be made part of the Terms & Conditions to be conveyed to the parties
upon renewal/ sanction of limits.
5) LOANS AND ADVANCES CIRCULAR No. 55 dated 26.3.2021: GREEN RENEWAL:

MODIFICATION IN GUIDELINES :-
It supersedes the IRMD L&A Circular No. 38 dated 26.03.2020 & Circular letter no. 15
dated 05.09.2020, wherein guidelines regarding simplified procedure for review/
renewal of credit facilities i.e. Green Renewal were circulated.

The gist of modifications is as under: -
 Simplified categorization of accounts under Green Renewal: Irrespective
of the nature of facility, the limits for green renewal shall be (i) Above Rs 10
Lakh and up to Rs 1 Cr (ii) Above Rs 1 Cr and up to Rs 10 Cr.
 For Limits upto Rs 1.00 crore: compliance of triggers dispensed with
 IRR should be B2 and above (or equivalent to PNB Score). Earlier it was
B1 and above
 Rationalization of Triggers: Triggers prescribed under green renewal have
been reviewed and rationalised to ensure simplicity and timely renewal
 Single Unified Format combining Term Loan and Working Capital limits: For
combined Term Loan and Working Capital limits subject to overall limits of
Rs 10 Crore, unified format for Green Renewal format is to be used
6) LOANS AND ADVANCES CIRCULAR NO 56 dated 26.3.2021 : REVIEW OF

COVID-19 IMPACT ON INDIAN INDUSTRIES :-
Attention is invited to IRMD L&A Cir. No. 212, 217 & 224 dated 01.12.2020,
1
10.12.2020 & 17.12.2020, respectively, inter-alia conveying the future impact of Covid-
19 on various industries/ sectors and also guidelines relating to loaning powers based
:0
on industry/ sector wise future impact.
22
/20 963
In view of revival of Indian economy, its GDP and many other incentive schemes
announced by GoI under ―Atmnirbhar Bharat‖, the Board has approved lifting of the
restrictions made on various industries and approved as under:
21
/04 58
―Discontinuation of L&A circular no 212/ 2020 about Future Impact of Covid on

Industries and subsequent clarification.
3
7) LOANS AND ADVANCES CIRCULAR No. 57 dated 31.3.2021: INTEREST RATES

ON ADVANCES :-
Vide the circular MCLR, RLLR and Base rate w.e.f. 01.04.2021 have been conveyed.
There is no change in any bracket in respect of MCLR and RLLR or Base Rate.
05
8) IRMD CIRCULAR No. 3 dated 30.3.2021:- DYNAMIC REVIEW RATING MODEL –

TREATMENT OF OVERDUE CREDIT RISK RATINGS :-
The operational guidelines on treatment of overdue credit risk ratings was circulated
vide IRMD Circular No. 02/2019 & 03/2019 dated 02.01.2019 and 07.01.2019
respectively. However, the treatment specified for overdue risk ratings was deferred
vide IRMD Cir No 34/2020 dated 30.12.2020 and kept in abeyance till 31.03.2021 with
instructions that w.e.f. 01.04.2021 all overdue credit risk ratings shall be treated as
PNB-B3 or one notch down in case rating is already PNB-B3 or below.
However, keeping in the view that amalgamation of PNB with UBI & OBC w.e.f.
01.04.2020 & the ongoing difficulties faced due to COVID-19 pandemic, the treatment
specified for overdue risk ratings has been deferred for a further period of 3 months
(i.e. upto 30.06.2021).
----------------------

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LOANS

PUNJAB NATIONAL BANK

Loans & Advances STC 1, Lucknow Page 1 of 236

Any suggestion for improvement of the contents is welcome.

Loans & Advances STC 1, Lucknow Page 2 of 236

1. Pre Sanction Appraisal: General Guidelines -Page 4

16. Validity of Sanction -Page 70

18. Time Norms -Page 77

19. Loaning Powers -Page 79

22. Demand Loan/ Overdraft -Page 106

24. Command Area -Page 120

Loans & Advances STC 1, Lucknow Page 3 of 236

Some general guidelines:

1. Guidelines contained in LA Cir 157/2020 dated 17.08.2020 on pre

review and confirmation.

rejection of their applications.

to 25 Cr. Further vide L&A circular 168/2020 dated 05.09.2020 Credit

Loans & Advances STC 1, Lucknow Page 4 of 236

availed of by the parent company or the borrower group as a whole should be

5%of the projected turnover shall be brought in by the promoters/borrowers as

Loans & Advances STC 1, Lucknow Page 5 of 236

The required contribution (NWC), which should be at least 25% of peak

contribution (other than funds to be provided through internal generation) and

Loans & Advances STC 1, Lucknow Page 6 of 236

81/2017 dated 25.09.2017)

ascertained before disbursing the loan amount by visiting the supplier/dealer‘s

Bureau (CEIB) on the prospective borrower be properly analyzed and if any

Loans & Advances STC 1, Lucknow Page 7 of 236

India is exempted and may not be insisted upon. However, exemption/

provided to Independent Directors(LA 157/2020 and LA 229/ 2020).

Loans & Advances STC 1, Lucknow Page 8 of 236

borrowers to be submitted to NeSL. Agreements/ letter of undertakings as per LA

41/2018 to be obtained as applicable and undertaking for debiting charges on

borrower shall be accompanied by a fee to be paid to NeSL which is

Loans & Advances STC 1, Lucknow Page 9 of 236

54. In case of Project Finance, since there is no additional income to service

Loans & Advances STC 1, Lucknow Page 10 of 236

Need based credit requirement of the borrowers shall be assessed properly

KYC guidelines aimed at identification of the customer, opening an account with

Where frequent changes in management structure are observed, officials should be

list (RBI/ECGC)/ willful defaulters‘ list etc.

The list of companies struck off from Register of Companies is available on

It is also advised to have an enhanced diligence while dealing with Companies in

Loans & Advances STC 1, Lucknow Page 11 of 236

and there is also a view public documents facility on link

which may also be checked at Pre-sanction stage.

CONTROL MEASURES: PRE-SANCTION CREDIT APPRAISAL AND

should be conducted through the DIN of the respective director to verify

group/ allied concerns. While appraising a credit proposal, information of

Loans & Advances STC 1, Lucknow Page 12 of 236

UNIQUE DOCUMENT INDENTIFICATION NUMBER (UDIN) :

From 1st February 2019, it is mandatory to obtain UDIN by all practicing

Loans & Advances STC 1, Lucknow Page 13 of 236

The visit by bank officials to borrower‘s/guarantor‘s office/business

 In order to keep a record, a register for unit inspection as per Appendix-VIof

details of visits made to the borrower‘s premises may be captured in

 In case of any pre-sanction visit by Senior Official, the officer accompanying

Loans & Advances STC 1, Lucknow Page 14 of 236

Loans & Advances STC 1, Lucknow Page 15 of 236

Credit Information Reports (CIRs) on the Borrowers/Guarantors/Co-obligants drawn

Commercial Category Accounts), requiring fresh credit facilities before sanction of

facilities as well as at the time of Renewal/ Review/ Enhancement of such facilities

* Any type of Adhoc/additional credit facilities