A
Summer Training Report
On
Corporate Credit
At
“We Care… Dil Se”
Submitted in partial fulfillment of requirement for
the award of degree of Masters of Business Administration
2006-08
Submitted to: Submitted by:
Mr. Vikram Sandhu Sumeen Kaur MBA IIIrd Sem Roll no: 44
Department Of Commerce and Business ManagementGuru Nanak Dev University
Amritsar
Acknowledgement
The formal statement of acknowledgement will hardly meet the ends of justice in
matter of expression of my deep sense of gratitude and obligation to all those
who helped me in completion of my summer training report.
The sincere assistant and contribution of many people led to the culmination of
this effect. This will be the most appropriate form to thank all of them. I express
my heartiest appreciation for all these concerned.
I feel to acknowledge my indebtedness and deep sense of reverence to Mr.
Vipan Kapur (Branch Head – Amritsar, IndusInd Bank Limited) for giving me an
opportunity of doing my summer training at their branch. It had been a wonderful
learning experience for me to have worked with such professional people as
himself and other employees.
I am extremely thankful to Mr. Navin Bedi (Deputy Manager- credit, Amritsar) for
being my project co-coordinator and rendering a helping hand to me whenever I
needed assistance of the kind. In spite of his busy schedules he extended me his
full co-operation and support. His constant encouragement, inspiration, personal
interest, guidance and patience have gone a long way in completion of my
training and project report.
Certificate
This is to certify that Miss Sumeen Kaur D/O S. Pritpal Singh student of MBA-III
rd Semester, GNDU, Amritsar has undertaken 6 weeks practical training on
“Corporate Credit” at IndusInd Bank Limited.
Training was imparted at the request of the candidate for two months from
4/06/07 to 16/07/07. Her behavior and attitude during training period was quite
satisfactory.
I wish her success in life.
Declaration
I Sumeen Kaur is hereby affirm that the summer training project report on
“Corporate Credit” at IndusInd Bank Limited submitted to Guru Nanak Dev
University, Amritsar in partial fulfillment for the award of degree of Masters of
Business Administration is bonafide report and no copy of this report has been
submitted for any other degree or diploma.
(Signature)
Sumeen Kaur
Preface
The most motivating aspect with pursuing a course in management or business
studies is the dynamism associated with it. Dynamism of adding a new
perspective to one’s personality and vision by accumulating wider knowledge,
developing analytical and conceptual skills, not only by traditional ways of
teaching and learning but by observing the things at work. The summer training
gives a considerable exposure to students and provides them with an opportunity
to see the practical aspects of working of corporate world. It exposes a student to
an invaluable treasures experience.
My training report is on “Corporate Credit” at IndusInd Bank Limited. The banking
industry is probably the most dominant financial services industry in the world
today. Banks have been around for a very long time and have now evolved into
more specialized and sophisticated institutions.
Corporate Banking deals with the industry financing and servicing part of the
banking operations. The bank provides various kinds of services to its corporate
clients and markets them in a manner which is notably different from other
marketing practices.
Contents
Chapter No.
1) Industry Profile
Introduction to Banking Industry
History of banking
Banking in India
Defining ‘Bank’
2) Company Profile
About IndusInd Bank Limited
History of Indusind
New Era at IndusInd
Financial Status
Future Outlook
3) Services offered at IndusInd Bank
Personal Banking
Wealth Management Services
Corporate Banking
International Banking
Treasury
Capital & Commodities market
NRI Services
On Line Banking
4) Corporate Credit at IndusInd
Organization of Credit
Credit Origination
Credit Appraisal
Credit Risk Assessment
Credit Risk Rating
Security
Pricing
Documentation Standards
Broad Parameters for different Borrower Segments
Products
Credit Administration
Credit Monitoring & Risk Containment
Credit Audit
Benchmark norms for various Segments/ Activities
Corporate Credit Products
5) Evaluation & Conclusion
References and Sources
Industry Profile
Introduction to Banking:Banking system occupies an important place in a nation’s economy. A banking
institution is indispensable in modern society. Banking institutions are the premier
financial institution which plays a private role in the economy of the country. The
main principle of the business of banking is that the resources mobilized through
the acceptance of deposits must institute the main stream of funds which are to
be utilized for lending or investment purpose. The banker, is thus, an
intermediary and deals with money belongings to the public. A number of other
institutions, which also deals in money, are not designated as banking
institutions, because they do not fulfill all the pre-requisites of a bank. The
specialized financial institutions e.g. Industrial Finance Corporation of India (IFCI)
and State Financial Corporation (SFC’s) etc are not banks they do not accept the
deposits as banks.
History of Banking:
At the end of late-18th century, there were hardly any bank in India in the modern
sense of the term. At the time of the American Civil War, a void was created as
the supply of cotton to Lancashire stopped from the Americas. Some banks were
opened at that time which functioned as entities to finance industry, including
speculative trades in cotton. With large exposure to speculative ventures, most of
the banks opened in India during that period could not survive and failed. The
depositors lost money and lost interest in keeping deposits with banks.
Subsequently, banking in India remained the exclusive domain of Europeans for
next several decades until the beginning of the 20th century.
At the beginning of the 20th century, Indian economy was passing through a
relative period of stability. Around five decades have elapsed since the India's
First war of Independence, and the social, industrial and other infrastructure have
developed. At that time there were very small banks operated by Indians, and
most of them were owned and operated by particular communities. The banking
in India was controlled and dominated by the presidency banks, namely, the
Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on
merged to form the Imperial Bank of India, and Imperial Bank of India, upon
India's independence, was renamed the State Bank of India. There were also
some exchange banks, as also a number of Indian joint stock banks. All these
banks operated in different segments of the economy. The presidency banks
were like the central banks and discharged most of the functions of central
banks. They were established under charters from the British East India
Company. The exchange banks, mostly owned by the Europeans, concentrated
on financing of foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the
presidency banks, and the exchange banks. There was potential for many new
banks as the economy was growing. Lord Curzon had observed then in the
context of Indian banking: "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden
bulkheads into separate and cumbersome compartments."
Under these circumstances, many Indians came forward to set up banks, and
many banks were set up at that time, and a number of them set up around that
time continued to survive and prosper even now like Bank of India and
Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank.
Banking in India: Banking in India originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by Bank of
Hindustan. Both these banks are now defunct. The oldest bank in existence in
India is the State Bank of India being established as "The Bank of Bengal" in
Calcutta in June 1806. A couple of decades later, foreign banks like Credit
Lyonnais started their Calcutta operations in the 1850s. At that point of time,
Calcutta was the most active trading port, mainly due to the trade of the British
Empire, and due to which banking activity took roots there and prospered. The
first fully Indian owned bank was the Allahabad Bank, which was established in
1865.
By the 1900s, the market expanded with the establishment of banks such as
Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai -
both of which were founded under private ownership. The Reserve Bank of India
formally took on the responsibility of regulating the Indian banking sector from
1935. After India's independence in 1947, the Reserve Bank was nationalized
and given broader powers.
Defining ‘Bank”:
A bank is a commercial or state institution that provides financial services,
including issuing money in various forms, receiving deposits of money, lending
money and processing transactions and the creating of credit. A commercial
bank accepts deposits from customers and in turn makes loans, even in excess
of the deposits; a process known as fractional-reserve banking. Some banks
(called Banks of issue) issue banknotes as legal tender. Many banks offer
ancillary financial services to make additional profit; for example, most banks
also rent safe deposit boxes in their branches.
Currently in most jurisdictions commercial banks are regulated and require
permission to operate. Operational authority is granted by bank regulatory
authorities which provides rights to conduct the most fundamental banking
services such as accepting deposits and making loans. A commercial bank is
usually defined as an institution that both accepts deposits and makes loans;
there are also financial institutions that provide selected banking services without
meeting the legal definition of a bank.
Banks have influenced economies and politics for centuries. Historically, the
primary purpose of a bank was to provide loans to trading companies. Banks
provided funds to allow businesses to purchase inventory, and collected those
funds back with interest when the goods were sold. For centuries, the banking
industry only dealt with businesses, not consumers. Commercial lending today is
a very intense activity, with banks carefully analysing the financial condition of
their business clients to determine the level of risk in each loan transaction.
Banking services have expanded to include services directed at individuals, and
risk in these much smaller transactions are pooled.
A bank generates a profit from the differential between the level of interest it pays
for deposits and other sources of funds, and the level of interest it charges in its
lending activities. This difference is referred to as the spread between the cost of
funds and the loan interest rate. Historically, profitability from lending activities
has been cyclic and dependent on the needs and strengths of loan customers. In
recent history, investors have demanded a more stable revenue stream and
banks have therefore placed more emphasis on transaction fees, primarily loan
fees but also including service charges on array of deposit activities and ancillary
services (international banking, foreign exchange, insurance, investments, wire
transfers, etc.). However, lending activities still provide the bulk of a commercial
bank's income.
The name bank derives from the Italian word banco "desk", used during the
Renaissance by Florentines bankers, who used to make their transactions above
a desk covered by a green tablecloth.
According to WHITEHEAD: “ A bank is defined as an institution which collects
surplus funds from the public safeguards them and makes them available to the
true owner when required but also lends sum not required by their true owner
those who are in need of funds and can provide security.
According to Indian Banking Companies Act : “Banking company is one which
transacts the business of banking, which means the accepting for the purpose of
lending or investment of deposits of money from the public repayable on demand
or otherwise and withdrawal by cheque, draft, order and otherwise”.
COMPANY PROFILE
About IndusInd Bank:IndusInd Bank Ltd. is one of the leading new-generation private-sector banks in
India which commenced its operations in 1994. The Bank recently had a
successful GDR issue and its net worth touched Rs. 1056 crores as on March
31, 2007. The Bank posted a total business turnover of Rs.28,700 crores and is
poised for greater growth in the years ahead. Its network expansion received a
fillip with the Bank securing 40 authorizations from Reserve Bank of India for new
branches and 100 offsite ATMs in the last calendar year. The Bank currently has
a network of 170 branches, spread over 141geographical locations in 27 states
and union territories across the country. In addition, IndusInd Bank also has a
representative office each in Dubai and London. The Bank has proactively
adopted the requirements of ISO 9001:2000 quality certification for its entire
network of branches.
Driven by technology, IndusInd constantly upgrades its support systems for the
introduction of retail banking products and alternative delivery channels. The
Bank continues to display its commitment to global benchmarks in technology, as
testified by its winning the prestigious IBA Award for the year 2006 (Runner Up)
for the Overall Implementation of Straight Through Processing between various
systems. Since the merger of Ashok Leyland Finance in June 2004, the Bank
has expanded its retail portfolio. It is a large player in the financing of commercial
vehicles, utility vehicles, 2/3-wheelers and construction equipment. It is one of
the first banks to go live on the Real Time Gross Settlement (RTGS) initiative of
RBI. It enjoys clearing bank status for both major stock exchanges - BSE and
NSE and three major commodity exchanges in the country – MCX, NCDEX, and
NMCE. It also offers DP facilities for stock and commodity segments.
IndusInd Bank has been awarded the highest A1+ rating for its Certificates of
Deposits by ICRA and the highest P1+ rating for its FDs by CRISIL, which
has also assigned the highest safety ratings to the Bank’s Pass through
Certificates for securitized assets.
History of IndusInd:
IndusInd is an organisation established in 1994 with the aim of providing a
common conduit to channel the entrepreneurship and philanthropy of Non-
Resident Indians (NRIs) for the benefit of India. IndusInd derives its name and
inspiration from the Indus Valley Civilisation which, over 4500 years ago,
promoted flourishing trade between India and other countries, backed by
sound business sense and a spirit of innovation.
While the concept was originated by Mr. Srichand P Hinduja, Chairman of the
Hinduja Group and Global Coordinator of IndusInd, it has been converted into
reality through the collective efforts of a large number of businessmen and
professionals from India and abroad.
In a span of just 12 years, IndusInd has become a truly global entity through the
collective efforts of its members. It has ventured into banking, financial services,
media & communication, and philanthropy & social upliftment.
The IndusInd Group was responsible for setting up IndusInd Bank Ltd., the first
private-sector bank in India in the post-1991 liberalised era.
The IndusInd organisation, having successfully established IndusInd Bank and
other commercial ventures, has also set up a philanthrophic organisation, the
IndusInd Foundation, to fulfil the objectives of charity and social upliftment.
IndusInd Bank supports IndusInd Foundation’s activities.
As an extension of its multidimensional activities, IndusInd, has also created an
apex body of resident and overseas Indians and foreign investors, namely
“IndusInd International Federation”, to promote, advance, protect and stimulate
the interests of trade, commerce and industry in India and other parts of the
world.
The Bank was formally inaugurated in April 1994 by Dr. Manhmohan Singh,
Honorable Prime Minister of India who was then the country’s Finance Minister,
started with a capital base of Rs.1, 000 million (USD 32 million at the prevailing
exchange rate), of which Rs.600 million was raised through private placement
from Indian Residents while the balance Rs.400 million (USD 13 million) was
contributed by Non-Resident Indians.
A New Era at IndusInd:
The merger with the Bank in June 2004 of Ashok Leyland Finance Ltd., among
the largest leasing finance and hire purchase companies in India, set in motion a
process of consolidation through the combined customer base of the merged
entity and its increased geographical penetration. IndusInd Bank has become
one of the fastest-growing banks in the Indian banking sector today with its
branch network expanding from 61 as on March 31, 2004 to 137 as on March 31,
2006 – reflecting an increase in excess of 125% in 24 months. The Bank has
approximately 150 ATMs of its own, and has concluded multilateral
arrangements with other banks with a total network of 15,000 ATM outlets. All the
outlets of the Bank, including its branches and ATMs, are connected via satellite
to its central database that operates on the latest version of IBM’s AS400-720
series hardware and Midas Kapiti (now, Misys) software.
IndusInd Bank’s broad lines of business include Corporate Banking, Retail
Banking, Treasury and Foreign Exchange, Investment Banking, Capital Markets,
Non-Resident Indian (NRI) / High Networth Individual (HNI) Banking, and
(through a subsidiary) Information Technology.
