IDBI Bank Ltd. Co-Lending Policy le ) IDBI BANK Document Control ‘Organization TDBIBank Title Policy on Co-Lending Model (CLM) of losns by Banks and| NBFCs. Document Owner IDBI Bank Vertical Priority Sector Group (PSG)LEE _— Cause areas Page No 7 I Tan = 5% Coenng Model Option ()e——— ae a f 2 Reap fe Pag A 3 Baa | 4 [Seta oPRBRE — 5 [ret 807 5 [ening Arango 310 $—[Rssentet Feature of Coniginaton mode Ti [ Sharing of Rik sd Reward io 52" Know Your Customer YC) io _ : Ts 74} merst Rate _ 75 Common Acau - a 76 [ a Use of Fund B18 | 77:7_| Monitoring and Recoveny 1617 | | Beary an Charge Cresion Ta 79 Prvsonng and Reporting Reale is | Assignment change in oa iis is Tt Grievance Reda is aa Leer 9 1 Hear Documents 3 | is i Wat ot pais iB TI [Pato Venton ad oping 20 12] Deviation in Pligy Paras 30 13 foes x21 Model Option = Backend = — Eig — Scelon of BFC : Tending Arrangement sven Feat of Co Tees Know Your Customer (KYC) _ intrest Rate Common Accom(ola [End Use of Fund G8_| Security and Charge Creation (G9_[ Applicability of Staff Accountability Policy 34 Gi0 | Provisioning and Reporting Requirement 34 GH [ Assignment’ change in loan limits as ‘G12 | Grievance Redressal 35 ‘G13 | Business Continuity Plan 35 [Loan Documents 35-56 | Fee/Other charges : 36, T___| Validity of policy - 36 K___[ Portfolio Verification and reporting ~ 36 T.___| Deviation in Policy Parameters 36-37 M [Others 3738 ‘Annexure | CICs cut-off score | EDaM Corlending Model DA Direct Assignment KYC Know Your Customer KY Central Know Your Customer ‘CRMC Credit Risk Management committee cic (Credit Information Companies —_— SPARC ‘Systems, Products, Approval & Review Committee ‘AUM. ‘Asset Under Management ‘cLe ‘Centralized Co-lending Cell — RLCE ‘Regional Level Credit Committee RWA Risk Weighted Asset Standard Operating Procedure Dealing Group ‘Uayam Regi iifcale ‘Structured Retail Asset ‘Minimum Holding Period Regulated Entity ‘Hlousing Finance Compan Micro Finance Institution. (Original Seen and Verified Delegation of Power Non- Banking Financial Company Priority Sector Group Asset -Liability Commitee ‘Registrar of Companies "National Automated Clearing House [Special Mention Account ‘Central Registry of Securitisation Asset Reconstruction and Security Interest of India Electronic Clearing System ‘Non- Performing Asset [Credit Administration Paran12. 16, |. The co-lending model introduced by RBI permit Banks to co-lend with all registered (LEE | Introduction [NBFCs (including HFCs) based on prior agreement. The Bank may be entered into a master agreement with co-lending partner. The master agreement may provide for the Bank to either mandatorly take their share of individual loans originated by NBFCs in their books as per the terms of agreement or retain discretion to reject certain loans after due diligence which will be akin to direct assignment transaction [NBFCs being a Regulated Entity (RE) and having demonstrated effecive collection and recovery mechanism, found to be potential partner in addressing the I:nding challenges, addressing KYC concems within the overall regulatory guidelines ‘This Co-Lending policy document lays down broad approaches and guidance for co-lending with NBFC for different segments and credit processes within the regulatory framework for co-lending by Bank and NBEC. The policy documents contain two models of co-lending by Bank and NBFCs and | detailed guideline on co-lending under both co-tending model Viz. Option (A) ic. | Co-origination & Option (B) ie. co-lending, akin to Direct Assignmert. ‘The Policy on Co-lending model (CLM) would be a standalone policy and should be read in conjunction with edit poliey and be governed by extant CLM policy as per the | applicable RBI Guidelines. Delegation of Power (DoP) for sanction and disbursal of individual/pool of loan under co-lending arrangement would be guiled by co-lending Policy, In case of any NPA in co-lending, reeovery/setlement shall be governed by NPA Management policy of the Bank. Consumer Credit report with Cut-off score of three CICs Viz. CIBIL, CRIF Highmark & [Equifax shall be accepted for selection of borrower. Pricing/ROT structure of individual or pool of loan under Co-Lending Model (CLM) ‘would be mutually agreed between bank and Co-lending partner and approved by sanctioning authority, within the pricing range’ structure (fixed/floating RON) approved by ALCO.(LOE 1.9, ‘The Co-lending Policy is valid for 2 years from the date of approval. The Review of the policy shall be done once in two years. 1.10..F any inconsistencies are observed between the guidelines in this Co-lending Policy and that of RBI, guidelines issued by RBI would prevail. Where inconsistencies if any, are observed between any of the guidelines in this Co-lending Policy with that of any — | ‘guidelines issued by any department vertical, guidelines contained in the Co-lending Policy would prevail 1.11.Board has authorized CRMC to approve modifications in the operat onal parameter of corlending model within the broad framework of RBI guidelines. Accordingly, any changes/modifications approved by CRMC, would form part of Co-lending policy.