|RELATIONSHIPS BEYOND BANKING}

Bank of India was formed on the 7th September 1906, by the group of eminent businessmen from Mumbai. The bank was under private ownership and control till July 1969 when the nationalization of 14 banks took place. The Bank of India has made the rapid growth with over 3101 branches in India spread over all states/ union territories including 141 specialized branches controlled through 48 Zonal Offices; the bank also has 29 branches/ offices (including three representative offices) abroad. The Bank of India has been innovative since the beginning. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalized banks to establish a fully computerized branch and ATM facility.

(Rs. In Crores, Except %) Deposits Operating Profit Growth Net Profit Advances Gross NPA Ratio Growth Net NPA Ratio Business Mix Provision Coverage Growth Earnings Per Share (Rs.) Growth Return on Equity Book value per Share (Rs) Capital Adequacy Ratio 229762 4705 21% 1741 168491 2.85% 18% 1.31% 401078 65.51% 20% 33.15 14.76% 236.84 (Basel-II)

Mission: "To provide superior, proactive banking services to niche markets globally, while providing cost-effective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders".

Vision: "To become the bank of choice for corporates, medium businesses and up market retail customers and to provide cost effective developmental banking for small business, mass market and rural markets"

Quality Policy We, at Bank of India, are committed to become the bank of choice by superior, Pro active, innovative, state-of-art Banking services with an attitude of care and concern for the customers and patrons.

Following are some of the different types of credit (loans and advances) provided by the Bank: CASH CREDIT LOAN AGAINST TRUST RECEIPTS (LTR) TERM LOAN LEASE FINANCING SECURED OVERDRAFTS (SOD)

The bank accepts either primary or secondary origination of credit, namely by direct acquisition or through take over. Our policy in this regard is proposed as under: Primary Acquisition: These are direct credit acquisitions subject to the various guidelines of the bank. Secondary Acquisition: The bank considers takeover of sound and remunerative accounts with proper verification of past records keeping in mind that most corporates and other entities are no longer bound by traditional alignment with a bank, due to past connections.

Due diligence refers to the practice of undertaking thorough research of an account at entry level in order to prevent perpetration of frauds. It is also necessary to appraise the credit worthiness of a project and promoters and it throws up signals which helps the bank to avoid potentially risky business. While undertaking the due diligence process the concerned officer should ensure that the norms spelt out by the credit policy of the bank are adhered to and that the subject company is directly involved in providing full as well as reliable information. Certain information, materials and documents that branches should ask the company to provide in respect of due diligence include Articles of Incorporation, memorandum of association, articles of association etc. ;Status Reports from existing bankers of the borrower ;Market enquiries ;Licences / Certifications etc. The bank should essentially undertake a Registrar of Companies search; RBI/CIBIL/ECGC/ List of Defaulters / willful Defaulter List enquiries etc.

Sole Banking In situations where the bank is the only banker with the organization it is said to undertake sole banking. Multiple Banking Where the bank is the sole banker but the borrower desires to avail of credit limits from other bank/s, (the reasons for the shift to another bank being ascertained and recorded) Consortium Lending In situations where the borrowers avails credit limits from a number of lending institutions under similar conditions and policies using separate loan documentation. Syndication A syndicated credit is an arrangement between two or more lending institutions to provide a credit facility using common loan documentation.

For an asset to be accepted by the bank it is important that it fulfils certain pre requisites:Good ownership title Freely marketable Minimum Price fluctuation Imperishable in nature Freely transferable title Easily determinable value Durable in nature There are seven types of assets which can be taken as the security for the purpose of lending:Immovable properties (land, building) Plant and machinery, equipments etc. Shares and debentures Stock of goods Life policies Book debts Fixed deposits Supply bills Movable Assets

There are 2 types of account that the Bank of India maintains. Those are:SME account [Small And Medium Enterprise Account] C&IC Account [Commercial and Institutional Credit Account] SME Accounts can be classified into manufacturing sector accounts and service sector accounts. For manufacturing sector accounts micro and small enterprises which have an investment of up to 5crores in plant and machinery and medium enterprises which have an investment of up to 10crores in plant and machinery fall under the SME category While for service sector accounts micro enterprises with an investment of up to 10lakhs in equipment and small enterprises and medium enterprises with an investment of up to 2crores and 10crores in equipment respectively fall under the SME category C&IC accounts include large industries, corporate bodies, financial institutions and manufacturing and service sector accounts which do not fall under the SME accounts category.

To assess the requirement of working capital, it is necessary to get the information from the borrower his/her regarding his/her past present and projected performance. CMA data used for collecting all financial information from the borrower cover following six forms:PARTICULARS OF EXISTING / PROPOSED LIMIT FROM BANKING STATEMENT. OPERATING STATEMENT BALANCE SHEET ANALYSIS COMPARATIVE STATEMENT OF CURRENT ASSETS AND CURRENT LIABILITIES COMPUTATION OF MAXIMUM PERMISSIBLE BANK FINANCE FUND FLOW STATEMENT

In order to maintain the health of its credit portfolio, the bank undertakes credit rating and endeavors for accounts with a credit rating of AA and above. The rating is used for measuring the risk and for pricing the credit i.e. for applying different rates of interest because the greater the risk in a credit, bank should be compensated more in the form of interest income. The risk in a credit proposal is measured taking into account the financial risk, market risk, industry risk etc . While assessing the risk in bigger accounts the availability and value of collateral is given weightage. The corporate risk scoring model used by the Bank of India requires 6 different types of inputs to get the corresponding risk score namely: Financial input Business input Management input Firm standing input Monitoring input Pricing input

The credit rating model calculates and provides required marks or output of the six different types of inputs provided. It contains the following items:Adjusted borrower risk grade and monitoring notch Monitoring notch Monitoring score Borrower risk grade Basic borrower risk score Management risk score Firm standing risk score Business risk score Marks for pricing The features of the above model are as follows: It gives the rating in terms of LC01 to LC10 . It is used for the credit exposure of more than 5 crores. The output is in the form of marks of pricing and borrower risk grade. The borrowers with the LC rating from LC01 to LC05 are considered reliable for sanction of loan while a rating beyond LC05 requires extra diligence and approval from the Zonal Office / Head Office.

Working Capital Assessment is undertaken by the bank in order to assess the exact requirement of the customer. The limits given to the customer for his/her loan are ascertained on the basis of this assessment There are 3 types of assessment methods that are adopted by the bank of India, namely:Turnover method Projected cash flow statement method Lending based on inventory and receivables

Determination of Rates of Interest For fund-based credit facilities, the directives of Reserve Bank of India issued from time to time apply. Presently, Banks are required to fix Benchmark Prime Lending Rate (BPLR) taking into consideration cost of funds and transaction costs. The Bank is permitted to offer Rates of interest below BPLR rates to creditworthy borrowers including public enterprises on the lines of a transparent and objective policy. BPLR is equivalent to the aggregate of cost of funds and cost of capital plus, subject to money market conditions, a suitable risk premium charge, etc. The BPLR is applicable to the borrower enjoying financially and operationally the best health. For others, the interest rate would be suitably stepped up in stages, as per the Credit/Risk Rating awarded to that customer.