IndusInd Bank provides multi-channel facilities including ATMs, Net Banking,
Mobile Banking, Phone Banking, Multi-city Banking and International Debit
Cards. It was one of the first banks to become a part of RBI’s Real Time Gross
Settlement (RTGS) system. It has implemented an enterprise-wide risk
management system encompassing global best practices in the area of Risk
Management, with help from KPMG. This has enabled the Bank to remain in the
forefront in complying with the requirements of Basel II. It is the first bank in India
to receive ISO 9001:2000 certification for its Corporate Office and its entire
network of branches.
With its roots in Indian tradition and emphasis on customer care, IndusInd Bank’s
service philosophy is well reflected in the communication tagline “We Care… Dil
Se”.
Financial Status:
An Overview 2006-2007 (for year ending 31st March, 2007)
Net profit of Rs. 68 crores vis-à-vis Rs. 37 crores last year (increase of
84%).
Healthy growth in business – balance sheet size crosses Rs. 20,000
crores.
Net worth now in excess of Rs. 1000 crores.
Capital Adequacy Ratio of 12.54% - up from 10.54% last year.
Branch network touches 170, against 137 last year.
Significant growth in non-interest income – Rs. 244 crores vis-à-vis Rs.
189 crores
Total income has grown, and operating expenses have also been
contained by and large, but interest expense has continued to rise.
Capital
The Bank took major strides during the year in enhancing its capital.
These included:
A maiden GDR issue of Rs. 147 crores (which also raised the paidup
capital by Rs. 30 crores)
Tier-II issue of Rs. 50 crores.
Upper Tier-II issues (in two trenches) of Rs. 209 crores.
The Bank now has a very healthy CRAR of 12.54 per cent.
The CRAR would be even higher as per the new capital adequacy
framework (in line with Basel-II guidelines) and would come to 13.24 per
cent, largely because of the retail portfolio comprising schematic loans
such as vehicle loan, housing loan, etc. and small-ticket loans to small
businesses.
Major Initiatives
The Bank took several major initiatives during the year. Among these are:
Launch of new products and services like Mobile Banking, Visa Gold Debit
card, Gift Card, On-line issuance of insurance policies, Sunday Banking,
8-to-8 banking, etc.
Tie-up with Aviva Life Insurance for bancassurance.
Tie-up with the National Financial Switch (NFS), and now allowing our
customers access to more than 19,000 ATMs in India.
Strategic alliance with Doha Bank, Qatar and launch of e-remittance
product.
Additional tie-ups with Exchange Houses in respect of inward remittance.
Financial Results 2007-2008 (for quarter ending 31st June, 2007)
Performance Highlights
Operating profit and net profit have both gone up, vis-à-vis the levels a
year ago
Operating profit is up from Rs. 27 crores to Rs. 32 crores – an increase of
19 per cent
Net profit has grown by more than 62 per cent - from Rs. 8 crores last year
to Rs. 13 crores in the current year
Deposits are up from Rs.15,400 crores as of June 2006 to Rs.17,329
crores as of June 2007 – a year-on-year growth of 13 per cent
Advances have grown by 6 per cent during this period - from Rs. 10,809
crores to Rs. 11,469 crores
Average deposits (up from Rs. 14,853 crores to Rs. 17,047 crores) and
average advances (up from Rs. 9761 crores to Rs. 11,247 crores) have
each grown by 15 per cent
Future Outlook:
The bank is quite positive about the coming months.
They do not expect any further rise in cost of deposits, partly because of
their focused CASA thrust and partly because of the hopefully benign
interest rate scenario for the remainder of the current year.
At the same time the yield on advances should continue to go up, even if
the interest rates stabilize, with existing low-yielding loans making way for
newer higher-yielding loans.
And, going ahead, their focus on fee-based income is also expected to
make significant contributions to the bottom-line
Key Focus Areas during 2007-2008
International Banking.
Capital and Commodity Markets.
M&A Advisory.
Rapid scale-up of alternate distribution channels such as ATMs, Internet
Banking, Contact Centre, Direct Sales Force (e.g., Business Facilitators
and Business Correspondents), etc.
Effective re-branding in the marketplace.
Implementation of new technology relating to data warehousing, customer
relationship management, Basel-II compliance, kiosk banking, online
share trading and mutual funds purchase and redemptions, cheque
truncation, etc. You
SERVICES offered at IndusInd
Personal Banking:IndusInd Bank understands that Personal Banking needs are unique. That is
why they offer a wide range of services that combine convenience with care for
their customer’s time, money and security. IndusInd Personal Banking services
makes banking easier for us.
1. Accounts
IndusInd Bank Deposit Schemes help manage finances better by saving time
and money. A wide range of deposit schemes cater to the varying needs at every
stage in ones life.
1.1 Regular Saving Bank Account:
IndusInd Bank extends Savings Bank Account with various facilities
Quarterly BalanceRs.5000/- in case of A class cities, Rs.3000/- in case of B class towns and Rs.2000/- in case of C class towns
Multicity OperationCustomer are able to operate the account from any of their branches directly
StatementsStatement of Accounts is provided at quarterly intervals
Debit CardInternational Debit Card is issued to the customer at reasonable charges and access to 1700 ATMs under bilateral arrangements with free of charges
Internet BankingAccess to Internet banking is allowed free of charges
Standing OrdersStanding Orders and Balance orders will be activated at nominal charges
1.2 Indus Easy Saving Account:
Indus Easy Savings Account is a facility to provide basic banking facilities to
common man without tedious processes and higher minimum balance. One may
recommend eligible potential customers to be a part of IndusInd Family through
Indus Easy Savings Account.
1.3 Demat Account:
A depository system is a system, which holds your shares in the form of
electronic accounts in the same way a bank holds our money in a savings
account.
When one decides to have his shares in electronic form he should approach a
Depository Participant (DP) who is an agent of the depository to open an
account. He should surrender his share certificates in physical form and his DP
will arrange to get them sent to and verified by the company and on confirmation
credit his account with an equivalent number of shares. This process is known as
dematerialisation. We can always reverse this process if you so desire and get
your shares reconverted into paper form. This process is known as
rematerialisation.
Share transactions (like sale or purchase and transfer/transmission etc.) in the
electronic form can be effected in a much simpler and faster way. All we need to
do is that after confirmation of sale/purchase transaction by our broker, we
should approach our DP with a request to debit/credit our account for the
transaction. The Depository will immediately arrange to complete the transaction
by updating our account. There is no need for separate communication to the
company to register the transfer.
1.4 RFC Account:
As an important step towards further liberalisation of foreign exchange facilities
available to individual residents, it has been decided by Reserve Bank of India to
permit a person resident in India to open, hold and maintain with a licensed Bank
(which is also an Authorized Dealer) in India a Foreign Currency (Domestic)
Account and foreign exchange acquired from any of the sources specified as
under can be kept in this account by the resident.
while on visit to any place outside India by way of payment for services not
arising from any business in or anything done in India; or
From any person not resident in India and who is on a visit to India, as
honorarium or gift payment for services rendered or in settlement of any
lawful obligations; or
by way of honorarium or gift while on a visit to any place outside India; or
from an authorized person for travel abroad and represents unspent
amount; or
Gift received from close relative; or
foreign exchange earned through export of goods and/ or services.
1.5 ZERO-C-Account:
Indus Zero-C-Account is a unique type of Current Account with all benefits of a
Premium Account without insisting for a pre-defined minimum balance.
Customers are able to get any number of Demand Drafts/Pay orders, irrespective
of the amount, on any of their branches free of commission (Zero Charges
account). This account is ideally meant for transactions by Cheques/DDs/POs
and not for Cash transactions (Zero Cash account), even though cash
deposit/withdrawal upto Rs.10000/- per day is permitted.
1.6 Premium Current Account
IndusInd Bank extends Premium Current Account with a number of benefits to
the Business community
Quarterly Balance
Average Quarterly Balance of Rs.50000/-
Multicity Operation
Personalized Multicity Cheque book will be issued
Statements
Monthly statements would be available before 5th of succeeding month
Debit Card
International Debit card is allowed in the case of Sole Proprietorship account
Internet Banking
Allowed without charges
Standing Orders
Standing Orders and Balance Orders will be executed at free of cost
Demand Drafts
Free DDs and POs will be allowed, if it is not out of cash remittance even on
Correspondent Banking arrangements
1.7 Premium Saving Account:
IndusInd Bank extends Premium Savings Bank Account with a number of facilities.
Quarterly BalanceAverage Quarterly balance of Rs.25000/-
Multicity OperationPersonalized Multicity Cheque books will be issued to the account
StatementsMonthly statement of accounts will be available before 5th of succeeding month
Debit CardInternational Debit Card with access to 1700 ATMs without any charges
Internet BankingAvailable without any charges
Standing OrdersStanding Orders and Balance Orders will be executed free of charges
Demand DraftsDDs and Pos will be issued free of charges, if it is not out of cash remittance
Best ForAll Premium customers
2. Deposits
IndusInd says “You have worked hard to earn your money. Now, let your money work hard to earn for you … with IndusInd Bank Fixed Deposits.”
2.1 Flexi Term Deposit:
IndusInd Bank extends flexibility in partial withdrawal of Term deposit without affecting the remaining portion of deposit. A Cheque book is issued to the Zero Balance account to be opened along with the deposit.
Minimum Deposit amountRs.25000/-
Interest RateAs applicable to Term deposits including Senior Citizen benefits
TDS on InterestApplicable
Deposit Tenor7 days to 120 months
Documents required> Application form> Passport size photograph> Proof of Residence> Introduction
FeaturesTerm deposit is treated as a cluster of Rs.1000 units and part withdrawals are being treated as closure of units with applicable rate of interest.
Loan facilities95% of the Balance Principal and interest credited
Nomination facilityAvailable
Premature ClosureAllowed
2.2 Two-In-One Deposit:
IndusInd Bank extends Overdraft facility along with Term Deposit, to enable the depositor to avail 95% of the deposit as overdraft with reasonable interest rate for the period and amount overdrawn.
Minimum Deposit amountRs.10000/-
Interest RateAs applicable to Term deposits including Senior Citizen benefits
TDS in InterestApplicable
Deposit Tenor7 days to 120 months
Documents required> Application form> Passport size photograph> Proof of Residence> Introduction
FeaturesAn overdraft limit to the tune of 95% of the deposit will be set along with the placement of deposit
Loan facilitiesBuilt-in Overdraft
Nomination facilityAvailable
Premature ClosureAllowed
Best ForIndividuals and Corporate who expect short term credit limits without affecting the deposit
2.3 Sweep-In/ Sweep-Out Deposits:
IndusInd Bank offer Sweep out facility over a cut off limit in CA and SB accounts. Similarly, the Term deposits would be closed and credited to the CA/SB account (Sweep-in) as and when it is required, with minimum interest loss to the customer.
Minimum Deposit amountRs.10000/- SBRs.20000/-CA
Interest RateAs applicable to Term deposits including Senior Citizen benefits
TDS in InterestApplicable to the Term deposits
Deposit Tenor7 days to 120 months
Documents required> Application form> Passport size photograph> Proof of Residence> Introduction
FeaturesBalance over Rs.10000/- in SB and Rs.20000/- in CA will be automatically transferred to Term Deposit for a predetermined period, as per customers instruction. In case of insufficient balance in the CA/SB account at any point in time, required amount will be transfered to these accounts by breaking deposits to the benefit of the customer.Loan facilities95% of the deposit
Nomination facilityAvailable
Premature ClosureAllowed
Best forIndividuals and Corporate who are getting continuous float in CA/SB
2.4 Monthly Income Plan:
IndusInd Bank offer Monthly Income Plan to Term Deposit holders
Minimum Deposit amountRs.10000/-
Interest RateAs applicable to Term deposits including Senior Citizen benefits
TDS in InterestApplicable
Deposit Tenor12 months to 120 months
Documents requiredApplication formPassport size photographProof of ResidenceIntroduction
FeaturesThere are two options available under Monthly Income Plan
a) Monthly discounted interest will be credited to account/by DD/by ECS creditb) Monthly interest without any discount from third month onwards which will be credited to account/by DD/ECS credit
Loan facilities95% of the deposit
Nomination facilityAvailable
Premature ClosureAllowed
Best ForIndividuals and Corporate who expect short term credit limits without affecting the deposit
2.5 Young Saver Deposit:
IndusInd Bank inculcate savings habit among children with high return on their savings by linking Savings Bank Account with Flexi Recurring Deposit. Account is being opened and operated by the guardian for the minor.
Opening BalanceRs.11/-
Interest RateAs applicable to Term deposits in the case of Recurring Deposit
TDS in InterestRecurring Deposits are exempted from TDS
Deposit Tenor12 months to 120 months
Documents required> Application form> Passport size photograph> Proof of Residence> Introduction
FeaturesBalance in Savings Bank account will be transferred to a flexi recurring deposit on the last day of every month, leaving Rs.100/- in SB account.
Loan facilities95% of the amount available in RD account
Nomination facilityAvailable
Premature ClosureAllowed
Best ForYoung children
2.6 Senior Citizen Scheme:
IndusInd Bank offer special rates to Senior Citizens on Term Deposits
Minimum Deposit amountRs.25000/- No maximum
Interest Rate+ 0.50% than the actual rate for General Public
TDS on InterestApplicable
Deposit Tenor7 days to 120 months
Documents requiredApplication formPassport size photographProof of Age & ResidenceIntroduction
FeaturesSpecial rate is applicable to Senior citizen those who have completed 60 years of age. In case of joint deposits, the first name should be of the Senior citizen.
Deposits under Senior citizen should not be used as security for commercial purposes.
Loan facilities95% of the Balance Principal and interest credited
Nomination facilityAvailable
Premature ClosureAllowed
Best ForIndividuals and Corporate who are in need of short term investment
2.7 Regular Recurring Deposit:
IndusInd Bank accumulates our monthly installments with high yield through its Recurring Deposit Scheme.