(ORES Policy on Co-tending of loans by Banks & NBECS for lending to Priority Sector Option (A) 1. Background i. The Reserve Bank of India (RBI) has released guidelines on co-origination of loans by bbanks and Systemically Important Non-Deposit taking Non-Banking Financial ‘companies (NBEC-ND-SIs), “hereinafter called NBFC in the priority sector. The move is aimed at leveraging the reach of NBFC for providing competitive credit to Priority Sector segment Ji,_As per RBI guidelines, the policy for co-origination of loans by bank end NBFC will be applicable to all Schedule Commercial Banks (excluding Regional Rural Banks and ‘Small Finance Banks) to co-lending loans with NBFC for creating Priority Sector Assets. RBI in its notification also advised that the Individual Banks/NBFCs shall formulate a Board approved policy for entering into a co-origination agreement with the NBECs/Banks. iv. RBI based on the feedback received from the stake holders, has decided to provide ‘greater operational flexibility tothe lending institutes, while requiring them to comfort to the regulatory guidelines on outsourcing, KYC ete. and accorcingly has issued ‘circular dated November 05, 2020 on Co-lending by Banks and all registered NBFCs to priority Sector. -v. The primary focus ofthe revised scheme, rechristened as Co-Lending Model (CLM) (as against Co-origination), is to improve the flow of credit to the un-served and underserved sectors ofthe economy and available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from the Banks ani greater reach of the NBFCs. 2 Seope of the Poliey ‘This policy will cover loan under Co-Lending Model (CLM), wherein Bank will engage with all registered NBFCs fo co-lend loans for augmentation of Retail, Agri. and MSME (RAM), The arrangement will entail joint contribution of credit atthe facility level by bot lenders, involving sharing of risks and rewards between them for both Priority as well as Non Priority Sector advances 22 Banks shall not be allowed to enter into co-lending arrangemen with an NBFC ‘belonging to the promoter Group.@ IDBI BANK 3. lgibitty i) AIL NBFCs with an Asset Under Management (AUM) of Minimum 2.500 crore and HFCs with AUM of Minimum Rs.1000 crore as per the last audited belance sheet or as stipulated by RBI from time to time, whichever is higher. No deviations permitted ‘against minimum AUM norms, Bank may also tie-up with eligible NBFC-MFT's/HFC as ‘Co-lending partners. ii) NBFCAIFC should be in line of the business for more than 2 years ‘or Fintech based NBFCIHEC & 3 years for Traditional NBFC/HFC and having minimum capital to risk ‘weighted Assets Ratio (CRAR) of 20 % and above. The promoter / Promoter group/ ‘parent company should have experience of minimum years or more in the similar line forthe existing NBFC, 8 Minimum External Rating to be “A” and above. External rating of “BBB* to be allowed only for co-lending arrangement towards ‘© Loan backed by gold as security ‘+ Co-lending with NBEC-ME. Have TOL/TNW of 7:1 or below, Have required technological platform to maintain accounts and exchange necessary MIS, 4. Have Internal Policy and Controls for origination, underwriting and disbursement of ‘each individual case, and Have robust credit delivery system along with satisfactory ecllection recovery mechanism, ‘The down-gradation of external rating of NBFC below “A” or “BBB" rating (whichever applicable) will automatically disqualify the NBFC to have any further co-lending ‘business with the Bank tll such time the rating is restored to “A” or “BBB” & above (as applicable) and co-lending arrangement is reviewed by Executive Director's Credit Committee (EDC) in which a fresh approval would be obtained for restart of -lending product 4s not similar to Bank's existing product) may be considered by the bank on case to ease basis. For eases above Rs.2S lakh (Individual loan in Bank's Book), bank will carry ‘out legal search and valuation from empanelled Advocate and valuers of the bank respectively. For cases, where legal/valuation carried out by empanelled agency of NBFC, in such cases, NBFC shall indemnify Bank against any loss incurred on account of deficiency in services by the professional/agencies. Format for Indemnity to be exee:ted by NBFC for deficiency of services by the empanelled valuer/Advocate of NBFC would be vetted by legal department. Bank shall not accept valuation / legal report from any of individual / agency under negative list ofthe bank / IBA. Sanetion of Individual! pool accounts under each co-len arrangement would be carried out by departmental committee at PSG/SRA. At PSG, Committee woilld be under the Centralized Co-lending Cell with 4 members headed by GM, PSG hand| @IDBI Bank Co-tending Cell and other 3 members drawn from Co-lending Cell/PSG vertical in the grade of DGM/AGM. Further provision being made to nominate one member by other ‘verticals having co-lending proposal who would attend meeting in place of one oF more ‘members from PSG. Members ofthe committee will be minimum 75% attendance. The Quorum of the committee will be approved by CGM PSG handling the Co-lending Cell. The control returns shall be submitted to CGM- PSG handling co-lending, Cell. Further any change in the constitution/formation of Committe shall be approved by cRMc. For SRA Vertical, constitution’ formation of Committee and other related guideline {or sanction of individual/poo! of loan shall be approved by CRMC. In case of Gold Loan under Co-lending arrangement, sanction of loan shall be at branchveentralized co-lending cell based on individual DoP/Commitee. The detailed guideline for sanction and disbursement including other operational matters under the said co-lending arrangement for the Gold Loan will be decided as per mutually agreed terms with NBFC and detsiled process including SOP approved by Sanctioning Authority empowered for selection of NBFC or SPARC (in case, he c2-lending product Is not similar to Bank's existing product) In case of lending through digital/FinTech platform, credit decision shall be based on parameterized scoring model and product parameters.Scoring SheevCard shall not be applicable in case of co-lending under Gold Loan or MSE/Agti Loz backed by Gold Jewellery and Micro Finance Loan, ) Nature of assistance would be in form of Term Loan, Short Term Loan, and revolving credit by way of Bill discounting/Supply Chain Finance only. Moratorium, tenor and ‘other parameters ofthe facilities to be fixed as per mutually agreed product guidelines. vi) Product based scoring model duly approved by sanctioning authority'SPARC (in case ‘the co-lending product is not