ANNEXURE -2 TO HEAD OFFICE BRANCH CIRCULAR DATED 01.04.

2019
SBS SCORING MODEL FOR BRANCH -

Assig
Actual (i) ned
TOTAL SCORE
Parameters % increase or (ii) ratio as the Measure SCORE Score WEIGHT
Weight x Assg. Score (Colm.5 x Colm. 6)
case may be (Assg.
Score)

Colum
Column 1 Column 2 Column 3 Column4 Colm 6 Column 7
n5
A. Financial Risk Score - Based on Latest Balance Sheet (Audited/ Provisional)

15% & above increase over previous year 1

1. SALES 5% & above but below 15% increase over previous
2 1 4 4
GROWTH year
0% & above but below 5% increase over previous
3
year
Negative over previous year 4

25% & above increase over previous year 1

2. PROFITABILI 15% & above but below 25% increase over previous
TY ( 2
year 4 4 16
PBITDA/ Sales
* 100) 0% & above but below 15% increase over previous
3
year
Negative over previous year 4

3. LIQUIDITY
( Current Ratio) 1.50 & above 1
(Current 1.33 & above but below 1.50 2 1 4 4
Assets/Current 1.00 & above but below 1.33 3
Liabilities)
below 1.00 4

0.00 above but below 1.00 1

4. LEVERAGE 2 8
1.00 & above but below 3.00 2 4
(TOL/ TNW)
3.00 & above but below 4.00 3
4.00 & above 4
5.COVERAGE )
(a) (Debt Service Coverage Ratio)
2.00 & above 1
1.50 & above but below 2.00 2 2 4 8
1.00 & above but below 1.50 3
-1.00 & above but below 1.00 4
(b) (Interest Service Coverage Ratio)
2.00 & above 1
(Profit before 1.50 & above but below 2.00 2 1 4 4
tax+Interest+D
1.00 & above but below 1.50 3
epreciation
+loan installment/ -1.00 & above but below 1.00 4

XXXX
SUB-TOTAL OF FINANCIAL RISK SCORE (A1 TO A5 ABOVE) XXXXXX 44
XX
(B) Management Risk Score
(1) Management Character

(a) There is no possibility of diversion of funds and there are no group

1
companies

a) Diversion of 1 4
4
funds
a) Diversion of (b) Diversion of funds is unlikely, though there are group entities – 1
2
funds marginal amounts may be diverted for personal use

(c ) Diversion of funds is likely on a regular basis to group entities and

3
for personal use

(d) The borrowing entity is only a front for diversion to the rest of the 4

(a)Well-established member of the community whose integrity is

1
unquestionable
(b)Generally respected by peers and by the community 2
b) Integrity- (c)Does not always act in an upright and honest manner. 3 2 4 8

(d) Should repayment capacity be impaired, management may not co operate with
4
lender or no information could be obtained about management’s integrity

(a) Promoter is highly involved in this business, has long standing 1

(b) Promoter is fairly committed to this business but has substantial 2
(c) This business occupies only a small portion of his time and investment and his
3 1 4 4
most significant business interest lies elsewhere
(d) No involvement by the promoter; business merely a legacy or promoter
diversifying into other areas where his involvement will increase in future or unable to 4
gauge commitment
XXXX
B1 SUB-TOTAL MANAGEMENT CHARACTER SCORE (1a to 1c above) XXXXXX 16
XX
(2) Management Capacity
(a) Financially very strong; high net worth and flourishing group entities 1
(b) Good financial strength; minor group entity may not be doing well 2
2 4 8
(c)Financial strength is OK; however poor group entity could impact 3
(d) Very poor financials or financial strength could not be ascertained 4
(a) Management is very good. Person is well organised and knowledgeable about the
1
company and the industry in which he operates

(b)Person has reasonable management skills but weakness in one or two areas is
2
evident. Tasks are performed satisfactorily.
b) Competence 1 2 2
© Person exhibits limited managerial skills. Individual does not have a complete
3
understanding of the business.

(d) Person exhibits a total lack of skill. Decisions are illogical and loan repayment
4
could be at risk.