Opening BalanceRs.500/-
Interest RateAs applicable for term deposits including the benefits of Senior Citizens
TDS in InterestNo TDS as per current regulations
Deposit Tenor12 months to 120 months
Documents requiredApplication formPassport size photographProof of ResidenceIntroduction
FeaturesFixed monthly installments are being remitted to Recurring Deposit by a Standing Order, ECS Mandate or by regular direct remittance
Loan facilitiesUp to 95% as Loan or Overdraft
Nomination facilityAvailable
Premature ClosureAllowed with eligible rate of interest for the period run without any penalty
Best ForBusiness class and Self employed with varying income stream
3. Loans
IndusInd Bank offers a range of loan schemes for all our special needs that
require finance.
3.1Personal Loan:
It is an easy and sensible way to have quick access to the money we need and when we need it. Competitive fixed interest rates with flexible terms that are customized to fit our budget.
PurposeTo help pay for unexpected expenses, household goods or just about any personal need.
Nature of facilityBalance transfer facility is available to reduce the high interest burden with existing financier
SecurityPersonal guarantee
Period12 to 60 months
QuantumRs.20000/- to Rs.10 lacs
Rate of Interest16%
RepaymentEquated Monthly Installments
Processing Charges1% of the Loan
Best ForIndividuals, Professional, Self employed and Businessmen
3.2 Home Loans:
Home Loan for Resident Individuals
Home Loan for construction / purchase of house / flat or take over of an existing loan Renovation / improvement / extension of House
Nature of facilityLoan
Margin20% of Agreement Value+Stamp Duty +Registration30% cost of construction
SecurityHouse property and Spouse to be Co-applicant. Equitable Mortgage will be created and cost to be borne by applicant
QuantumRs.3 lacs to Rs.50 lacs
Rate of Interest10.5 % (for amounts <20 lakhs) reset fixed -Interest calculated at monthly rests13 % (for amounts >20 lakhs) reset fixed -Interest calculated at monthly rests9.25 % floating rate (for amounts <20 lakhs)12 % floating rate (for amounts >20 lakhs)
Prepayment charges2% of outstanding amount
Processing Charges1.25 % of the loan amount
Best ForIndividuals, salaried, professional & self-employed
Home Loan for Non Resident Individuals
Home Loan for construction / purchase of house / flat / renovation / improvement / extension of house to Non Resident Indians.
Margin20% of the Agreement Value + Stamp Duty + Registration.
SecurityMortage of the house property. Co-applicant should be spouse (wherever applicable) and Personal Guarantee of Resident Individual
TenureMaximum 120 months
QuantumRs.5.00 Lacs to Rs.50.00 Lacs
Rate of InterestBest in the Industry
Processing Charges1.25% of Loan amount
Best forSalaried Individuals, professionals and self-employed
3.3 Small Business Loan:
For any business to succeed, the availability of funds throughout its life cycle is of
paramount importance. Bank offers a wide range of services to meet all the
banking requirements of small and medium enterprises. The limits are fixed
keeping in view the enterprise's need for funds against the value of the security,
margin available and credit worthiness of the borrower's enterprise.
3.4 Loan Against Shares:
INDUS demat cash scheme
Eligibility Adult Individuals
Purpose The loan is given for any of the purposes broadly categorized as under :
Personal Purposes: For meeting personal expenses like for marriage, housing, education, medical etc.
Business Purposes: For meeting financial requirements for your professional or business purposes other than operations on stock markets
Loan Amount Minimum Rs. 1 lac, Maximum Rs.20 lacs
SecurityEquity Shares of the Companies on the approved list of the Bank held in demat form.
Margin 40% of the value of shares for approved Stocks only.
Value of Shares Current Market Price
Interest Rate 10.50% p.a. with quarterly rests payable monthly.
Processing Charges1% (of the loan amount sanctioned) upfront and no processing charges on renewal
Period of Loan
For 12 months. May be renewed on request, at Bank's discretion:
Conditions:
Current Account to be opened with the Bank for availing the OD facility
Depository Account to be opened with the Bank for holding the Demat shares.
Only Demat shares from the Banks' approved list will be accepted as security.
However shares held with other Depository Participants may also be accepted as
security.
3.5 Credit Against Specific Securities:
IndusInd Bank solves your liquidity problem without liquidating your long term investment.
Nature of FacilityOverdraft
Margin20% of face value
SecurityPledge of specified security
QuantumNo ceiling
Rate of InterestBest in the Industry
PeriodRenewable every 12 months
RepaymentService the monthly interest. Settle account with own source or by bullet payment at the time of maturity
Processing Charges0.25% of the advance
Best forSaleried class and IT payers
3.6 Traders Advances:
IndusInd Bank extends Working Capital limits to small traders and businessmen
on the basis of turnover and other parameters.
Nature of facility
Demand Loan / Overdraft
Margin
25%
Security
Primary security of stock and collateral security of property.
Quantum
20% of annual turnover upto Rs.10 lacs. Projected turnover and audited financial
statements for credit limits over Rs.10 lacs and the eligibility would be fixed as
per various financial parameters.
Rate of Interest
Best in the industry.
Repayment
By monthly installment / on demand and servicing of monthly interest.
Processing Charges
0.25% of advance
Best for
Wholesale / Retail traders with valid licence / registration
4. Cards
Surprising how a slim piece of plastic with a magnetic strip eases life! Whether it
is an ATM card or a credit card, there are definite advantages to the increasing
trend of cashless transactions. But not without limitations. The advantage of
almost universal acceptability of a credit card comes with a subtle disadvantage
of indulging in extravagance without thought of prudence.
4.1 Power card
And trust IndusInd Bank to bring it to us - the IndusInd Bank Visa PowerCard - an
International Debit Card that is as widely accepted as a credit card but restrains
us from overspending!
After all, for someone who is going places, need a card that can accompany him
too! The IndusInd Bank International VISA PowerCard ensures that there are no
inconvenient detours to an ATM Center in our journey to our destination, be it
shopping, eating out, travelling or whatever. Using the VISA Electron Online debit
card program, our IndusInd Bank Account will instantly debited every time we
transact using our PowerCard at any VISA-accredited Merchant Establishment or
ATM, anywhere across India or the world.
4.2 Mahila Card:
Mahila Card is a variant of Power Card wherein the features of International
Debit Card are blended with Personal Overdraft to make it user-friendlier and
with wide customer accessibility. This product is developed focusing the Debit
Card requirements and Credit needs of female customers.
Eligibility:
Women in the age group of 21 to 60 are eligible for Mahila Card. Customer
Accounts with Cheque returns on account of financial reasons will not be eligible
for this Card.
4.3 Gift Card:
IndusInd Bank brings us the Indus Gift Card - an ideal gift for any occasion. This
card is available at IndusInd Bank branches, from Rs.250/- to Rs.20,000/- for any
amount.
Beneficiary has the option to purchase any item of his / her choice from any of
the merchant establishments in India or abroad using the gift card. And it can be
used for on-line purchase from shopping portals also.
4.4 Gold Debit Card:
IndusInd Bank also provides its value added Gold Debit Card. This card is
designed for us, to exceed our expectations at any of the VISA ATMs or Point-
Of-Sale terminals, in any part of the world. Gold Debit Card cardholders of
IndusInd Bank can receive global assistance, 24 hours a day, 7 days a week,
when they travel overseas from VISA Global Customer Assistance Services.
These services can be used for lost/stolen Card reporting or miscellaneous
information that we may require overseas.
Wealth Management Services
1. Portfolio Management Services
IndusInd Bank (IBL) has tied up with one of India’s leading financial service
providers- Religare, to offer Portfolio Management Services (PMS). IBL
customers can now avail of PMS to get the best out of equity markets.
Religare is a decade old company, promoted, controlled and managed by the
promoters of Ranbaxy Ltd. The Portfolio Management team at Religare has 52
man years of experience in the equity market. The process-driven approach to
wealth management aims to safeguard our interests, while leveraging risk to our
advantage. We can choose among different portfolios according to our
investment objectives and our risk-return profile.
2. Investments
IndusInd Bank offers us personalised investment options to help achieve your
financial objectives. Solutions are tailor-made to suit each individual's
requirements. They offer a host of financial instruments that includes Fixed
Deposits, Mutual Funds, Bonds and Insurance products.
2.1 GOI Bonds:
GOI Savings Bonds are instruments that are issued by the RBI, and currently has
one option - 8% rate of interest per annum, which is taxable. The maturity period
of the 8% (taxable) bond is six years. These are among the safest instruments
available for investment, and we can be assured of getting back the full amount
of your investment.
2.2 Capital Gains Bonds:
Bank also distributes other bonds like National Housing Bank (NHB) and Rural
Electrical Corporation Ltd. (REC).
3. Mutual Funds
A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
Mutual Funds can broadly be classified into three categories:
Equity Funds - An equity mutual fund identifies and invests in shares of high
quality companies whose businesses are sound and have good, steady growth.
These funds seek to provide good returns in long-term.
This is an ideal category for those who want to participate in stock market but do
not have sufficient time or expertise required for an active tracking. This category
of funds would help in growing investors money with the help of Fund Managers
expertise.
Balanced Funds - A balanced fund seeks a mix of the two classes, debt and
equity, to achieve a higher return than debt without forsaking completely its
safety and stability. The offer document of the fund would specify the percentage
range that would be allocated to equity and to debt. Usually, the range is
between 50 per cent and 75 per cent in equity, and the rest in debt.
Debt Funds - This one would aim to achieve steady income at low risk to the
invested principal. To achieve this the mutual fund would invest in what are
called fixed-income instruments.
Corporate Banking
1. Large Indian Companies
IndusInd offers credit facilities including working capital finance, term loans, trade and transactional services, foreign exchange and cash management services to large Indian companies. The facilities are structured to meet specific needs of the clients keeping in mind their risk profile. With thier strong customer oriented approach, they have built relationships with a number of Indian companies including those belonging to well known industrial houses.
1.1Fund Based Facilities:
a) Working Capital Finance
Working Capital facilities are provided to finance the day-to-day business
requirements. Funding requirements are structured to finance procurement of
raw materials/stores and payment towards manufacturing costs and other
overheads. Sales are financed against sundry debtors/ receivables.
The Bank offers a combination of operative cash credit and working capital
demand loan to meet the domestic working capital requirements of its clients.
b) Short Term Finance
The Bank offers short-term loans for a period ranging from 3 months to 12
months to sound corporates for meeting their specific short-term working capital
requirements. The funds are provided with interest rates either linked to BPLR or
at a fixed rate with varying repayment patterns.
c) Term Loans
IndusInd offers term loans to both Industrial as well as Infrastructure sectors
promoted by strong business houses. These loans are for a period of 3-5 years
with a moratorium period. Interest rates could be fixed or floating linked to the
bank's BPLR.
d) Bills Finance- Supply/ Purchase
This product enables corporates to fund their operating cycle right from the stage
of procurement to sale. Bill Financing is extended by IndusInd Bank to its clients
at competitive rates. Letter of credit backed bill discounting and clean bill
discounting are the convenient mode of financing for domestic trade transactions.
BOE could be broadly classified into Demand and Usance bills and are further
classified into clean and documentary bills.
e) Asset Securitization
Bank also extends loans for asset securitisation comprising lease rental
receivables and other receivables backed by firm arrangements. In such cases,
the future cash flows of the client are discounted applying a discount rate and
arrived at the Net Present Value (NPV) which is the amount lent to the borrower.
f) Line of credit
This facility provides total flexibility to corporates to utilise the line (sanctioned
limit) of credit. The terms of the line of credit are either predetermined or
negotiated at the time of availment. This facility is used as and when the client
has a requirement.
g) Asset Based Financing
Bank offers finance for the purchase of Construction / Earth Mining Equipments
of all brands, new and used Commercial Vehicles of all manufacturers and Two
Wheelers. Their schemes are structured to suit our specific requirements.
(i) Commercial vehicles
(ii) Two- wheelers/ white goods
(iii) Construction equipments
1.2 Non Fund Based Facilities:
a) Letter of credit
The Basic objective of Letter of Credit is to facilitate orderly movement of trade. It
is therefore necessary that the evidence of movement of goods is present. Banks
are not connected with the quality / quantity of the goods and are concerned only
with the documents which should conform to the terms and conditions of Letter of
Credit.
IndusInd Bank establishes Letters of Credit for inland and foreign transactions.
b) Bank guarantees
Bank Guarantee is a contract to perform the promise or discharge the liability of a
third person in case of his default. IndusInd Bank sanctions Bank Guarantee limit
to facilitate issue of guarantees on behalf of its clients. Various types of
guarantees offered are – financial, performance, bid bond, tenders, customs, etc.
These guarantees are well accepted. And their overseas correspondent bank
alliances also enable them to issue guarantees overseas for participation in
global tenders, etc.
1.3 Value Added Facilities:
a) Associate financing
Working capital finance is extended to Enterprises having business association
with large Indian Companies. IndusInd Bank sanctions bills discounting facilities
for bills drawn by the supplier/vendor and accepted by the corporate.
The Bank also offers our cash management solutions to integrate your
associates with the bank to facilitate quick transaction delivery.
b) Cash management services
IndusInd CMS aims at collecting, maintaining, and disbursing our funds in a way
that minimizes the risk of misuse, maximizes profitable cash flow, and supports
our operations and mission.
c) Corporate salary accounts
Indus Comfort accounts offer us many conveniences. Employees can avail the
comfort of all the facilities of a savings account, preferential pricing on loans,
salary advance and overdraft facility. All these come at no extra cost and at no
minimum balance.
d) Investment avenues for cash surplus corporates
(i) Deposits:
Term Deposits ranging from 7 days and above can be made. No penalty on
premature closure upto Rs. 50 lacs. And special rates for amounts more than
Rs. 15 lacs are quoted on a daily basis.
Flexible term deposits from 7 days and above can also be made. Deposits can
be placed in units of Rs. 1/- giving you the convenience of withdrawal in an
emergency. And special rates for amounts more than Rs. 15 lacs are quoted on
a daily basis.
(ii) Other avenue:
The bank is empanelled as a distributor for most of the well performing and
leading mutual funds. Certified personnel assists in making an investment
decisions for us.
Instruments by the RBI and various other bonds like National Housing Bank
(NHB) and Rural Electrical Corporation Ltd. (REC) are also distributed.