similar to Bank's existing product) will be used for underwriting of co-lending of loans between Bank & NBFCs for exposure up to Rs.2 crore. For individual loan exposure above Rs.2 crore, product based scoring model internally developed will be used in consultation with Risk Management Department acceptable to the NBFC and Bank for underwriting of co-lending of loans ‘vii) Letter of Intent (LOI) shall be issued by NBFC for the total amount of loan as mutually agreed upon, Any change in sanction terms interest ete. by Bank & NBFC will be ‘communicated to the customer timely by NBFC. viii) NBFC shall carry out CERSAI, ROC Search and check the Credit Bureau data to check the credit history of the borrower under co-lending model of loan. CIC checkLEM shall not be mandatory for Gold loan, NBEC shall have responsibility to check willful have any further CCo-lending arrangement with the Bank till such time the NPA percentage is restored to the level as stated above and the Co-Lending arrangement is reviewed by EDCC. BFC will stand disqualified for Co-lending of foans with the Bank in case of any incidence of wilful default, fraud and malfeasance, A clause indemnifying the interest of the Bank on incidences of wilful default, fraud and malfeasance (by borrowers/officials of NBFCs) shall be included in the agreement. Bank's endeavour will be engaging with NBFCs, which would source business in geographical areas where Bank has limited presence. Selection of NBFC The committer for selection of NBFC is as per extant Delegation of Power (DOP) depending on quantum of exposure to be financed through NBFC. However, the committe for selection of NBFC should not be below EDCC. Product Mutually agreed products will be identified for every Co-lending partner including ‘model of sourcing, underwriting, lending, collection and reccvery mechanism, servicing fees, etc. duly approved by respective appropriate authorities of the bank/NBFC. Applicable guidelines would be RBI guidelines on DA and Co-lending policy of the bank with 1 Bank's discretion, tually agreed product specific scorecard for exercising The product selection, SOP and Score card sheet indicating minimum cut off will be approved by sanctioning authority empowered for selection of NBFC. Approval shall be submited with checklist depicting features of co-lending product to establish‘OIE similarities with such existing product. Incase, the co-lendling product is not similar 10 Bank's existing product, SPARC to approve the new product F. Lending Arrangement F.l NBFC will source loans (seeured/ unsecured) under co-lending arrangement between Bank & NBFC as per the mutually agreed parameters of the product, Credit guarantee coverage shall be obtained in ease of unsecured loan under co-lending wherever credit guarantee coverage is applicable for stch type of loans. ‘The process/SOP for CGTMSE cover in case of unsecured loan under co-lending trrangement wherever applicable, will be approved by SPARC at the time of approving the co-lending product in each case F.2 BFC will assess the proposal as per the mutually agreed produc: & underwriting standard and recommend to the Bank forjoint lending. F3 Bank shall exercise its discretion for acceptance / rejection under the Direct Assignment (DA) of RBI from time to time along with @ product specific mutually agreed process / scorecard with certain cut off. Since the extant co-lending | arrangement is with a discretion right forthe bank, the same is akin to DA and hence | the guidelines followed would be that of DA. F4 The NBFC shall be the single point of interface for the customers and shall enter into 1 Toan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks. FS All the details ofthe arrangement shall be disclosed to the customers upfront and their explicit consent shall be taken, F.6 The extant guidelines relating to customer service and fair practices code and the ‘obligations enjoined upon the banks and NBFCs therein shall be applicable mutatis ‘mutandis in respect of loans given under the arrangement. F-7 The NBFC should be able to generate a single unified statement of the customer, through appropriate information sharing arrangements withthe bank, F.8 The Master Agreement may contain necessary clauses on representations and ‘warranties which the originating NBFC shall be liable for in respect of the share of the loans taken into its books by the bank. Essential Features of Co-lending model Sharing of Risk and Rewards G.1.1. The Bank will take exposure to the extent of maximum 80% of erait risk by way of | direct exposure and NBFC shall have minimum 20% of eredit risk in its books of the proposed co-lending exposure till maturity 28(aE G.12. The NBEC shall give an undertaking tothe bank that its contributior towards the loan amount is not funded out of borrowing from the co-originating tank or any other ‘group company ofthe partner bank. G2 Know Your Customer (KYO) The - co-lending lenders shall adhere to applicable KYC/AML guidelines, as prescribed by Department of Banking Regulation (DBR)Department of Non-Barking Regulation (DNBR) of RBI. The Bank shall comply with the Master Directions - Knew Your Customer (KYC) Direction, dated February 25, 2016 and updated from time to time, permitting reliance on KYC & customer due diligence carried out by third party (Regulated Entity), subject to specified conditions KYC. NBFC/HFC/Co-lending pariner shall make available CKYC information mandatorly and also make available a copy of KYC documents through clectronic! physical mode. PAN Verification/Validation shall be carried out by the Bank ‘wherever feasible/applicable. CKYC information to be verified at random for atleast 1% of the borrowers in portfolio. Contact no/Mobile No. to be obtained forall borrowers, Mobile verification of the proposed borrowers shall be carried out by the Co-lending partner or through third