(a) Several years of sound business experience in the same line and
1
c) Business extremely successful
(b) Fairly long experience in the same line of business with limited success 2 1 2 2
Experience
© Fair experience but in related line of business 3
(d) Very short or no experience in any business 4
(a) Internal control is fairly good and is dependent on the owner’s long standing
1
relationship with his employees

(b) Internal control is not very tight and employees have too much discretion 2
2 2 4
(c)Internal control is totally dependent on the owner’s presence in the business
3
location and his personal supervision

(d) No internal control at all - the owner does not have a clue to what is happening 4

(a) Motivated and loyal employees who have a sound understanding of

1
the business
e) Employee 2 4
(b) Employees are loyal but do not have much experience 2 2
quality
© Employees are not motivated and do not contribute their best 3
 (d) Employees are neither motivated nor competent 4
XXXX
B2 SUB-TOTAL MANAGEMENT CAPACITY SCORE (2a to 2e above) XXXXXX 20
XX
(3) Management Succession
(a) Well-defined succession plan in place; business not dependent on
1
one person
(b) Business dependent on one person at present, but in the event of incapacitation of
2
that person a good succession plan is in place
© Succession is not addressed adequately and hence dealing with a change in the 2 4 8
management team could adversely affect the company’s performance; however the 3
damages can be contained

(d) Succession has not been addressed and in the even of incapacitation of the key
4
person, the business would suffer financial setbacks
(a) Successors have far more than the necessary skills, experience
1
and knowledge about the business.
(b) Successors have adequate skills, experience and knowledge about the business
even though there would be some learning and adjustment needed to be fully capable 2
of replacing current management.

(c ) Successors have some skills and knowledge about the business but a lot of 2 8
3 4
learning and adjustment needed to be fully capable of replacing current management.

(d) Successors are poorly prepared for assuming the role of current management and
4
are not currently, nor could they be made capable of replacing current management.
XXXX
B3 SUB-TOTAL MANAGEMENT SUCCESSION SCORE (3a & 3b above) XXXXXX 16
XXX
(4) Management Reputation
(a) Obligations to creditors are met before or within agreed terms 1

(b) Payments have extended beyond agreed upon terms on an infrequent basis 2

a) Business (c ) Often borrower allows bills to extend 60-90 days beyond payment date 3 2 8
4
Loan History
(d) Credit checks indicate the borrower is consistently late, without cause, in paying its
suppliers or Information could not be obtained on how the borrower handles its 4
payment responsibilities

a) Company has never violated any term and condition of it's loan
1
agreement

b) Company rarely does not meet all terms and conditions of its loan agreement 2
b) Credit Track 2 8
4
Record
c) Now and then the company breaches a significant term or condition of the credit
3
agreement
d) Company consistently violates loan agreement covenants 4

a) Firm in existence for more than 10 years 1

b) Firm in existence for more than 5 years 2
c) Firm's age c) Firm in existence for more than 2 years 3 1 8 8
d) Firm in existence for less than 2 years 4

(a) Excellent relationship with suppliers with no disruption of supplies.

1
Excellent reputation with customers resulting in growth and timely payments.

(b) Good relationship with suppliers with some disruption of supplies. Good reputation
2
with customers resulting in growth and generally timely payments.
2 4 8
d) Reputation
with customer 2
and suppliers (c ) Fair relationship with suppliers with frequent disruption of supplies. Fair reputation
3
with customers but increase in credit period and some defaults.

(d) Poor relationship with suppliers. Poor reputation with customers

4
with substantial increase in credit period and high defaults.
XXXX
B4 XXXXXX 32
XX
XXXX
SUB-TOTAL MANAGEMENT RISK SCORE (B1 TO B4 ABOVE) XXXXXX 84
XX
( C ) Business/
Industry Risk Score

(a) Diversified customer base having reasonable size, stable purchase

1
pattern from the firm and likely to pay outstanding invoices on a timely basis.

(b) Generally diversified customer base who maynot have either a reasonable size or
a) Customer a stable purchase pattern from the firm but is likely to pay outstanding invoices on a 2
Quality and timely basis. There maybe a few large customers. 2 4 8
Concentration
(c ) Customer has has neither reasonable size nor a stable purchase pattern from the
firm but is likely to pay outstanding invoices on a timely basis. The firm may have only 3
a few customers with little product diversification
(d) Customers are not expected to pay on time. The firm may have only 1-2
4
customers.

b) Supplier 1
Quality and (a) Firm has a choice of suppliers supplying quality goods & services. 2 3 4 12
Concentration (b) Firm has a choice of suppliers supplying average quality goods & services. 3
(c ) Firm has very few suppliers supplying goods & services. Quality of goods & 4
services is not very good.
(d) Monopsonistic situation with no control over quality.

(a) Current Industry structure not expected to lead to decline in GP

1
c) Impact of margin
Competition on (b) Industry competition may result in marginal decline in margins. 2 2 4 8
GP Margins
(c ) Industry competition has resulted/may result in significant decline in margins. 3

(d) GP margins have declined significantly due to competition and expected to decline
4
further.