2. Small & Medium enterprises
For any business to succeed, the availability of funds throughout its life cycle is of
paramount importance. Bank offers a wide range of services to meet all the
banking requirements of small and medium enterprises. The limits are fixed
keeping in view the enterprise's need for funds against the value of the security,
margin available and credit worthiness of the borrower's enterprise.
2.1 Fund based facilities
a) Working capital finance
b) Short term finance
c) Term loans
d) Bills finance- supply/ purchase
e) Asset securitization
2.2 Non- fund based facilities
a) Letters of credit
b) Bank guarantees
2.3 Value added facilities
a) Associate financing
b) Cash management services
c) Corporate salary accounts
d) Investment avenues for cash
3. Supply chain management
3.1 Working capital finance
3.2 Bill discounting
This product enables Suppliers and Customers of large business establishments
to fund their operating cycle right from the stage of procurement to sale. Bill
Financing is extended by IndusInd Bank to its clients at competitive rates.
Letter of credit backed bill discounting and clean bill discounting are the
convenient mode of financing for domestic trade transactions. BOE could be
broadly classified into Demand and Usance bills and are further classified into
clean and documentary bills.
International Banking
IndusInd Bank provides a wide range of international banking products and
services to corporate clients, both large and medium, and small-scale
enterprises. Innovative products are designed with focused approach and to suit
the requirements of the clients.
Bank offer Trade Finance to exporters, both at pre and post shipment stage, in
Indian Rupees and Foreign Currencies at competitive price.
1. Correspondent Banking
Bank has a full-fledged Correspondent Banking Dept. It has correspondent
banking relationships with over 232 banks spread across the globe to facilitate
cross-border trade and payment related services. The services offered include a
wide variety of fee-based corporate products and services like documentary
credits, stand by letter of credit, guarantees, remittances, acceptance of
collections etc. The Bank takes care of specialized project/activity funding in
foreign currency.
2. SWIFT
Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a
highly secured mechanism to transfer funds. The users of SWIFT are a closed
group, consisting of member banks, securities houses, financial institutions, etc.
In order to become a member of the SWIFT network and use SWIFT
communications facilities, a bank has to become a shareholder of SWIFT.
SWIFT has standard message formats which is defined for all kind of messages,
hence all messages sent and received have a standard SWIFT format for
Customer to Customer, Bank to Bank, Statements, Foreign Exchange, Precious
Metals deals, Cash Management, Letters of Credit and Trade Finance etc. are
few among them.
Over 40 branches of IndusInd are connected with Swift directly which helps
speedy transmission and delivery of messages. Messages sent through SWIFT
are cost effective against messages sent through telex or any other mode of
communication.
3. Rupee drawing arrangement
IndusInd Bank offers INR remittance services to NRI's and persons residing
abroad through drawing arrangement/fast remittance facility through exchange
houses for their remittance requirement to India.
For it, Bank has entered into a money transfer agreement with Gulf Express
Exchange and M/s. Wall Street Exchange Centre Dubai. Bank is also in process
of entering into 4-5 new exchange houses based in Dubai and Kuwait facilitating
remittance in INR to India.
4. Advisory services
Bank provides advisory and financial services to Indian entities for setting up joint
ventures and wholly owned subsidiaries abroad and trade finance solutions in the
area of cross border trade and to exploit the emerging business potential and
support international banking operations.
5. Facilities to exporters
5.1 Export Finance in Rupees
As an important incentive to the exporters community for boosting exports,
financial assistance in Rupees is extended to exporters on priority basis on
relatively liberal terms. Such finance is provided both at pre-shipment stage (as
working capital finance) and at post-shipment stage (to bridge the time lag
between the shipment of goods and the realisation of proceeds). Interest charged
on export credit is exempted from the purview of interest tax.
5.2 Forward booking Facilities to Exporters
Exporters can book forward contracts to cover their crystallized exposure to
exchange risk in respect of genuine transactions permitted under the Exchange
Control Regulations, against production of suitable documentary evidence.
The choice of the currency and tenor are left to the exporter. The maturity of the
cover should not exceed the maturity of the underlying transaction.
5.3 Other Facilities
The bank also provides all the other facilities to exporters permitted by Reserve
Bank of India and allowed under FEMA viz.
6. Trade finance
IndusInd Bank offers special schemes to provide timely credit to
Importers/Exporters at competitive interest and exchange rates in Indian rupees
well as foreign currency.
7. Gold banking
Government of India has liberalised the policy on Bullion Trading and permitted
Authorised Dealers to import gold/silver/platinum for sale to NRIs, exporters
manufacturing gold ornaments, SIL holders and residents. Reserve Bank of India
has permitted IndusInd Bank to import gold, silver and platinum. Their branches
at Ahmedabad (Ellisbridge), Bangalore (M.G.Road), Chennai (Nungambakkam),
Coimbatore (Avinashi Road), Jaipur (Church Road, Off M.I.Road), Mumbai
(Opera House), New Delhi (Barakhamba Road) and Secunderabad (Begumpet)
are designated for importing gold on consignment basis to cater to the need of
Gold traders, jewellery manufacturers – exporters, and domestic consumers.
9. Remittance services (Money transfer services)
9.1 MoneyGram
IndusInd Bank offers a new International money transfer product 'MoneyGram'.
MoneyGram is a person to person money transfer service launched by M/s.
MoneyGram International Ltd., Colorado, USA. This enables a person to transfer
funds upto USD 10,000 to any person in just 10 minutes.
9.2 M/s Zoha Inc
M/s Zoha Inc. is also a licensed money transfer company based at New Jeresy,
U.S.A. Besides their own locations the company has tied-up with 1000 other
agents in New York and New Jeresy states, USA. The arrangement of
transferring funds favouring beneficiaries in India by M/s Zoha Inc. is through
their web site.
10. Suvarna mudra – A range of 999.9 pure gold coins
Attractively priced gold coins (5gm and 10gm) and ingot (50 gm)
Magnificently designed product, presented in Tamperproof Assay Certified
Certicard
Highest purity – 999.9
Available at 69 branches across the country
Can be purchased by cash (upto Rs. 50,000), debit to account (IndusInd
customers) or against Payorder /Demand Draft. In case of DD/PO,
delivery will be affected only after receipt of clear funds.
Can be purchased by non-customers too.
Discount available for bulk purchases
Treasury
The treasury of the bank is a very active participant in the inter-bank market. It
mobilises resources for the bank from domestic as well as international markets
and also manages the surplus funds available by deploying it profitably. The
treasury is divided into foreign exchange and money market desks. The foreign
exchange desk is supported by the sales desk, which interacts with the corporate
clients keeping them abreast of the latest happenings in the international markets
and advising them on risk management tools available and the best strategies for
hedging their exposures.
1. Foreign Exchange desk
Foreign Exchange Desk is bifurcated into Inter-bank & Corporate Desk. The
corporate desk interacts with the branches and clients for trade and other related
transactions, while the Inter-Bank desk undertakes the cover operations for such
transactions. The Inter-bank desk also trades in currencies on bank’s account.
2. Money market desk
Money Market desk performs the following activities on the bank’s account: >Funds Management >Balance Sheet Management >Debt securities trading
2.1 Treasury bills
Treasury Bills are short term money market instruments issued by RBI on behalf
of the Govt. of India. Basically, they are Zero coupon bonds issued at a discount
to face value and redeemed at par on maturity date. On which no Tax is
deducted at source.
RBI has permitted booking of forward contract against face value of T-bills on the
maturity date. A finite yield is thus possible insulating the investor against
exchange rate fluctuations. However, booking a forward contract is optional to
the customer. The return offered by bank is the sum of the yield on treasury bills
and exchange gains, if any.
2.2 GOI securities
These are sovereign coupon bearing instruments issued by the Government of
India. These are fixed half-yearly coupons paid on specific dates. Available in
wide range of maturities from above one year (short-dated) to twenty years (long-
dated). These are available in primary & secondary markets and are highly liquid.
Capital and Commodities markets
The Bank’s Capital and Commodities Market group has a range of services for
different segment of clients like Investors, Brokers, Corporates etc
1. Stock exchange cell
The Bank is clearing banker to cash and F & O segments of National Stock
Exchange of India Ltd. (NSE) and The Stock Exchange, Mumbai (BSE). Bank
extends following credit facilities to the members of these exchanges subject
to Bank’s internal credit norms, which is framed on the lines of guidelines issued
from time to time by RBI.
1.1 Bank Guarantee
1.2 Secured overdraft
1.3 Delivery versus payment
1.4 Intra Day Funding
2. Commodities exchange cell
The Bank is clearing banker to Multi Commodity Exchange (MCX).
As Clearing Bankers it acts as the intermediary carrying out the flow of funds
from the MCX accounts to the trading member’s account and vice versa
depending on the statement provided by the exchange. Bank carries all the
various transactions as the Clearing Bank to the MCX and gives the required
effects to the various accounts on receiving a statement of instructions from
MCX. Members have to open 2 accounts with the clearing bank at the
designated branch.
3. Bankers to public/ rights issues
Bank is registered with SEBI to act as banker to issue. All branches and
extension counters are connected through V-SAT to the central database with
IBM - AS 400 hardware and Kapiti/3 International banking software. This enables
us to give on-line the collection figure to the issuing company at any given point
in time and expedite various reports to be given to SEBI or stock exchanges.
4. IPO funding
As per RBI guidelines, Bank has started funding IPO subscription to individuals.
Product : Indus Prime Invest
Eligibility : Resident Individuals
Purpose : At the discretion of the Bank to fund subscription of selective public issues
Loan amount : Maximum Rs. 10 lacs
Margin : As stipulated by RBI, at present being 40%
Interest : Charged upfront at the rate of interest decided by the Bank for specific IPO.
Conditions : Current and depository accounts to be opened with the Bank.
Documentations : Simple, Standard and pre-printed document sets.
5. Depository services
In line with its commitment of providing highly evolved products and prompt
services, the Bank provides depository services to its clients. IndusInd Bank is
one of the first banks to offer depository products to its customers, which
commenced with the enactment of Depositories Act 1996, in India. The Bank got
registered as a Depository Participant (DP) of National Securities Depository
Limited and started offering a range of Depository Services since January, 1997.
NRI Services
NRI’s (Non Resident Indians) have always been the most important focus of
IndusInd’s business. It is their endeavor to cater to the evolving needs of
NRI’s and to continuously meet their expectations with new products and
services to deliver prompt and efficient personalised customer service at all times
through the best of Electronic and other Direct Banking Channels.
On Line Banking
1. Indus-Net- Internet Banking
Indusnet - Internet Banking service from IndusInd Bank offers us banking
services online with the same personal effort that we receive at their branch. Our
online requests are processed by a proactive team of Personal Bankers
adhering to service quality standards.
Security features include multi layered security architecture comprises of
firewalls, filtering routers, Verisign's 128-bit SSL enabled encryption and digital
certification to ensure security and protect against any unauthorized access.
2. Indus Pay- e-wallet
It is a simple and convenient way to transact online from anywhere at any
time. With this service we can create our own e-Wallet and assign accounts to it.
We can then shop / donate / subscribe online with list of Merchants and
authorize the transaction from chosen bank account using our transaction
password. Moreover, we can also view all these transactions online.
3. VISA money transfer
No more waiting in queues in Bank branches, getting the Demand Drafts made,
and writing cheques that takes days to clear, here is the only solution to make it
simpler, convenient and faster by IndusInd Bank VISA Money Transfer.
Transferring money has never been so easier before. From our IndusInd Bank
account, we can now transfer money to any of the 23 million VISA Cards
anywhere in India through IndusNet - IndusInd Bank’s Net Banking service
and any of IndusInd Bank ATM.
4. ATM’s
Easy access to the national network of IndusInd bank ATM’s
4.1 Deposit Cash / Cheque
Special deposits slip-cum-envelopes are provided at the ATM centers. All we
have to do is fill in the details of cash or cheques and insert it into the deposit
slot. Just remember not to put stapled notes or coins into the envelope
4.2 Withdraw Cash
We can withdraw up to Rs 15,000/- per day from our account using the
ATM/Debit card in any of ATMs across the country subject to availability of
balance in our account. Also we can shop up to Rs 25000 per day using our debit
card.
4.3 Statement Enquiry
We can get a mini-statement of last five transactions done on our account.
4.4 Balance Enquiry
We can check the available balance in our account and even get it printed on the
transaction slip
4.5 Request for a Cheque Book
We can key-in the request for a Cheque book and get it collected with
valid authorisation or in person as soon as it is ready.
4.7 Funds Transfer
Flexibility to allow on-line transfer of funds between our various accounts
linked with our ATM/Debit card.
5. Mobile Top ups
INDUS MOBILE TOP UP’S - enables the customer to refill his mobile prepaid
card directly through IndusInd ATM’s.
Mobile Top Ups is a Value added service offered to all IndusInd customers
through ATM channel. Customers can now recharge their mobile refills from IBL
ATM’s anytime.
6. E-statement
Now we can have your account statement information at our fingertips.
Just choose to receive Monthly/Quarterly Savings or Current Account Statement
Online at your e-mail address/es in an all-new PDF format. These online
statements can be downloaded to print, save and archive for future reference. It
is completely user friendly.
9. Mobile banking
Mobile Banking is a new convenience Service for IndusInd customers. Under
this, information based services is offered to customers by way of SMS
messages, for which one register. These could be event or frequency based
alerts.
Corporate Credit at IndusInd
Credit Organization:
1. Business Segments
IndusInd’s business segments for building credit portfolio are broadly
classified as under:
1.1Retail Banking -- Vehicle Finance Division
This segment covers individuals, corporate and non-corporate entities.
Vehicle Finance Division has two product groups, as under:
Commercial Vehicle Division handles loans for acquisition of new
vehicles/equipment for commercial application
Personal Products Division handles loan for acquisition of vehicles –
viz. cars and two wheelers for personal use
1.2 Retail Banking (other than vehicle finance)
This includes:
a. All advances and credit facilities sanctioned to individuals and Hindu
Undivided families, mainly schematic loans.
b. Non-individual borrowers excluding public limited companies with annual
net turnover of less than Rs.25 crores to whom -- either singly or in
association with related entities – our Bank’s aggregate exposure is Rs.2
crores or less.