party agency cempanelled by Co-lending partner! Bank. Por eases above the threshold limit, either Bank officials or through third party ageney approved by Bank shall carryout mobile verification of the proposed borower. Threshold limit for mobile verification shall be decided’ approved by Sanctioning authority’ SPARC. Mobile verification of the borrowers is not required in case of co-lending under Gold loan/Microfinance. G3 Loan Sanction G.3.1 The overall exposure of CLM through single NBFC will be restri:ted at 30% of its AUM subject to following maximum cap on the basis of external rating: (a) For NBFC (excluding gold loan companies) AAA - Rs.300 crore, AA. ~Rs.200 crore | A -Rs.100 crore BBB - Rs. 50 crore (For NBFC-MFIs only)G33 a34 @) IDBI BANK against collateral of gold jewel AAA-Rs, 300 crore, AA -Rs. 200 crore A =Rs.100crore BBB- Rs, 50 crore For Gold backed Loan the overall exposure will be restricted at 50% of AUM. (6) NBECYHFCs (For SRA loans): © AAA-Rs300 crore 0 AA-Rs.200 erore © A-Rs.100 crore ‘The Co- lending portfolio / counts would be centrally maint ined at Co-Lending Cell (CLC) at Corporate Office, which would monitor overall exposure under Co- Tending and update the position internally (Intranet) on monthly basis. ‘The aggregate portfolio of the Bank through NBFC under co-lending model to be initially restricted 10 RS.1000 crore. Further, inerease in the portfolio may be permited by the Committee after 1 year depending upon the satisfactory performance of the portfolio; BFC /HFC! co: lending partner shall recommend proposals to the Co-lending Cell at PSG as found eligible under the mutually agreed structure, 20st carrying out Customer Due Diligence & KYC in line withthe extant RBI guidelines & Co-lending policy of the bank. Bank will rely on the KYC and due diligense carried out by NBFC/HFC as per extant RBI Guidelines. ‘After due diligence, Bank shall exercise the discretion in aceepting/ rejecting the loan based on mandatory requires nt and a cut off score (min. rating) under a mutually agreed score card approved by Sanctioning Authority empowered for selection of NBFC or SPARC (in case, the co-lending produet is not similar io Bank's existing product) for specific produet (wherever applicable). NBEC/HECICo-lending partner shall make available CKYC information mandatorily and also make available a copy of KYC documents through electronic! physical mode. PAN Verification’ Validation shall be carried out by the Bank wherever feasible/applicable. CK'YC information to ‘be verified at random for atleast 1% of the borrowers in portfolio. Contact no/Mobile No. to be obtained for all borrowers. Mobile verification of the proposed borrowers shall be earried out by the Co-lending partner or through third party agency empanelled by Co-lending partner! Bank. ”LEE | For cases above the threshold limit, ether Bank officials or though third party agency approved by Bank shall carryout mobile verification of the proposed borrower. Threshold limit for mobile verification shall be decided! approved by Sanctioning authority’ SPARC. Mobile verification of the borrowers is not required in case of co-lending under Gold loar/Microfinance, Consumer credit report of all RBI accredited CIC's (CIBIL, CRIF Highmark, Experian and Equifex) with ‘minimum/Cut-off seore to be accepted for selection of borrower under co-lending arrangement. At present, Cut-off score of three CICs (CIBIL, CRIF Highmark & Equifax) shall be accepted for selection of borrower. The cut-off sore and guideline for acceptance of consumer credit report for CICs (CIBIL, CRIF Highmark & Equifax) for selection of borrower under co-lending arrangenent is given at ‘Annexure. ‘The minimum eut-off score for particular CIC shall be approved by CRMC. Due diligence on CIBIL/CIC and collaterals would be as follows: Due diligence on CIBILICIC report: CIBIL /CIC (wherever applicable) related due diligence shall be to the extent of checking minimum CIBIL/CIC seore (Cut-off) as per the sanction term, The case of CIBIL/CIC observation with incidents of Wilfal Defauler/Fraud shall not be considered. CIBILICIC report will not be applicable for the Ioan against Gold (Jewellery omament). Due diligence on collateral: Bank shall rely on valuation report and legal vetting submitted by NBFC/ HFC. The service of empanelted valuer and edvocate of NBFC shall be acceptable, subject to advocate/valuer not in negative lis of Bank/IBA for cases upto RS.25 lakh (Individual loan in Bank's Book). Bank shall randomly eross verify valuation and legal search on sample basis. Deviation approved by NBFC! HEC (if any) while sanctioning the loan under mutually agreed product approved by ‘Sanctioning Authority empowered for selection of NBFC or SPARE (in case, the co- lending product is not similar to Bank's existing product) may be considered by the bank on case to case basis, For eases above Rs.25 lakh (Individual loan in Bank's Book), bank will carry out legal search and valuation from empaneled Advocate and valuers of the bank respectively. For cases, where legalvaluaton carried out by empanelled agency of NBFC, in such ‘cases, NBFC shal indemnify Bank against any loss incurred on account of deficieney in services by the professional/agencies. Format for Indemnity to be executed by [NBFC for deficiency of services by the empanelled valuer/Advoca:e of NBFC would be vetted by legal departmentGas. G36 G37 DAS Sanction of Individual/ pool accounts under each co-lending arrangement would be arried out by departmental committee at PSG/SRA. At PSG, Committee would be under the Centralized Co-lending Cell with 4 members headed by GM, PSG handling Co-lending Cell and other 3 members drawn from Co-ending CellPSG vertical in the grade of DGM/AGM. Further provision being made to nominate one member by other verticals having co-Lending proposal who would attend meeting in place