CPG sample

CREDIT POLICY GUIDELINES OF THE UNIGLOBE BANK (TU BANK) Bidya N. Yadav Pooja Acharya Rabindra Rajbhandari Rajan Ghimire Rekha Bhattarai Roshan Budhathoki Sabita Dahal Sujan Marahatta Prepared And Presented By:


sample CPG

Transcript of CPG sample

Credit policy guidelines of The Uniglobe bank (TUB)

CREDIT POLICY GUIDELINESOFTHE UNIGLOBE BANK (TU BANK)Bidya N. YadavPooja AcharyaRabindra RajbhandariRajan Ghimire

Rekha BhattaraiRoshan BudhathokiSabita DahalSujan MarahattaPrepared And Presented By:

1CPG-IntroductionServe as a guideline covering every major aspect of the lending procedures.Main objective of CPG is therefore to assist the staff/officer involved in credit processing to make quality decision based on sound credit principles and proceduresMonitor its risk assets to maintain its health and take recovery action if any early warning signal are observed in any credit relationship.3/12/20152

The success of a bank depends on its lending program and successful lending which is only possible through well-formulated credit policy. A CPG is the written document that provides complete and uniform guidelines for overall management of credit.

MissionThe Bank provides finance, investments and related advisory services to viable enterprises and creditworthy individuals.Maintaining a high quality of accounts receivable while selling to all customers that represent prudent credit risks. Attempt to screen out customers that will result in obvious bad debts.Attempt to build relationships with all other customers and affect collection without jeopardizing a sales relationship.Intended to help staff and board make loans that meet the project-related credit needs of community development organizations in our town while simultaneously meeting our obligations to investors for safety, liquidity, and social and financial returns.


ObjectivesThe primary objective of this Credit Policy Guideline is to state the banks credit policy and define the regulations, procedures and authorities necessary to approve and monitor credit exposures.To focus on the various kinds of loans that the bank provides which are explained further.3/12/20154

To strengthen credit culture and place the long term interest of the bank ahead than the short term interest of any particular business unit.Sound and prudent bank lending practices in use elsewhere in the world.Comply with the regulations set by the NRB.

Timely and Adequate Delivery of AssistanceMinimum Cost and Efficient Delivery of ServicesPrice Competitiveness and Service QualityMonitoring and ControlProfitabilityMitigation of Risk


DefinitionsAct means Bank and financial Institution Act, 2063.Uniglobe Bank or Bank means The Uniglobe Bank Ltd also called TUBL established under Companies Act, 2063 and Bank and financial Institution Act, 2063.Nepal Rastra Bank or NRB means the Central Bank of Nepal established under Nepal Rastra Bank Act, 2058.Board means Board of Directors of the Bank.Chief Executive means the person appointed as Managing Director/Chief Executive Officer of the Bank and entrusted with overall Management responsibility of Administration and Operations and accountable to the Board. Chief Business Officer mean the Head of the Business Department who shall have the total responsibility of driving the credit, deposit and transaction banking business of the Bank.Chief Risk Officer mean the Head of Credit Risk Management Department who shall have the total responsibility of credit risk assessment and credit management.Relationship Manager means Assistant Relationship Officer/Relationship Officer/Assistant Relationship Manager/ Relationship Manager, who is responsible for selling the credit product and developing and managing the relationship with the customer.Branch Manager means Head of the branch of The Public Bank. Department Head means the Head of a particular Department of the Bank.Customer or Borrower means the customer availing of credit facilities from the Bank.SME loan mean loans granted to the small firms to meet their financial needs.


Types of Credit and other facilities1. Overdraft:Shall be operated by cheques on a current account. The borrower allowed to overdraw his/ her current account within prescribed limit and stipulated time period offered by the competent authority. The borrower can deposit any amount in this account. Thus the balance will be fluctuating due to withdrawal and repayment of money by the borrower. Overdraft will generally be granted to the businessmen for the fulfillment of their short-term credit needs.


2. Demand LoanProvided in lump sum repayable either in fixed installment or in lump sum. Once it is granted, it shall not be considered as a running loan account. Shall have a debit for the offered amount and only credits after repayment therefore. 3. Hypothecation LoanThe bank may provide a loan with security of movable property acceptable to the bank by entrusting the possession of the security to the borrower on the condition that bank may take possession of the property.4.Bills purchase and discountingThe bank shall credit the borrower account with the amount of bill after deducting the charge as specified by the bank. There will be two types of such documentary bills:Demand Bills Usance Bills


5. Hire purchaseThe bank would not finance 100% of the value of goods under this scheme. A detailed viability study will be done before granting the loan.The ownership remains with the person that gives the goods on hire. 6. Term loanGranted for industry to finance the fixed assets whose gestation period is high. The repayment period will generally be more than three years.The maximum length of term loans should not exceed 15 year in duration for infrastructure project and 7 year for other activities. Such loan is repayable an installment over the period of loan.7. House loanTenure of this type of loan will be determined based on borrowers repayment capacity. The borrower required to submit his/her income statement and/or projected income statement along with the loan application request.


8. Project loanBased on viability of the project.Borrower to be asked to invest certain portion of the project from their equity and the rest will be financed by the bank as project loan.The maximum debit equity ratio 70:30.9. Working capital loanDivided into fixed working capital and variable working capital.Normally loan outstanding must not exceed 70% of eligible goods receivable and stocks. If at any point of time, the outstanding exceeds the extended valuation of the stocks and goods receivables after providing the margin of 30%, the drawing power must be reduced immediately and the borrower should settle the excess outstanding in cash promptly. 10. Priority/ deprived sector loanAs per the NRB directive, 12% must be extended towards priority sector including 3% in deprived sector.


11. Loan against fixed depositExtended to the maximum of 90% of the fixed deposit amount with additional interest rate above the fixed deposit rate as decided by the management from time to time. 12. Loan against shareIt can be given to the extend 50% of the present market value or 180 days weight average value of the shares whichever is lower. 13. Lease financingDue to the nature and complexity of lease financing, treated the same as financing under the term loan with amortized payment and approval is required for additional conditions.14. Guarantees15. Import credit-trust receipt loan (TR loan)16. Export credit


17. Education loanMaximum l5% of the cost of the tuition fee, travel costs, admission costs and hostel charges against the mortgage charge over the fixed properties or other security acceptable to the bank. Must produce evidence of regular source of income to meet the repayment of principal and interest.Tenure of this loan not to exceed 15 years.The moratorium period for repayment of the loan not to exceed regular tenure of the course undertaken plus one year.18. Retail and SME FinancingGuided by product papers and will be granted to business as well as individual with one of the thrust areas of the banks for portfolio diversifications. The tenure of all retail and/or SME loans will be guided by separate related lending guideline and product papers.


Operating Procedures in LendingLoan application Interview by loan officerPresentation of documents Document verification & analysis Site visit ( Project, Collateral) Credit analysis (6 Cs)CharacterCashCollateralConditions Control Capacity Key financial ratios analysis (liquidity, profitability, solvency, Efficiency)


133/12/201514g. Risk and mitigation h. Pricingi. Preparation of CAR j. Loan approval k. Legal procedures m. Disbursement of loan amount n. Post disbursement activities

Organization StructureThe Bank's functions and responsibilities relating to credit are organized on the basis of appropriate segregation in order to assure objectivity in managing credit. 3/12/201515

Specification of Lending Authority of Each Loan Officer and Committee

AuthorityConsortium LoanBusiness LoanConsumer LoanFDR & Gold LoanBODOverallOverallOverallCEO0< 5 million< 10 millionDepartment Chief0< 1 million< 5 millionBranch Manager0