1.3 Wholesale Banking
All other borrower segments are covered under wholesale banking including
all non-individual borrowers with annual net turnover of Rs.25 crores or more,
or to whom -- either singly or in association with related entities – our Bank’s
aggregate exposure is more than Rs.2 crores.
Further wholesale banking is sub-divided into following segments based on
annual turnover:
a) Corporate and Institutional Segment: Covers all Entities with
annual net turnover of more than Rs.300 crores.
b) Small and Medium Enterprises (SMEs) and Agricultural Banking:
Covers
All Entities with annual net turnover of Rs.25 crores or more, but not
exceeding Rs.300 crores and
All those with annual net turnover of less than Rs.25 crores to whom --
either singly or in association with related entities – our Bank’s
aggregate exposure is more than Rs.2 crores.
Agricultural banking with reference to WBG refers to direct/indirect lending
for agriculture/Micro-Finance under tie–up arrangements with
Corporates/Institutions, where lending is through such
Corporates/Institutions under Managing and Collection Agency
agreements or other such well defined arrangements. Direct loans to
farmers for agriculture would be handled by RBG and VFD.
c) Financial Institutions Group: All financial institutions irrespective of
turnover.
2. Business Groups
As per our organization structure, following business groups are responsible for
building Bank’s credit portfolio:
2.1 Retail Banking --- Vehicle Finance Division (VFD):
VFD specializes in Vehicle Financing and functions through various branches
across the country. Vehicle financing covers all commercial vehicles, mining/
earth moving/ construction equipment, cars/jeeps, etc.
2.2 Retail Banking (other than vehicle finance) (RBG)
RBG handles all Retail advances extended to individuals and Hindu Undivided
families, mainly as schematic loans and Non-individual retail borrowers defined
at 1.2 above. This group operates through all branches.
2.3 Wholesale Banking Group (WBG)
WBG comprises Business, Product and Support Groups covering the following
functions:
I. Groups
a) Corporate and Institutional Segment: Responsible for Corporate advances
and liabilities from this segment.
b) Small and Medium Enterprises (SMEs) and Agricultural
Banking: Responsible for ensuring a significant market share in
SMEs segment to enhance returns to the Bank and distribute risk.
c) Financial Institutions Group: Responsible for developing
relationships from target customer segment consisting of Commercial
Banks, Financial Institutions including Development Finance
Institutions, Mutual Funds and Co-operative Banks, etc. and achieve
business and revenue targets.
II. Product Group
1) Treasury : Responsible for acquiring product-specific relationships for
Forward Contracts, other Derivatives like Interest Swaps and
structured investment products including Constituent Securities
General Ledger accounts (CSGL).
2) Trade Finance: Responsible for originating and building client
relationships with a focus on Trade Finance products for domestic and
international Remittances, Collections, Negotiation (LC & non-LC
based), Discounting (LC & non-LC based) (build fund based bills
portfolio) as also non-fund based credit portfolio.
3) Capital / Commodity Markets : Responsible for originating and
building client relationships with a focus on Capital and Commodity
Market products such as Fund based Loans to brokers, Non-fund
based – Bank guarantees for brokers towards exchanges Depository
services, Broker’s pool accounts, Advances against shares (capital) or
warehouse facilities (commodity), Bullion operations (consignment and
retail), etc.
4) Transaction Banking : Responsible for originating and building client
relationships with a focus on remittance and cash management
products such as Anywhere Banking, Electronic fund transfer, RTGS,
Dividend / interest warrant payments, Draft / pay orders (bulk), Cash
Management Services, Online remittance products including NRI
focused inward remittances.
5) Liabilities: Responsible for originating and building client relationships
with a focus on Liability products mainly Time Liabilities.
6) Private Banking (Insurance, HNI / NRI & Mutual Funds):
Responsible for achieving premium collections and commission
earnings as per budget and provide value added services to
customers. Distribute all third-party products to achieve fee-based
income to augment overall earnings of the bank and ensure top-line
and bottom-line budgets for HNI and NRI segment.
WBG set-up has identified Business / Product Heads for every line of activity
in Corporate Office. These Business / Product Heads are supported by their
respective team of Relationship Managers/ Product Managers placed in
branches.
Business Heads at Corporate Office and their Relationship Teams will focus
on customer segments of Corporate and Institutions, SME/SSI/Agriculture
and Financial Institutions Group (FIG) with following roles and responsibilities:
To originate fund and non-fund relationship from respective customer
target segment
To originate Corporate Finance/Investment Banking deals for advisory
and placement by Investment Banking Division of the Bank
To cross-sell other products/services through the support of Product
Heads
To develop a portfolio of Customers originated through Credit
relationship and ensure cross selling of other products/services.
Product Heads at Corporate Office and Product Managers at Branches will
focus on customer origination through non-credit relationship and by sale of
Bank’s products/services covering segments like Liabilities, Transaction
Banking, Trade Finance, Treasury & Risk Management products and Capital
& Commodity Market products. The responsibilities would include the
following:
Customer/Business origination through sale of respective product and
services
Sale of respective products through leads generated by Business
Heads
Provide leads to Business Heads for Credit relationship and cross-sell
other products/services
Sale of Mutual Fund products (as alternate investment to deposits)
Employee Salary accounts and retail loan products (including demat
accounts)
As and when any customer (product/service user) gets converted into a credit
relationship by way of credit exposures (covering either fund based or non-fund
based exposures), entire relationship (including product /service-based) will
stand shifted from related Product Group to respective Business Group. Both
teams will converge towards Bank’s ultimate objective of acquiring customer
relationships and expanding customer base.
WBG has realigned the set-up in 13 Branches identified as “A” category
branches having greater potential for entire gamut of wholesale business (13
erstwhile Corporate Banking Branches). Similarly, the Group also proposes to
position WBG team at “B” category Branches identified depending upon their
segment specific potential, mostly at non-metro urban centers, from where they
will cover nearby “C” category branches.
3. Other functions relating to business processes:
3.1 Credit Function
Credit function support, which will have no budget responsibility, is available
to above business groups, as under:
Credit Department at Corporate Office is responsible for facilitating
approvals for credit proposals (other than exposures to
Capital/Commodities market) sourced by WBG.
Vehicle Finance Division has its own credit structure coming from its
organization before merger with the Bank.
Retail Banking Group has its retail credit structure reporting to Retail
Head.
Capital and Commodity Markets Division also has a credit structure
within its set-up.
Over a period of time, all credit groups would be completely separated from
business groups. In 2004-05, this separation has been implemented in corporate
credit, which now functions independent of business origination process.
3.2 Treasury:
Treasury handles inter bank exposures, exposure to rated and traded paper
FOREX and interest rate derivatives.
3.3 Capital and Commodity Markets Division (CCMD) :
CCMD handles capital market related activities including depository services,
IPO financing, loan against shares, issue of guarantees (and other services) on
behalf of brokers, etc.
3.4 Risk Management:
Bank follows a strong enterprise-wide risk management system put in place wIth
the help of KPMG in 2003-04. Bank has set up Integrated Risk Management
Department responsible for continuously monitoring credit risk, market risk and
operational risks and also taking proactive measures as warranted for mitigating
such risks in advance.
3.5 Asset Management
This group is responsible for monitoring and follow up of Non performing assets,
preparing strategies for recovery / rehabilitation/ restructuring of assets, etc. and
ultimate recovery of Bank’s dues.
Credit Origination
The Credit Origination will be done by Business Groups as follows :
1. Vehicle Finance Division – (VFD)
VFD will look after specific business of erstwhile Ashok Leyland Finance Ltd.
for financing acquisition of trucks, commercial vehicles, construction vehicles,
two and three wheelers, cars, etc. New products will be added on ongoing
basis.
The essential nature of lending is schematic lending and there is an
organization structure in place for credit origination, credit approval and credit
monitoring. There are standardized benchmarks for credit norms for various
schematic-lending programmes.
This group will decide on credit strategy within the overall business strategy in
conjunction with credit and risk management to decide on the credit scoring
templates and risk containment measures and monitoring requirements.
This business group will, as and when considered necessary, securitise its
receivables within the overall business strategy of the Bank. Securitised
assets will be managed by credit and monitoring department within this group.
2. Retail Banking (other than vehicle financing) – (RBG)
RBG will originate credit at all branches in schematic or non-schematic
lending formats. Schematic lending covers loans to individuals in form of
housing loans, personal loans, consumer loans, car loans, etc. Non-
schematic lending is by way of credit facilities to small traders and
businessmen, self-employed individuals, agriculturists, etc.
This business group will evolve its own credit strategy looking at business
environment and market opportunity in various retail branches. This will be
done in conjunction with credit and risk management to evolve suitable credit
benchmarks and risk containment strategies. The group will also develop
sales and support organizations for customer relationship management.
Branch Head / Relationship Officials will be responsible for all customer
interface necessary for maintaining asset quality through monitoring/follow up.
3. Wholesale Banking Group - (WBG)
WBG will target non-schematic lending to Corporate and Institutional
Segment, SME (at times schematic for SMEs), Agriculture Banking and
Financial Institutions Group. These will be fund based as well as non-fund
based exposures including short term, medium term, and long term
exposures and will also include forex exposures.
Based on the strategy formulated for WBG, Relationship Managers will plan
business strategy for related segment after evaluating emerging business
opportunities in command area. Credit Relationship Managers/ Branch Heads
at various branches will market corporate business guided by overall
business plan. Relationship Managers/ Branch Heads will be responsible for
customer acquisition, retention, business/profit maximization and all customer
interface necessary for maintaining asset quality through monitoring/follow up.
3.1 Treasury
The credit exposures will be of following nature:
Exposures for management of bank’s balance sheet.
Inter Bank exposures for various business requirements.
Counter party exposures taken for trading requirement.
Customer related exposures.
All these exposures can be either inland or forex exposures.
Except for customer related exposures, all other credit exposures will be
taken at Central Treasury at Mumbai. Customer related credit exposures will
be originated at branches by Relationship Managers.
Apart from credit risk, Treasury exposures carry market risk and settlement
risk. This will be closely monitored by Risk Management Department.
All customer related credit exposures would be appraised by Credit
Department, which will evolve suitable appraisal methods so that risks are
addressed while business opportunities are captured.
3.2 Capital and Commodity Markets Division (CCMD)
The Bank is acting as Clearing Bank for settlement of trades at two major
stock exchanges (NSE / BSE) and two major commodity exchanges (MCX /
NCDEX).
The Bank has established a specialized branch at Fort, Mumbai to act as link
between members (of the exchanges) and the exchanges.
CCMD looks after credit exposures related to capital market and commodity
market. WBG Group will formulate business strategy paper every year in
conjunction with CCMD and Risk Management Department.
CCMD will operate through all branches.
Credit Appraisal
Bank is aiming for separation of credit appraisal from business origination
process. This separation has already been implemented in case of Corporate
Credit. Similar structure exists in Vehicle Finance Division. This system is to be
implemented in Retail Banking Department.
1. Organizational Structure for Credit Appraisal
Business originated by various business groups is appraised by Credit
Analysts /Executives and reviewed by suitable senior personnel before
recommending to specified authority as per DOP for sanction or further
recommendation to specified sanctioning authority. Credit
Analysts/executives do not have business or volume targets to ensure that
risks are evaluated independently. Credit executives are expected to evaluate
the credit risk within overall framework of Bank’s credit policy/RBI guidelines.
At the same time, they facilitate timely decisions to enable business groups to
close out all business opportunities.
In case of “A” category branches, Credit Analysts are placed in Branches to
facilitate better understanding of customer and local business environment,
though they are part of Central Credit Team and report to Head – Credit or his
immediate deputies / subordinates.
2. Credit Appraisal Methodology
The Bank adopts both the Subjective Approach and the Objective Approach
to credit decision making. Subjective Approach to lending is based on
assessment of the borrower's ability and willingness to repay the loan and this
takes into account the Six 'C's of lending viz. Character, Capacity, Capital,
Collateral, Conditions and Concentration. In the Objective Approach, the
credit decision is based on more scientific way of assessing the quality of the
asset by shifting the emphasis from the 'borrower' to the 'quality of the asset'
based on assessment of the risks involved. To facilitate objective appraisal of
credit proposals, the Bank has acquired from Crisil and operationalised
Rating and Appraisal Models (RAM). Currently, it is mandatory that all non-
schematic proposals for exposure of more than Rs.2 crore be rated in RAM.
There are 5 models for different segments of borrowers viz. Large
Corporates, SME borrowers, Traders, NBFCs and Capital market brokers.
Besides, Bank has developed internal rating model for rating domestic banks,
domestic entities of international banks, financial institutions and primary
dealers.
In each of the models, ratings are done on a scale of 1 (most superior) to 8
(most inferior). The rating grades are uniquely named for each model. For
instance, rating grades of Large Corporates are named as L1 to L8, whereas
those of SME model are named as S1 to S8.
However, all these model-specific rating grades are mapped to a common
scale rating grades IB-1 (most superior) to IB-8 (most inferior).
Going forward, we may add new models and separate appraisal formats for
agriculture, infrastructure, services, etc. for standardizing appraisal and
capturing segment specific characteristics, risks and risk mitigants and
facilitating timely decisions.
Vehicle Finance Division has its own policy and detailed manuals for
schematic lending. Detailed paper on evaluation techniques/recovery set up
is presented in Section II.
Retail Banking Department has separate manuals for advances. Detailed
paper on evaluation techniques/recovery set up is presented in Section III.
Corporate Credit : Detailed paper on approach to Corporate Credit and
assessment methods, segment specific parameters and products is
presented in Section IV of this policy. Segment specific parameters and
products will be applicable to all credit facilities sanctioned by the Bank
(other than schematic loans) whether originated by RBG / WBG. Any
other existing norms/parameters in this regard adopted by any Group
will have to be within the broad parameters and product specifications
contained in this document.
Treasury works within the overall framework of Bank Risk policy, country risk
policy and other policies on derivatives, etc. Detailed paper is presented in
Section V.