of one or mote member’s from PSG. Members of the committee will be ‘minimum 75% attendance. The Quorum of the committee will be approved by CGM PSG handling the Co-tending Cell. The control returns shall be submitted to CGM. PSG handling co-lending Cell. Further any change inthe constitution/formation of Committee shall be approved by CRMC. For SRA Vertical, constitution/ formation of Committee and other related {guideline for sanction of individual/pool of loan shall be approved by CRMC. In case of Gold Loan under Co-lending arrangement, sanction of loan shall be at braneh/centralized co-Lending cell based on individual DoP (Commitee. The detailed ‘guideline for sanction and disbursement including other operational matters under the said co-lending arrangement forthe Gold Loan will be decided as per mutually agreed terms with NBFC and detailed process including SOP approved by Sanctioning, Authority empowered for selection of NBFC or SPARC (in case, the co-lending ‘product is not similar to Bank's existing product) In case of lending through digital /FinTech platform, eredit decision shall be based on parameterised seoring model and product parameters. Searing SheotCard shall nat be applicable in case of eo-lending under Gold Loan or MSE/Agri Loa backed by Gold Jewellery and Micro Finance Loan, [Nature of assistance would be in form of Term Loan, Short Term Loan and revolving credit by way of Bill discounting'Supply Chain Finance only. Morstorium, tenor and ‘other parameters of the facilities to be fixed as per mutually agreed product guidelines duly approved by delegated Authority Product specific mutually agreed scoring model between bank & partner NBFC with certain cut off score would be used for acceptance’ rejection of the proportionate share, Product specific score card to be part of the product and ta be approved by Sanetioning Authority empowered for selection of NBFC or SPARC (in case, the co- lending produet is not similar to Bank's existing product). Scoting Shee/Card shall, ‘not be applicable in case of co-lending under Gold Loan or MSE/Azri Loa backed by Gold Jewellery and Miero Finance Loan. @ Dy(EE G.3.8 Letter of Intent (LOD shall be issued NBFC. Any change in sanction terms / interest te. by Bank & NBFC will be communicated to the customer timely, G39 NBFC shall carry out CERSAI, ROC Search and check the Crecit Bureau data to check the credit history of the borrower under co-lending model of loan. CIC check shall not be mandatory for Gold loan. NBFC shall have responsiblity to check willful defaulter list check for Individual exposure of Rs.25 lakh & above & CFR check as per applicable RBI guideline. G.3.10Bank will reserve the eight to acceptor reject the proposal as per the merit of the same and in compliance with Bank’s guideline. G3.11 The target borrowers under the loan co-lending model shall broadly be Individual, JLGISHGs, Sole Proprietorship, Partnership Firm, LLP and Limited Companies. However, the detailed segmentation will be clearly spelt out in the mutually agreed product. G.3.12 In case of Gold loan under Co-lending arrangement, the sanction and disbursement including other operational matters viz. valuation, Re-valtation, appraisal, re-appraisal, storage ete, for the individual cases under the said co-lending arrangement for the Gold Loan will be decided as per mutually agreed terms with NBEC and detailed process including SOP approved by Sancioning Authority ‘empowered for selection of NBFC or SPARC (in case, the co-lenaing product is not similar to Bank's existing product) 63.13 Far co-lending proposals processed under co-lending model option “B’ 1 corlending cell, PSG, parking of accounvshadow credit shall be decided as per the product & SOP approved by Sanctioning Authority empowered for selection of NBFC or SPARC (in case, the co-lending produet is not similar to Bank's exiting product) GA Interest Rate GA.1 The Rate of Inerest (Rol) to be charged by the bank for its proportionate share would be as per mutually agreed structure benween the Bank and the co-lending partner BFC, subject compliance with any relevant regulatory / interna! guidelines on the co-lending transaction. G42 Minimum rate of interest and/or benchmark pricing structure forthe products under Co-Lending Model (CLM) would be approved by ALCO. Pricing/ROI structure of individual or pool of loan under Co-Lending Model (CLM) would be mutually agreed between the bank and Co-Lending partner and approved by sanctioning authority, within the pricing range (structure approved by ALCO. GA3 The interest rate will be floating/fixed ROI, where a weighted average rate of the ‘benchmark interest rates in proportion to the respective loan contribution shou(Onan offered. Fixed interest rate if offered under any produet will be for3 years with reset clause or the frequency as approved the sanctioning authority? S2ARC. However, under this policy, Loan tenure should be maximum 15 years witk floating rate for Morigage based loans (LAP! Property Power! other similar product) and 30 years with floating interest rate for home loans. G44 For other loans including MSME loan tenure should be maximum 10 years with ‘loating/fixed interest rate. Fixed interest rate i offered under any product will be for 3 years with reset clause or the frequency as approved the sanctioning authorty/ SPARC. GA.S The ultimate borrower may be charged an all-inclusive interest rate as may be agreed ‘upon by both the lenders conforming to the extant guidelines applicable to both, G.A.6 Further, NBFC-MFI are required to abide by the pricing of credit and other applicable regulatory guidelines for loans covered under "Qualifying Assets" regarding thei contribution towards the co-Lending loan, GS Common Account G.S.1 Thé Bank will open a common escrow cum collection account in the name of “Borrower = (NBEC-Co-lending collection account)” for