(a) Product has no substitutes, regulatory threats demand will remain

1
stable or grow

d) Sales Trend (b) Product has limited substitutes (other brands or other products) and regulatory
2 2 4 8
(product) threats; however, this will not pose a threat to the borrower

(c ) Demand for product may be affected by lower-price substitutes and regulation;

3
however the threat is unlikely

(d) Demand faces serious threat due to substitutes and regulation 4

(a) There are no foreseen changes in the direct/indirect tax structure

1
or import/export restrictions which could impact the industry profitability.
e) Regulatory /
Fiscal risk- 1 4
4
Impact of
duties (product)
e) Regulatory /
Fiscal risk- b) While some changes in the direct/ indirect tax structure or import/ export 1
Impact of restrictions which impact the industry are foreseen,these may have some impact on 2
duties (product) industry profitability
(c ) Some changes are foreseen in the direct/indirect tax structure or import/export
restrictions which impact the industry. These may have a major impact on industry 3
profitability and affect viability of marginal players.
(d) Significant changes are foreseen in the direct/indirect tax structure and/or
import/export restrictions which impact the industry. These may have a significant 4
impact on industry
(a) Technology profitability
is tested and notandexpected
viability of
to players.
change in the long run. 1
(b) Technology is tested and unlikely to change in the medium term. 2
(c ) Technology tested but likely to change in the medium term. 3 2 2 4
(d) Outdated technology or technology subject to very fast obsolescence or
4
technology as yet untried/untested.

(a) Unlikely to face pollution related problems in future. 1

g) (b) Limited likelihood of facing pollution related problems in future. 2
Environmental 1 2 2
impact (product) (c ) Polluting industry but complies with current norms which are subject to change. 3

(d) Polluting industry and does not comply current norms. 4

XXXX
SUB-TOTAL BUSINESS/ INDUSTRY RISK SCORE (Ca to Cg above) XXXXXX 46
XX
CUSTOMER RATING SCORE
(A) FINANCIAL RISK SCORE 44
(B) MANAGEMENT RISK SCORE 84
( C ) BUSINESS/ INDUSTRY RISK SCORE 46
FINAL RISK SCORE (A+B+C) 174
Credit Rating Grade based on Final Risk Score SBS4
( Please refer to Final Risk Score Annexure for Credit Rating Grade)
Parameters to be considered for calculating the required ratios INSTRUCTIONS FOR COMPILING THE RATING SHEET
1. Current Ratio=(Debtors<=180 days+Inventory+Other Current Assets+Cash & Bank)/(Cash
Credit+ICD/STD+Current Portion of Long Term Debt+Sundry Creditors+Provision+Other Current
Liabilities)
2. Total Outside Liabilities/Networth=TOL/(Net Capital-Misc. Expenditure- Accumulated Losses)
1) Branches are advised to fill in the
3. DSCR=(Net Profit+Interest+Depreciation +loan installment/Current O/S of Term Loan+interest) actuals in column no 2 under Financial Risk Score 1 to 5(b).
2) As regards descriptive items in Management Risk Score & Business/ Industry Risk Score, branches are
4.Interest Coverage=(PBT+Interest Expenses)/ Interest Expenses) advised to allot marks which fits best (closest) to the parameter

5.Capital Gearing=(TOL+[LC+BG+Other Contingent Liabilities])/(Net Capital-Investment in group

companies-Other Investments-Other Current Assets-Misc.Expenditure-Accumulated Losses)

Prepared by: (Sr. Manager) Checked by: (Chief Manager)

Approved by:
Annexure B page 5 to Br. Cir 01/149 dt 14.08.2013
OVERALL CREDIT RATING GRAI)E - SBS MODEL
FINANCIAL RISK MANAGEMENT RISK BUSINESS INDUSTRY RISK -- CUSTOMER RATING -based on Final
Risk Score:
Credit
Financial Risk Financial Management Management Rating-- Rating
Busiriess/ IndUstry Risk Score -E Final RiskScore
Score- A Rating--B Risk ’Score D Grade--H
--G (A+C+E)
Rating . C . (based on
G)
0 to 28 1 0 to 51 1 0 0 SBS I AAA
29 to 33 2 52 to 77 2 24 120 SBS 2 AAA
34to37 3 78to103 3 36 140 SBS3 AAA
38to42 4 104to120 4 48 160 SBS4 AA
43 to 50 5 121 to 138 5 56 180 SBS 5 AA
51 to 58 6 139 to 155 6 64 213 SBS6 AA
59 to 63 7 156 to 172 7 72 247 SBS 7 A
64 to 68 8 173 to 190 8 80 268 SBS8 A
69 to 95 9 191 to 207 9 88 287 SBS 9 A
96 10 208 10 96 400 SBS1O B