Capital and Commodity Markets Division : For business from capital and
commodity market segment, origination of business is from branches and
analysis / processing of credit proposals is centralized. Detailed paper is
presented in Section VI.
Credit Risk Assessment
In last decade, the business environment has undergone radical change.
Before liberalization the business environment used to be reasonably stable and
predictable. Moreover, in a shortage prone economy most of what was produced
was sold at cost plus pricing. In such an environment, it was adequate to analyse
the past performance based on financial data and extrapolate into the future.
However, now the business environment is free from capacity constraints
internally and is exposed to global competition externally. This necessitates
change in the credit risk assessment methodology.
Credit risk assessment will therefore be based on –
Understanding of business cycles and industry risk in the segment where
borrower operates (Industry Risk).
Stability of business model of the borrower in competitive environment
(Business Risk).
Financial risk based on balance sheet structure (Financial Risk).
Promoter’s competence and reputation (Management Risk).
Availability of credit enhancements (Risk Mitigants).
Adequacy of security offered (Risk Mitigants).
The Rating and Appraisal Models (RAM) acquired by the Bank from CRISIL,
which have been fully operationalised, adequately cover all the above aspects
and all the credit proposals should be compiled on the appropriate RAM model.
Bank will progressively work towards credit enhancements by discriminating
between the quality of different cash flows of borrowers and aim to capture the
better quality cash flows through pooling of cash flows, use of escrow/TRA
accounts or any other methods of credit enhancement.
1. Assessment of Requirements:
1.1 Working Capital Assessment
For over two decades banking industry primarily followed Tandon Committee
methods of lending for assessment of maximum permissible bank finance
(MPBF).
RBI has now permitted Banks to have an independent approach on methods
of assessing working capital requirements. However, in absence of any
stabilised alternative, large number of banks continue to use the same
method for working capital assessment.
In the changed industrial and business environment, borrowers are becoming
more efficient in use of working capital with help of technology and better
management process. So, Corporates are aiming at reducing working capital
borrowings. Best of the companies have already migrated to negative
working capital cycle.
In such a situation, Bank has to adopt different methods for assessing
borrower’s requirements. Moreover, MPBF method of credit assessment is
typically meant for manufacturing units. In FY’05, manufacturing contributed
27% of GDP whereas “services” accounted for over 52% of GDP. Taking
these changes into consideration, our approach to assessment of working
capital requirement will be as follows:
In case of manufacturing companies, second method of lending as per
Tandon Committtee will be followed for assessment of working capital
requirements.
As recommended by RBI, cash budget method will be adopted for
assessment of working capital needs of seasonal industries like sugar and
certain other industries like Construction, Film production, Infrastructure,
services/service intensive industry (software, hotels, ship breaking,
plantations, etc.).
In case of SSI units (with requirement upto Rs. 5 crores), we will follow the
Nayak Committee method based on turnover.
In all the above cases, our endeavour will be to move towards structured
finance to fund receivables/payables based on cash flow control and credit
enhancements.
1.2. Assessment of Term Loans:
Bank will provide project-specific Term Loans as also for normal capital
expenditure and augmenting long term working capital and other general
purposes. Maturity of Term loans will normally be restricted to seven years
except in the case of Home loans where the maturity could extend upto 20
years.
In case of project specific loans, assessment of loan will be based on :
Requirement as per business needs
Project cost and means of finance
Pattern of funding
Technical feasibility
Financial viability
In case of other term loans, Bank will accept reasonable assumptions on
projected earnings from the borrower’s business as a whole and analyse the
debt servicing capacity, based on which, bank will take suitable credit risk.
Bank will try to identify one or more good quality cash flows and escrow the
same to enhance credit quality, wherever feasible.
In case of syndicated loans, the Bank will base its appraisal on the Lead
Manager's appraisal. However, the Bank will endeavour to make an
independent verification of the same.
2. Structured Loans
In keeping with the present trend, Bank will also take term exposures by
securitising quality cash flows (for e.g., securitisation of lease rentals, loan
receivables, receivables under specific contracts, etc.). In such cases, the
adequacy and stability of escrowed cash flows will be analysed for debt
servicing. Structured exposures may not be internally rated.
Generally, characteristics of structured loans vary from case to case depending
on identified cash flows and therefore, require specific checks and stipulations.
Indicative safeguards for certain structured loans are discussed below :
Securitisation of lease rentals : It will be ensured that underlying
rental property is occupied by the lessee and rent is regularly paid by
the lessee through the Bank. Besides identified repayment source,
such exposures will be usually backed by mortgage of property.
Amount of loan will be arrived at after factoring in TDS, reasonable
maintenance charges as per lease terms, deposit taken by the Lessor
and other such specific charge on the rentals. The loan will be normally
released only after the lease rental agreement is executed. (Product
specifications are discussed in Annexure II.)
Securitisation of receivables pertaining to retail loans : It will be
ensured that none of Facilities in the Pool have been restructured or
rescheduled and that all loans are free from any encumbrances. Pools
should be geographically well diversified. Necessary certificate will be
obtained from the Originator, to the effect that facility documents are
valid and enforceable. It will be ensured that adequate credit
enhancement by way of cash advance facility i.e. liquidity support and
credit collateral by way of first loss credit facility and second loss credit
facility, is available to cover portfolio leveI expected losses. Issues will
be preferably rated by an external credit rating agency (No internal
rating), with Minimum rating “A” (Adequate safety). (Product
specifications are discussed in Annexure II.)
Securitisation of receivables under specific contracts : This type of
facility will be normally considered in case of large value contracts
where payment risk is on a top quality corporate with exceptional
market standing. Underlying contracts will be thoroughly scrutinized to
ascertain payment terms to schedule repayment relating to specific
milestones, factoring in time for administrative processes, if necessary.
Generally, such exposures would be taken up under syndication
arrangement, which will provide for scrutiny of documents, clearing
disbursement based on completed work/supplies, tracking milestones,
etc. by facility auditors, to ensure thorough checks and one-point
reference for borrowers facilitating operational convenience.
3. Non fund based limits
Limits for Letters of Credit for procuring raw materials will be assessed
based on estimated purchases during the year, cycle of purchase, usance
period, shipping period, etc.
In case of capex LCs, limit will be based on project related / capex cash
outflows.
Bank Guarantee limits will be based on existing outstanding, expected
cancellation and fresh issues –depending on the need in line with the
activity of the borrower.
Non-fund base facilities like LCs and Guarantees will not normally be
sanctioned on a stand-alone basis, except to customers of exceptionally good
standing.
No guarantees will be issued in respect of disputed liabilities except when
backed by 100% cash margin as security.
Credit Risk Rating
Bank will rate all credit exposures as per Risk Assessment Module (RAM), which
classifies exposures from IB-1 (highest) to IB-8 (lowest).
Minimum Acceptable Rating Grades would be as under:
The minimum acceptable credit rating shall be IB-4 for all borrowers.
In case of existing borrowers having a rating of IB-5 or IB-6, we propose
adoption of any one or more of the following strategies:
Strengthen the collateral security and other comforts.
Efforts will be made to increase the interest rate in order to
compensate for additional risk.
Continue with the exposure if there are additional comforts such as
collateral, good conduct of the account, effective support from Group,
etc.
If additional comforts are not available, Bank will consider gradual
reduction in exposure or initiate efforts to exit.
In case of existing borrowers having a rating of IB-7 or IB-8
No further exposures to such account
Strengthen the collateral security and other comforts.
Exit the account in a time-bound manner, in any way within a
maximum period of one year. Meanwhile, efforts will be made to
increase the interest rate in order to speed up the exit.
If exit proves difficult, reduce the exposures in a phased manner
The exact strategy to be followed will depend on the nature of the exposure.
Any one or more of the above strategies may be adopted on case-to-case
basis.
Other measures for maintaining asset quality
In case of “A” category branches, Relationship Managers and Credit Analysts
will monitor all exposures on an on-going basis with the ultimate objective of
maintaining asset quality. This process will involve identification of 2 lowest
quality exposures at Branch level for exit during every financial year, among
borrowers having credit rating IB-6 and above, as under:
In case of all borrowers having credit rating of IB-5 and IB-6,
specific strategy - whether to continue, reduce or exit from the exposure,
would have to be discussed in appraisal/review notes to facilitate a
conscious view.
In case of borrowers with credit rating upto IB-4, there may be
some cases where adverse features like specific market developments,
impact on market share, size vis-a-vis competitors, etc. impact credit risk;
even though credit rating may remain within acceptable level of IB-4. In
such cases, these developments would have to be discussed in
appraisals/review proposals giving specific strategy.
This exercise would ensure that early warning signals are detected and
conscious /timely decision is taken in respect of all such accounts
(irrespective of the credit rating) to ensure that quality of our credit portfolio is
maintained.
Security
Advances extended by Bank should normally be secured. In exceptional
cases, unsecured advances will be considered on merits of each case.
Security obtained should be marketable and documentation should ensure
that Bank foreclosure of security is facilitated in the event of default.
Decision to grant credit facilities will not be based only on availability of
security, Following factors will be primarily considered while evaluating a
credit proposal:
a. Stability and sufficiency of cash flows, to pay the debt.
b. Ability and intention of the borrower to pay.
Value of security will be constantly monitored.
Personal guarantees of promoter directors/partners will
be insisted upon in the case of closely-held companies, companies which
do not have a professional management set-up, family concerns, etc.
Undertakings provided by the customers as per sanction terms should be
carefully read, on receipt, at Branch level to ensure that they comply with
the Bank's requirements and are relevant for the purpose for which they
are obtained.
In compliance with RBI guidelines, the Bank will not grant advances
against fixed deposits / or term deposits of other banks.
Bank will not grant loans against Certificate of Deposits, as per extant RBI
directives.
Pricing
As per RBI’s Guidance Note on Credit Risk Management, banks should evolve
scientific systems to price the credit risk, which should have a bearing on the
expected default. The pricing of loans normally should be linked to risk rating or
any other indicator of credit quality.
Pricing for a particular facility will have to take into account all the factors relating
to risk and return and be governed by overall earnings from the
relationship/group. A comprehensive pricing framework, taking into account all
the related factors, is being formulated and shall be submitted to Board shortly by
Risk Management Department.
Extant guidelines on pricing as approved by BOD as part of Credit Risk Policy
shall continue till revised pricing policy is approved.
Bank will aim at pricing all products in a way to derive suitable risk adjusted
returns on overall relationship basis and as such bank may be flexible in product
specific pricing.
Competitive pricing may be used as a tool for customer acquisition.
Documentation Standards
Bank’s standardised documents as contained in manual for
documentation should be used. Any deviation to the above and specially
drafted documents in respect of specific cases will need prior clearance of
Legal Department. In the case of consortium advances and loans
sanctioned in participation with Financial Institutions, common documents
approved by Lead Bank/Lead Institution may be taken.
Specific issues relating to documentation impacting credit risk will
be referred to sanctioning authority through Credit Department.
Documents should be vetted by empanelled advocates and
disbursal should be made only after obtaining prior clearance from Legal
Department as per the guidelines issued by the Bank, from time to time.
Broad Parameters for different borrower
segments
It would be ideal if standard financial parameters like current ratio of 1.33 and
TOL/TNW of 3 are applied to all borrowers. Similarly, standard margins for
individual facilities are as under:
1. Raw materials 25%
2. Consumable and
Spares
331/3%
3. Packing materials 50%
4. Stock in process 40%
5. Finished goods 25%
6. Bills 25%
7. Book debts 50%
These standard parameters do not, however, factor in the peculiarities of
different borrower segments and as such deviations may have to be permitted in
order to factor in peculiar features of different sectors/activities. Broad
parameters for certain activities/sectors are set out in Annexure I and these could
be adopted while appraising credit proposals.
Products
Besides regular working capital limits like Cash Credit, export credit facilities,
term loans, Letters of Credit and Bank Guarantees, as also term loans, Bank will
continue to offer other products in line with changing market trends.
Details of some products are given in Annexure II. These are not intended to be
exhaustive, but only indicative. Going forward, new products will be added to this
list based on market conditions.
Segment specific parameters and products specifications discussed in
these Annexures will be applicable to all credit facilities sanctioned by the
Bank (other than schematic loans) whether originated by RBG / WBG. Any
other existing norms/parameters in this regard adopted by any Group will
have to be within the broad parameters and product specifications
contained in this document.
Credit Administration
Disbursement should be as per the guidelines laid down in operating manual on
advances:
Compliance with all terms of sanction including documentation and
pre-disbursement covenants should be ensured before disbursal of the
facility. Also compliance with RBI guidelines e.g. undertakings from
borrower/guarantor in respect of non-payment of commission on
guarantees obtained from directors, etc. should be ensured.
There may be certain terms which are required to be completed
within a prescribed period from disbursement. Branches should maintain
a follow up Register and ensure compliance within prescribed time. Non-
compliance / progress should be reported to Corporate Office.
Credit Monitoring and risk containment
1. Credit monitoring
Credit Management requires close and continuous monitoring of all exposures.
Early warning signals need to be detected and addressed to control slippage in
asset quality.
Operating manual of advances contains detailed guidelines for post-sanction
compliances. Major steps for exercising effective supervision and follow up are
given below:
i) Periodic Inspection
Inspection of factory premises, production process,
Inspection of books of accounts, accounting procedures
and system of financial planning and control.
Discussions with the owners/key officials on issues like
overall performance, problems and prospects of the unit, market
trends, competition, quality etc.
Inspection of specific assets financed by the Bank and
collateral security charged to the Bank.
ii) Scrutiny of Financial Statements/Returns and other Information
iii) Monitoring operations in the Account
iv) Ongoing compliance with terms of sanction, as applicable
2. Renewal / Review
Timely annual review is an important step in the follow-up, supervision and
administration of credit.
a) Review/Renewal exercise gives the Bank an opportunity, inter alia, to
assess :
Performance of borrower’s business activity.
Utilisation of borrowed funds
Position of Bank’s security.