pooling respective appropriate loan repayments from borrowers, without holding the fu float. G.5.2 Auto transfer cum debit in the account will be allowed for transfer of fund to Bank & NBECs loan accounts on due date towards repayment loan and interest servicing through ECS/NACH etc. Use of intech platform would be explored for distibution/monitoring ofthe collection forthe repayment G53 Bank will maintain individual borrower's loan account to the extent of credit risk ‘exposure and share the loan account statement with NBFC for onward sharing of a single unified statement to borrower. ‘Any prepaymentipart payment by the borrower during the tenor af loan, the same ‘will be appropriated in loan accounts of both lenders according ‘0 their loan ratio through colleetion account. Is for usage of | G6 End use of funds NBC will ensure through post-sanction visits and other suitable checks that end use of funds is for the purpose for which the loan is sanctioned. NBEC will submit a cettficate to the Bank within one month from the date of the Bank's disbursement for having, verified end use of loan, The proportionate share shall be disbursed to the account maintain by NBFC and NBFC shall ensure confirmation MEDGr Ga G72 G73 G74 ars G16 (ORE usage of fund/end use on # mutually agreed structure under SoP, duly approved by Sanctioning Authority empowered for selection of NBFC or SPARC (in case, the co- lending product is not similar to Bank's existing product) Monitoring and Recovery: NBEC will primarily be responsible for monitoring of loan accounts and collection of dues. However, the Bank along with NBFC will monitor the accounts financed under the co-lending model Bank and NBFC shall exchange the information about the asset classification and Special Mention Account status including overdue position in the underlying borrower accounts on monthly basis, Monitoring through visits to the underlying borrowers shall be carried out by partner BFC as pet mutually agreed frequency. Bank shall carry out visit of the underlying borrowers through approved outsourced agency for all cases having individual exposure with IDBI Bank. For cases, above the threshold limit, visit will be earried cout by the bank official, Threshold limit will be approved by the sanctioning authority/SPARC based on the matrix (envisaging % age of total no. of accounts(portfolio). Visit is not required in case of co-lending arrangement for Gold loan. Visit to be done for Microfinance loan at random for at least 5% of ‘the borrowers in portfolio. The assistance of the nearby branches or field investigation agencies (as in case of SRA products) may also be obtained. However, Bank would preferably not engaged for co-lending with Microfinance Institutions on account of small ticket size loan. Any such pre-sanction, post-sanetion and regula visits report shall in the digital’ physical form as may be case. The visit by Bank official shall be recorded by Geo-tagging. Bank/Branch shall monitor the accounts at portfolio level with an eye on early ‘warming in the form of SMA and other relevant informationirepors. In case 3% of portfolio of @ particular NBFC eo-lending loan slips into SMA 1, a portfolio review shall be carried out in collaboration with the concerned NBFC or standalone basis by the Bank in immediate next month, BEC shall have primary responsibilty of follow up with borrower for overdue cases and take all measures for recovery of NPAs in co-lending loan portfolio under applicable law and regulation. NBFC/Bank will submit the information on NPA and status of recovery to the BankINBFC on monthly basis or as and when required, ‘The initiation of the recovery process viz. Recall notice, SARFAESI, DRT, NCLT, OTS action, ete. will be executed as mutually agreed upon 2(OEEES 6.1.7 Primary responsibility of the collection & recovery shall be with the partner NBFC. However, if any hard recovery to be initiated by the bank, the same would be under the exlant regulatory / internal guidelines under the extant DoP. The under account once become NPA, shall be transferred to Retail Collection and Recovery Vertical as per extant internal guidelines. G18 Order of Appropriation for repayment: In order to synchrosize the order of appropriation followed by co-lending partner (NBFC), the waterfall mechanism for appropriation of repayment in loan account under CLM arrangement shall be as per ‘general practice in co-lending partneriNBFC which is a follow: © Interest © Principal © Charges © Penal Interest In addition to existing waterfall mechanism for appropriation of repayment in loan account under CLM arrangement, Bank shall also adopt its own order of appropriation of repayment ic. Charge-Interest-Principal. Order for appropriation ‘would be subject 10 review and CRMC shall be authorized to aporove any further ‘change in order of appropriation for repayment. 6.7.9 Bank may fix cut-off date and fix pay-out date for repayment wherever required G8 Security and Charge Creat G8.1_Asper revised RBI guidelines, the NBFC shall be the single point cf interface for the ‘customers and shall enter into a loan agreement withthe borrower, which shal clearly ‘contain the features of the arrangement and the roles and responsibilities of NBECs ‘ani banks. Hence all major conditions (mainly, the security, eligibility, ROI, Amount ‘ofloan, documentation, repayment, ollow up, monitoring, due dil genee, collection, recovery, legal action and other conditions for the produet for which the co-lending, larangement is to be made with NBFC will be documented in general master ‘agement with NBEC. G82 The Personalthird party guarantee of the promoteriditector/partnets ete and property ‘ouner shall be obtained as per Bank's co-lending product guidelines The same will ‘beduly incorporated in SOP duly approved by Sanctioning Authority empowered for sstection of NBFC or SPARC (in case, the co-lending product is not similar to Bonk's existing produet) based on mutual agreement. 2(lm G83 The NBFC will create the charge-hypothecation/mortgage (wherever applicable) and register the charges with ROC/ Registrar of assurances (wherever applicable) based ‘on the documents which will be held in the safe custody with Bank! NBFC or third parly depending upon the product. Sanctioning Authority may decide about the keeping of documents/security in safe custody in possession of BankiNBFCithird party vendor (as mutually agreed), based on the recommendation of Dealing Group, G4 Valuation of the Asset and collateral (wherever applicable) 0 be done as per ‘mutually agreed guideline between the Bank & NBFC/HFC. Valuation done by the NBFCJHEC should be acceptable to both the lenders and charges thereon shall be recovered from the ullimate borrower. Bank shall rely on valuation report and legal ‘vetting submited by NBEC/ HFC. The service of empanelled valuer and advocate of BFC shall be acceptable, subject to advocate/valuer notin negative list of Bank/IBA. for cases upto Rs.2S lakh (Individual loan in Bank’s Book), Bank shall randomly cross verify valuation and legal search on sample basis. For eases above Rs.25 lakh (dividual loan in Bank's Book), bank will carry out legal search and valuation from ‘empanelled Advocate and valuers ofthe bank respectively, G85 The secured Assets (wherever applicable) will be adequately insuted jointly in the name of Bank & NBFC (wherever applicable!feasible). The ratio of distribution of claim amount amongst Bank & NBFC/HFC will be as per their lean ratio. SOP for insurance cover to be approved by Sanctioning Authority empowered for selection of BEC or SPARC (in case, the co-lending produet is not similar 1 Bank's existing product) G9. Applicability of Staff Accountability Policy: Reckoning the nature and structure of the transactions under co-lending, the applicability of policy on staff accountability would be tothe extent of compliance of eo-lending policy. G.10 Provisioning and Reporting Requirement: Bank/NBEC shall adhere to its independent provisioning requitements including declaration of account as NPA, as per the applicable regulatory guidelines and shall report as per requirements including reporting to Credit Information Companies for their portion of lending.(RHE Any assignment of loans by any of the lenders can be done only with the prior consent of other fender, Further, any change in loan limit of the co-lending facility can be done only with the prior consent of both the lenders. G.11 Assigament/Change in Loan Limits: G.12. Grievance Redressal NBEC shall have responsibility to explain to the ultimate borrower regarding. the difference between products offered through the co-lending model as compared to its ‘own products, The NBEC will be primarily responsible for providing the required ‘customer service and grievance redressal to the borrower. However, any complaint registered by @ borrower with the NBFC and/or bank shall slso be shared with the bank/NBFC and in case, the complaint is not resolved within 30 days, the borrower would have the option to escalate the same comemed Banking ‘Ombudsmar/Ombudsman for NBECs. GM, Co-lending Cell at PSG shall be Nodal officer for handling the complaint registered by a borrower G13 Business Continuity Plan Retail Banking Group's business continuity plan shall be applicabe for co-lending model fo ensure continuity of uninterrupted service from nearby branches. Bank shall also obtain an undertaking from NBFC in respect that a proper business continuity plan is in place H. Loan Documents H.L The NBFC shall be the single point of interface forthe customers and shall enter into 1 Toan agreement with the borrower, which shall clearly contain the features of the arrangement and the roles and responsibilities of NBFCs and banks. 2 NBFC to ensure compliance of the sanction terms including documentation and security creation, H.3 Charge creation with CERSAI and ROC and with other authority will be done by BFC, H4 Cross verification or other due diligence may be done by the bank independently or ‘with the help of NBFC to the satisfaction of the bank HS Letter of Intent (LOI) along with Schedule of Charges (SOC) shall be issued by’ the BFC, which will be standardized by both the Bank & NBEC. H.6 The legal documents viz. Loan Agreement, Hypothecation Agreement, Deed of Guarantee, Mortgaged Documents, Undertakings ete. and other documents based on the product paper will be obtained from the borrower. 35HT He 12 13 14 (aE The Bank/NBFC will explore the possibility of appointment of trustee for the documentation and security creation and monitoring of the escrow account opened ‘with the Bank forthe collection of instalments The documentation will be kept with the NBFC/Bank/Third Party and the security charge will be assigned to the Bank. Fees/ Other charges Processing fee, Documentation and any other fee/service charges applicable forthe loan sanctioned to the ultimate borrower as per the sehedule of charges for the co- lending arrangement shall be collected from the Borrower and appropriated as per the mutually agreed terms as incorporated in general master agreement between Bank and BFC. ‘Stamp Duty, Legal Expendituee, Valuation Fee, Mortgage Charges, st. shall be borne by the ultimate borrower as per actual ‘The responsibility of collecting the above fee/charges shall be vested with NBFC. ‘Any other charges if applicable will be decided mutually between co-lending lenders and communicated to the ultimate borrower. Validity of Potiey ‘The validity of policy shall be up to 2 years from the date of approval. The review ‘of the policy shall be done once in two years Portfolio Verification and Reporting ‘The loans under the co-lending agreement shall be subject to pe-iodic verification by bank's / NBFC’s Internal Auditors