Any signs of incipient sickness and if so, take corrective steps
b) In case of companies where audited Balance Sheet is not available,
and the renewal is due, a quick review/continuation memo should be
put up (Continuation for a maximum period of 6 months); and within
one month of finalisation of audited Balance Sheet, regular renewal
should be submitted.
c) Due date diary should be maintained indicating month-wise record of
credit proposals falling due for review/ renewal.
d) If the borrower does not co-operate in submitting the required
documents despite follow-up by the Branch Manager, penal interest
should be charged over the stipulated rate on such credit facilities.
Periodic reviews/renewals
The following discriminatory schedule has to be adopted for interim/periodic
reviews and renewal depending on the credit quality of assets and size of the
exposure. However, validity period for renewal will be one year or as decided
by the approving authority at the time of sanction.
Rating Exposure
size
Frequency for Interim Reviews/ Renewal ##
All listed companies
irrespective of
exposure
Brief Quarterly review based on published
information and Annual renewal
Unlisted companies
IB-1
to
IB-4
Rs.25 cr &
above
Half-yearly review – based on available information
and Annual renewal
Below Rs.25
cr
Annual renewal (i.e. no interim review)
IB-5
to
Rs. 2 cr and
above
Half-yearly review – based on available information
and Annual renewal
IB-8 Below Rs.2
cr
Annual renewal (i.e. no interim review)
## Half-yearly review and annual renewal shall be submitted to the
sanctioning authority as per the delegation of powers in force, while the
quarterly review shall be submitted to Credit Dept, Corporate Office.
The above discriminatory schedule will cover all credit exposures. The
interim review shall be carried out based on a concise format designed by
Credit Department.
3. Credit Administration set up
In the revised set up of Corporate Credit Department, credit administration
function is separated from Relationship Management. Credit administrators at
CBBs will work under supervision of Credit Analysts, and will report to Head
(Credit Administration) at Corporate Office.
At the branches, Credit Administrator will analyse conduct of account and the
periodical financial feedback from the borrower and raise alert on early signs
of weakness to Branch Head and Head (Credit Administration) at Corporate
Office.
At the branches, Credit Relationship Managers (CRM) will closely monitor
credit risks based on market reports, external information and feedback from
Credit Administrator. Branch Head will then work on account strategy in
consultation with CRM based on the above information.
At Corporate Office, Head - Credit Administration (who reports to Head
Credit) will follow up each irregular account. Head - Credit Administration will
interact with Credit Administrator and Branch Head on these irregularities to
ascertain the seriousness and finalise strategy on each of them.
Head - Credit Administration will also interact with concurrent auditors,
internal auditors and Loan Review Mechanism Team on a regular basis to
track irregular features and ensure compliance /rectification and also take
steps to eliminate such observations in future.
4. Risk Containment and Exit Strategy
Credit monitoring will lead to identification of weak accounts for which Credit
Department and WBG will decide an account-wise strategy whether to
continue, reduce or exit from the exposure. Bank shall endeavour to obtain
suitable credit enhancement by way of additional security and/or higher
margins, etc., wherever deemed fit. Such account-specific strategy will be
implemented by Branch in a time bound plan, under close follow up from
Credit Administration.
Credit Administration Department will periodically put forth a monthly report to
the Board / Committee of Directors on irregularities and steps being taken to
address them.
Loan Review Mechanism/ Credit Audit
A separate policy on Loan Review Mechanism has been approved by the Board.
The policy stipulates details of accounts to be covered under Credit Audit, as
reproduced below:
a) All fresh sanctions and enhancements after the last visit are to be
subjected to LRM during every visit.
b) For accounts which are not included in (a) above, LRM is to be
conducted as per the following schedule:
Credit Rating Limits Frequency
IB-1 to IB-4 Rs.10 crores & above Once in a half-year
Below Rs.10 croresOnce in a year
IB-5 & IB-6 Rs.5 crores & above Once in a half-year
Below Rs.5 croresOnce in a year
IB-7 & IB-8 All accounts Once in a half-year
c) If one or more companies of a particular group fall(s) under Category (b)
above, all other companies in the group will be subjected to LRM in the
same frequency as applicable to the company falling under the above
category (irrespective of the rating or exposure size of such other
companies).
d) During every visit, LRM should also cover randomly selected exposures
(say 10%) from the accounts not covered by above criteria.
NPA Management
The Bank's objective is to contain NPAs to the minimum levels through a
combination of measures like (i) ensuring selection of quality assets through well-
designed credit approval process, (ii) closely monitoring the credit portfolio and
initiating effective measures to upgrade quality, (iii) upgrading non-standard
assets through rehabilitation/restructuring wherever possible, and (iv) recovery
through compromise settlements in appropriate cases and legal process in other
cases. NPAs will be recognised on the basis of the Income Recognition and
Asset Classification norms of RBI. In addition, potential NPAs will be identified
through the early warning signals observed during the course of credit
monitoring.
The Bank will also observe the guidelines provided under the Corporate Debt
Restructuring (CDR) mechanism in appropriate cases.
Benchmark norms for various
segments/activities
I. Manufacturing Companies:
Financial profile of manufacturing companies differs widely for different industrial
segments.
Indicative benchmark norms:
1. Current Ratio : 1.25 (Minimum)
2. TOL/TNW : 3 (Maximum)
3. Interest Cover : 2 (Minimum)
(For term loans)
4 (a) Average DSCR (Gross) : 2 (Minimum)
(b)Minimum DSCR(Gross) : 1.5
5. Asset Cover : 1.5 (Minimum)
6. Tenor : Not exceeding 7 years
7. Margin : Not less than 20%
II. Project Construction Companies :
This reference is to companies which undertake large infrastructure projects
like construction of roads and highways, railway bridges, hydel power
projects, dams, barrages thermal and nuclear power projects, marine
structures, water supply, factories and waste treatment plants, metro rail
projects and others. Real Estate developers will not be covered under this
category.
Such companies have a different profile from manufacturing companies.
They need large guarantee limits for performance and mobilisation advance.
The advance received is shown as ‘Current’ or ‘Term’ Liability. Thus,
TOL/TNW is high and current ratio is low.
Indicative benchmark norms:
1. Business Standing
(of Company / Group) : Minimum 5 years
2. TOL/TNW : 6 (Maximum)
3. Current Ratio : 1.10 (Minimum)
4. Minimum Margin on LC/BG : NIL for reputed companies
5. Receivables from the clients to be preferably escrowed.
III. Diamond Industry:
Industry is dominated by ‘De Beers’ who supply about 60% of global rough
diamonds through select buyers called ‘Sight holders’. Out of 40 odd Sight
holders, 60% of them are in India.
All diamond exporters import rough diamonds, polish and export them. The
working capital cycle is long and large export credit limits are required (about
6-9 months of sale).
Indicative benchmark norms:
1. Borrower should preferably be a ‘Sight holder’ or a group company of a
‘Sight holder’, existing well conducted account /consortium account
2. Turnover : Not less than Rs. 100
crores
3. Tenor for Export Packing Credit : 90-120 days
4. Tenor for Post Shipment Credit : 90-120 days
5. Of the post shipment finance 50% can be in form of direct bills. House bills
should not exceed 10%
6. Our exposure not to exceed 25% of borrower’s working capital
requirements.
7. TOL/TNW : 3 (Maximum)
8. Current ratio : 1.10 (Minimum)
IV. NBFCs:
Bank will fund only the NBFCs which are registered with RBI with the
exception of :
a. Housing Finance Companies (HFCs)
b. Stock broking Merchant Banking Companies (Separate policy
formulated by Capital and Commodity Markets Division).
Bank’s funding will be only for activities permitted as per RBI
guidelines issued from time to time, last resting with master circular No
DBOD.BP.No.17/08.12.01/2005-2006 dated July 14, 2005.
Bank will follow MPBF method for assessment of requirements.
Indicative benchmark norms:
1. Belonging to a reputed group.
2. Existence : Not less than 5 years
3. Net owned funds : Not less than Rs. 50 crores
4. Capital Adequacy : Not less than 12%
5. Net NPA : Not more than 5%
6. Preferably external
rating : A+ and above
7. Banks exposure : Not to exceed Rs. 50 crores except in case of
Top Grade Housing Finance Companies
(HFCs) for priority sector lending.
8. Tenor of term loan not more than 5 years. (7 years in case of reputed
HFCs for priority sector lending).
V. Traders:
In case of traders, profit margins are low and there is faster rotation of
working capital cycle.
Indicative benchmark norms:
1. Standing : Should be in same line of business for
minimum 5 years
2. Profit margins : Should have stable profit margins
3. TOL/TNW : 5 (Maximum)
4. Current ratio : 1.10 (Minimum)
5. Margin : Stock – 25%
Book Debts – 40%
L/C / BG – Minimum 10%
6. Security : Adequate security is essential with minimum
asset cover of 1.50
VI. Services / Service Intensive Companies:
These types of companies will have very low or no ‘inventory’. Current assets
will be primarily receivables. Some of them may have large term loan
requirements. The profitability is generally high.
Indicative benchmark norms :
1. Current ratio : 1.10 (Minimum)
2. PBDIT/Sales : 10% or above
3. Interest cover : 2 or above
4. Term Loans/
Cash Accruals : 5 or less
5. TOL/TNW : 3 (Maximum)
6. Security Cover : Suitable collateral is essential.
VII. Small & Medium Enterprises (SMEs) and other entities with annual
turnover upto Rs.300 crores:
SMEs are primarily manufacturing companies and will have business profile
similar to larger manufacturing companies.
1. At present, SSI unit is an industrial undertaking in which investment in
plant and machinery, does not exceed Rs.1 crore except in respect of
certain specified items under hosiery, hand tools, drugs and
pharmaceuticals, stationery items and sports goods where this investment
limit has been enhanced to Rs.5 crore.
2. As per RBI guidelines vide circular RPCD.PLNFS.BC. No. 35/06.02.31
dated 25.08.05, units with investment in plant and machinery in excess of
SSI limit and up to Rs.10 crore may be treated as Medium Enterprises
(ME).
(Only SSI financing will be included in Priority Sector.)
RBI has directed banks to fix self targets for financing SME sector for higher
disbursements as also to initiate steps to rationalize cost of loans linking them
to credit rating. Our RAM provides separate module for SMEs and pricing is
based on credit rating. As regards time to be taken for disposing loan
applications and limit upto which banks are obliged to grant collateral free
loans, RBI guidelines vide master circular No RPCD.PLNFS.BC. No.
03/06.0231/2005.06 dated 01.07.2005 on SSI sector, will be applicable for
both SSI units and ME sector.
RBI has also issued guidelines vide circular DBOD. BP. BC. No
34/21.04.132/2005-06 dated September 8, 2005 for Debt Restructuring
mechanism for SMEs. Our Bank will follow these guidelines for restructuring
in respect of following SMEs, which are viable and potentially viable :
i. All non-corporate SMEs irrespective of the level of dues to banks.
ii. All corporate SMEs, which are enjoying banking facilities from a single
bank, irrespective of the level of dues to the bank.
iii. All corporate SMEs which have funded and non-funded outstanding upto
Rs.10 crore under multiple / consortium banking arrangement (for
outstanding of Rs.10 crore and above, guidelines are being issued
separately).
Following units will be ineligible for restructuring:
i) Accounts involving wilful default, fraud and malfeasance will not be eligible
for restructuring under these guidelines.
ii) Accounts classified by banks as "Loss Assets" will not be eligible for
restructuring.
Broad parameters proposed for manufacturing companies will apply to
SMEs and other entities with turnover upto Rs.300 crores.
In case of additional comfort in the form of escrow arrangement for
identified cash flows, exclusive security and other such credit
enhancements, the parameters could be relaxed as under:
1. Current Ratio : 1.20 (Minimum)
2. TOL/TNW : 4 (Maximum)
3. Interest Cover : 1.5 (Minimum)
(For Term Loans)
4. Average DSCR (Gross) : 1.5 (Minimum)
Minimum DSCR (Gross) : 1.25
5. Tenor : Not exceeding 5 years
6. Margin (Term loans) : 20% (Minimum)
7. Margin for working
capital facilities : Stocks & Book debts – Minimum 25%
L/C & BG – Minimum 10%
VIII. Agriculture Sector
Our Bank will adopt innovative approach to Agriculture Business by offering
complete supply chain solutions. Both RBG and WBG will have dedicated teams
of agriculture sector specialists and finance professionals with deep
understanding of sectoral business environment who will devise customized
solutions and offer complete supply chain solutions for various segments as
under:
1. Sugar Industry
Bank caters to both the sugar industries as well as cane growers associated
with sugar companies. The strong linkage between cane grower and
processor provides Bank an opportunity to offer structured products to both
parties at very competitive rates.
1.1. Products on Offer
1.1.a. Regular commercial banking services for Sugar Companies :
Facilities like Working capital finance, Term loans, Forex derivatives and
others as per requirements and cash flows are being extended by our
Bank.
1.1.b. Corporate-linked Agricultural Loan : This is a product in which Bank
ties up with a sugar company to provide financial assistance to farmers
linked to the sugar company. The corporate would generally have an
arrangement with farmers to supply agricultural inputs and/or to
procure/assist in marketing farm produce.
(i) Features
Duration of loan will be between 12-18 months depending on
duration of the crop.
Loan will be disbursed directly OR through the Sugar Company
under Management and Collection agency arrangement.
Value of loan sanctioned to a farmer will be a function of area
grown under sugar cane cultivation. According to NABARD
recommended scale of finance, farmers are eligible for Rs.
10000/- per acre to plant crop and Rs. 7000/- per acre for ratoon
crop.
Bullet repayment of principal and interest from the proceeds of
sugarcane supplied by farmers to Sugar company.
Identification of Borrowers & Eligibility: Sugar Company will
identify the farmers for loans, which will qualify for agriculture loan
facility. They will contact individual farmers and get loan
application and other documents as prescribed by the Bank
executed by individual farmers.
Comfort will be available as under :
a) Hypothecation of standing crops
b) Declaration from the farmer that there are no outstanding dues
to any Bank/ other lender and there is no charge on the
aforesaid crop / receivables.
c) Authority to disburse the loan to Sugar Company.
d) Power of Attorney to collect the receivables directly from
Sugar Company.
e) Normally, guarantee of Sugar Company will also be available.