to ensure adherence to its internal guidelines, terms of the agrecment and extant regulatory requirements. Portfolio audit of the loan co-Lending should be done on yearly basis for 10% of the portfolio created in previous year in such a manner that portfolio of all the branches are covered in @ financial year. NBFC would be needed to submit the compliance of portfolio audit to the bank and as also sharing of the report. Deviation in Policy Parameters The Policy shall stand revised to the extent of changes in any of the guidelines) parameters‘eligibilty criteria, et. as might be advised by RBI from time to time relating to co-lending loan model and in case of any deviation approval form the co-lending policy norms, Credit Committee (CCI) would be minimum approving authority within the broad framework of RBI guidelines. However, there is no deviation permitted in respect of rinimum AUM criteria, 36L3 MI M2 M3 Ms M6 M7 Ms Mo (DoE CRMC jis authorized to approve modifications in the operational parameter of co- ending loan model within the broad framework of RBI guidelines. The Bank will abide by all the guidelines, directives, instructions and advices of RBI“ Regulators as may be in force fom time to time, The guidelines in this document should be read in conjunction with these guidelines, directives, instructions and advices. The Policy on Co-lending model (CLM) would be a standalone policy and should be read in conjunction with eredit policy and be governed by extant CLM policy as per the applicable RBI Guidelines. Others ‘The Standard Operating Process (SOP) and product for Retail, Agriculture, MSME (RAM) on co-lending of loan shall be framed and implemented with approval of Sanctioning Authority empowered for selection of NBFC or SPARC (in case, the co- lending product isnot similar to Bank's existing product) Product wise codes would be ereated separately for each NBFC. ‘While engaging co-lending arrangement the Bank/NBFC shall adhere to extant ‘outsourcing policy for financial services. In case of eo-lending arrangement for Gold Loan, centralize booking of business to selected branches may be done by Co-lending Cell, PSG or the same may be decided as mutually agreed with NBFC. In case of Gold loan under co-lending model is processed at branch level, the valuation ‘of Gold loan shall be done at selected branches of Bank/NBFC. The safe custody of ‘the Gold (security) shall be either with Bank or NBFC (Co-lending partner). Standard master agreement format for each homogenegus category to extent feasible would be created for lending under CLM, specifying which clauses! terms ean vary, for operational convenience as well as to ensure that the minimurr requirements are kept intact forall relationships. Bank shall accept the immovable property as collateralprimacy secutity, which would be clear, marketable and enforceable, Title Search and valuation to be cartied out one time i. atthe time of sanction of the facility. However, incase of NPA account, re valuation may be carried out for provisioning. Review of individual Term Loan under co-lending shall not be applicable. However, review of co-lending portfolio shall be done on need based/half yearly basis /at the time of annual review of the eo-lending policy Sanctioning Authority empowered for selection of NBFC or SPARE (in case, the co lending product is not similar to Bank's existing product) may consider need based ‘moratorium tothe borrower based on the cash flow of the product ”Mio Mul M2. MB. Mus. Mis. M6. (IE ‘To prevent documents from getting time-barred through limitation, NBEC shall submit 1 declaration to the bank on annual basis confirming that documents are valid and enforceable in court of law. ‘The Bank shall keep the KYC & other loan related documents in physicaV/electronic form, ‘Under co-lending model Option “B” (ie. akin to Direct Assignment), Bank will align the eo-lending product with the existing product of NBFC. Loan under co-Lending mode! is different from Ioan under direct lending by Bank. The Policy on Co-lending model (CLM) would be a standalone policy and should be read in conjunction with credit policy and be governed by extant CLM policy as per the applicable RBI Guidelines. The credit poliey norms for Monitoring of Credit Administration Parameters (CAP), Loan Review Mechanism ete. would not applicable under co-Lending mode! of loan. Delegation of Power for sanction and disbursal of individual/pool af loan under co- Tending arrangement would be guided by co-lending Policy. In case of any NPA in co- lending, recovery/settlement shall be governed by NPA Management policy of the Bank. “The co-Lending proposals processed under co-lending model option “B” shall also be parked to branches as well as Centralize business under Co-lending Cell (Sol-9995). ‘SOP in this rogard to be approved by sanctioning authority/SPARC 8(OREES CIC] General Scoring | Additional Score | CutaflTAcceplance of score Band ie tam a0 - 1 (Censuersotn | Below Cutt p 680 - Devion wihnatciet | sonmlte temo | Below = Not pelted, however wrong lander excptiml coe wih te ‘oon of ED orem Sene (1 Colter ea routed | | pe epesive poi ue o S20 ornate rode | [CRF 300-500] 112,14 15,16, 17] Cutoff score: 650 7 Harm | Whee stnis [ais Senor 415,17 8 18 be CNenty | |vay highend | ant shows not|esmaized by suconing aoc SticsCicy | Sitverytow | Sed on acon | wih colaeal ei eed pot wae” [or moran 0 |e ropetne pode tenes ot | | scive scons | 25% enor scent oduct | found, can’t be Score range- cimifed, Jigs ceed wih approval of Satie Nery | 02%: Aon sotaraibleee Com MSME EQUIFAX 300-900 [Tt6- —) Gutottscore MO GHBARAL) Catone WH eaten. din6 tbe cose | Low | ao el ening ary wth onan ee! nur as porte Vaca bua, |Repecine ota udlnes or at| | {a Rr com et (1) - Customers Score range nse ste Rented with apeval | .s lw cotenine ] 980-651: Acceptec with approval of | COM SME