(ii) Eligibility criteria for farmer selection : These will be fixed based on
following :
Land ownership
Consistent supply of cane for pre-specified period
Registered member of sugar mill
2. Plantations: Tea, Coffee, Rubber and other plantation products
Plantation sector is a significant foreign exchange earner for the Indian
economy. In the international trade arena plantation products from India
are unmatched in terms of the superior quality they offer. Some plantation
products are covered hereunder:
Tea plantation and processing:
Products:
2.1.1a. Regular commercial banking services for Large Tea
Companies : Facilities like Working capital finance, Short term loans,
Term loans for meeting capital expenditure on plantations and processing
facilities, dealer financing through Bill Discounting for domestic marketers
as also other facilities like Forex derivatives, etc. as per requirements and
cash flows are being extended by our Bank.
2.1.1b. Schematic lending to small and medium Tea Growers and
also stand-alone tea processing factories:
(i) Features: Loan for sale through Tea Auction Center
75% of the value of stock is extended as warehouse loan to the
grower.
Maximum Exposure per single borrower: Rs 50 lacs.
Total Exposure under the scheme: Rs 3000 lacs.
Margin: Minimum 25 %
Period: Maximum 45 days.
Rate of Interest: BPLR plus 0.50% minimum 14 % p.a.
Bank has to pay charges to the brokers for sourcing and handling
the entire process as per terms defined in tripartite agreement
amongst seller, broker and the bank.
Security :
Before Auction: Warehouse receipt endorsed in our favour.
i.e pledge of Tea under auction.
After Auction: Post Dated Cheque of the broker (as the
payments are made by the buyer on the prompt day in favour of
broker as per byelaw)
Personal Guarantee of sellers, Corporate Guarantee of
brokers through tripartite agreement amongst seller, broker and
the bank.
(ii) Eligibility:
Tea growers who sell their produce in the Auction House through
brokers. Sellers with minimum 5 years of track record in the field are only
eligible for consideration.
(iii) Identification:
All the Growers (In auction they are known as Sellers), Buyers and
Brokers must be the members of Tea Auction Center (TAC). The
byelaws have well defined the roles of all participant members.
2.1.1c. Other plantations like Coffee, Rubber, etc. : On similar lines as
discussed in 2.1 above, Bank would finance loans for other plantation
products as under :
Regular commercial banking services for Large Companies
Different stakeholders in the value chain : Dealer financing,
Finance against warehouse receipts, short term finance linked to
business cycle, bills discounting facilities, etc.
3. Seed sector
Bank shall consider following products in the seeds sector:
3.1Products
3.1.1 Regular working capital financing
Working capital requirement for seed companies is seasonal and
varies depending upon the crop portfolio and seasonality. Working
capital assessment for seed companies would be under cash flow
method. Regular working capital assistance would be in the form of
cash credit or working capital demand loan. The fluctuating part of
working capital would be structured as cash credit and balance as
working capital demand loan, as a revolving credit for fixed tenor with
minimum stipulated drawal.
3.1.2 Farmer / Organizer financing:
Seed organizers undertake seed production on behalf of the seed
company. Bank will develop products for assisting seed organizers on
recommendation and letter of comfort given by the seed companies.
Short-term loans would be extended for seed cultivation or against the
stocks held by the seed organizers pending seed certification process.
The credit limit would depend on the value of seeds to be procured by
the seed company from the seed organizer. The seed organizer would
give instruction to the seed company to make payments directly to the
bank on due date from the payments due to the organizer and this
arrangement should be confirmed by the seed company.
Features of this product will be similar to assistance extended to sugar-
cane growers and will be under a Management and Collection Agency
arrangement with Seed Companies with well defined terms relating to
eligibility, maximum tenor of loan, security, etc.
4. Fertilizer sector
4.1Regular commercial banking services for Fertilizer Companies:
Facilities like Working capital finance, Term loans, Forex derivatives
and others as per requirements and cash flows are being extended by
our Bank.
4.2 Dealer financing:
This product will aim at providing short term finance to the dealers of
fertilizer companies for making purchases of products from the
companies. The financing shall be typically for the inventory-holding
period of the dealer i.e. typically for a period up to 90 days.
The financing to dealers would be based on either of the following :
Financial recourse by way of Corporate Guarantee for
overall arrangement OR
Non-Financial Recourse through Letter of Comfort for overall
arrangement (Stop supply, etc.)
4.3 Securitisation of receivables for companies
Many fertilizer companies have outstanding loans in their books
towards the credit provided to the dealers for a period of 90 days.
These book debts would be securitised to provide liquidity to the
company; pricing and structure of transaction would be worked on a
case-to-case basis
5. Finance against warehouse receipts
The Agricultural Commodity market in India has grown substantially in the
last few years after the establishment of the Forward Market Commission
and the commencement of the Commodity Exchanges viz., MCX and
NCDEX.
The State and Central Warehouses all over the country have now
provided opportunity for farmers and private parties to store their
agricultural produce. These Developments have provided a scope for
banks to lend against pledge of commodities through warehouse receipts
without the associated price risk arising out of controls, hoarding, etc.,
Our Bank has launched a scheme viz. Advance Against Warehouse
receipts which has great potential for lending under priority and non-
priority segments.
5.1 Purpose:
To extend financial assistance to farmers storing produce in Government
ware-houses / cold storages against pledge of warehouse / cold storage
receipts and also against demat warehousing receipts issued by Multi
Commodity Exchange of India Ltd (MCX) and National Commodities and
Derivatives Exchange (NCDEX) aimed at mitigating the losses incurred by
the farmers who often resort to sale of agricultural produce immediately
after harvest due to lack of holding capacity and need for ready cash.
5.2 Target Group: All categories of Farmers / Individuals /Small traders
and other entities
5.3 Nature of Facility: Working capital Loan
5.4 Security:Pledge of warehouse receipt. The receipts issued by
Government (Quasi / State / Central) warehouse companies /
Corporations and other Government approved warehouse receipts and
demat warehousing receipts issued by MCX and NCDEX are
acceptable.
5.5 Quantum of Loan:
65% of the value (market price) of the produce stored.
Maximum upto Rs 10 lacs to farmers shall be classified as
Priority sector direct lending to agriculture.
Loan above Rs 10 lacs shall be classified as Non-priority sector
and
Maximum exposure is restricted to Rs 75 lacs.
5.6 Commodities
All fresh agricultural Commodities except the commodities on which
restrictions of hoarding imposed by Government / RBI at the time of
request. Perishable items, which are stored under cold storage, only
can be accepted.
5.7 Interest rate.
Priority sector : BPLR minus 4.25 % minimum 9.25% p.a.
Non-Priority Sector : BPLR minus 3.00% minimum 10.50% p.a
5.8Appraisal: Proper appraisal of the borrower with full details of
background, net worth, market report should be done.
5.9Tenor: Loan should be liquidated as and when the produce is sold
preferably within 6 months but not exceeding 9 months.
6. Other allied activities
Our Bank will aim at covering all agricultural activities like crop production,
horticulture, plantation crops, farm mechanization, land development and
reclamation, digging of wells, tube wells and irrigation projects, forestry,
construction of cold storages and godowns, processing of agri-products,
finance to agri-input dealers, allied activities like dairy, fisheries, poultry,
sheep-goat, piggery, etc.
Some identified segments are listed below:
6.1 Marketing Federations
State Level marketing federations are one of the thrust areas and Bank is
working with state level marketing federations of various states providing
the following facilities
Working Capital: Working Capital facilities designed to take care
of the day-to-day business requirements of the organization. Looking
at the domestic trading business, Bank can provide cash credit and
other customized short term products
Short term financing of fertilizer distribution: Distribution of
fertilizer is a core function of marketing federations. There is a strong
demand for fertilizer at the onset of Rabi and Kharif seasons, which
coincides with their requirement of funds. Bank will consider structuring
short term funding requirements at competitive rates.
Long term fund requirement, Bank will consider medium term
and long term funds for new projects and/or expansion. Bank would
consider funding construction of silos and warehouses.
Bank would also consider financing the clients associated
with the marketing federations like tyre companies and seed
companies, which buy rubber/seeds from state level marketing
federations.
6.2 Poultry farming
Regular commercial banking services for Large Integrated Poultry
Operating Companies : Bank will consider working capital finance for
funding stock of feeding material like maize, Soya, de-oiled cake,
vegetable oil, minerals, vaccines, medicines, etc. used while rearing the
birds, live poultry stocks (chicks under rearing) and receivables. Also Term
loans, Forex derivatives and others as per requirements and cash flows
would be considered by our Bank.
6.3 Contract Farming: This segment is gradually emerging. Many large food
and agro-based processing companies enter into contracts with farmers
for undertaking farming for such companies under pre-defined terms viz.
Contract Farming. Similar arrangements are also prevailing in case of
poultry farming where farmers undertake broiler production for large
poultry companies. Bank will consider finance to Farmers who have
entered into Contract farming agreements with reputed companies. These
will be corporate linked loans under Management and Collection agency
arrangement. Various aspects of financing Contract Farming are being
examined and separate scheme would be formulated for this segment.
6.4 Agriculture Infrastructure Financing
Warehouses / Godowns
Silos
Refrigerated transport infrastructure
Development of Market yards
Agri Business clinics
Value Addition farm centers
Food Parks
Agri Export Zones etc.
6.5 Food and agro-based processing sector
6.6 Dairy sector
Bank will aim at building Direct/Indirect Agriculture portfolio to the extent of
prescribed limit as per RBI guidelines. Terms of agriculture finance will be
within RBI guidelines issued from time to time.
IX. Microfinance
Microfinance is a term used to refer to the activity of provision of financial
services to clients who are excluded from the traditional financial system on
account of their lower economic status. Microfinance is unique as a
development tool because of its potential to be self-sustaining. Successful
microfinance institutions have proven that providing financial services to the
poor can be an effective means of poverty reduction and be a profitable
business.
Microfinance institution (MFIs) is an organization that offers financial services
to low-income populations. Such institutions generally are NGOs (Non-
government organizations), Charitable trusts, Credit unions, Cooperatives,
etc. MFIs provide a full line of financial products and services specifically
customized to meet the needs of their clients.
Our approach
As per RBI guidelines on priority sector lending, 10% of net Bank Credit
(within the overall target of 40%) has to be directed towards weaker section.
Our Bank shall aim at building this portfolio gradually, through MFIs, for
onward lending to weaker sections.
Selection criteria for MFIs
1. MFIs should preferably have a rating from Micro Credit Ratings
International Limited (MCRIL), CRISIL or other such acceptable rating
agencies. Rating should be equivalent to MCRIL’s rating indicating
reasonable safety and good systems, and above.
2. MFIs, which focus mainly on micro financing activities and provides
credit to the poor for income generating activities, would be preferred.
3. MFI’s portfolio should be reasonably diversified.
Models adopted by MFIs would have to be discussed in the proposals. Bank
will normally select MFIs, which adopt the successful model of Grameen Bank
of Bangladesh (modified to suit local requirements). Salient features of the
model are individual lending along with borrowers’ membership to a 5-
member joint liability group; Groups from the same village organized to form a
Center; peer pressure is the key factor in ensuring repayment; and each
borrower’s creditworthiness determined by overall creditworthiness of the
Group.
Quantum of exposure
Maximum Rs.5 crores per MFI
Corporate Credit Products
ProductShort Term Loan (STL)
Product Description
Short Term Loans can be structured as under:
Mibor-linked loans Rupee loans FCNR (B) Loans, etc.
Purpose For working capital finance within MPBF Short-term adhoc requirements Temporary cash flow mismatches Any other genuine requirement in the course of business
Utility of the product to us
Our deposits portfolio has fair share of short-term deposits. Short-term loans will reduce Asset-Liability mismatch.
Uncertainty and hence default risk is much lower in STL. Helps improve quality of the portfolio
Can be an entry-point product for a possible long-term relationship.
Eligibility norm Bank has a short term policy (approved in January 2003). Eligibility criteria will be as per this policy, as under : Top class / blue chip corporates Large / profitable PSUs Minimum annual turnover – Rs. 200 crores Profit making company for last 3 years TOL/TNW not to exceed 2.5 Minimum credit rating of IB-4
Amount of Loan
Maximum of Rs.50 crores The ceiling will go up for large PSUs like HUDCO, IOC, Coal
India, etc to 40% of Bank’s capital funds. If the loan is to exceed single borrower exposure norm
stipulated by RBI i.e. 15% of capital funds, permission of RBI should be obtained prior to disbursement of loan.
Period of loan We may consider STLs for maximum period of one year.
Repayment source
Source of Repayment has to be identified viz. Out of unutilized working capital limits Internal Cash generations Any other expected in flows
Bank may also extend short-term exposures on strength of borrower’s balance sheet not necessarily linked to expected cash flows but on borrower’s ability to leverage further borrowings / group support.
Security As per the prevailing market practices. However, the Bank will endeavour to obtain a charge on assets.
Post Dated Cheques
To be obtained normally. May be waived under exceptional circumstances
Disbursement guideline
By crediting the proceeds of loan to any of the Working Capital (WC) banker of the borrower, preferably Lead Bank if under consortium, under an appropriate covering letter
If STL is used for a particular purpose, by making payment for the identified purpose, under advice to the Lead Bank (consortium) or leading Working Capital banker (multiple / sole) of the borrower.
Any other form of disbursal will be discussed in the credit proposal, seeking specific approval.
ProductLine of Credit for Short Term Loan (on selective basis)
Product Description
Line of Credit, valid for a specific period, for release of fresh STL, on closure of the previous STL.
Utility of the product to us
Healthy corporates avail STL (for say 3 months) repeatedly to meet their WC needs, with an objective of reducing their interest cost.
Every time when a STL is to be released, detailed proposal needs to be submitted by branch to appropriate sanctioning authority, leading to re-assessment of risks within short periods through time-consuming process. This facility will facilitate elimination of repeated appraisals.
Modus Operandi of the product
Line of Credit will be sanctioned for a specified validity period (say a year) for availment of STL.
The minimum/maximum quantum of STL, which can be drawn under the Line of Credit, will be specified.
STL would be permitted to be drawn only for the purpose of WC needs, within the validity period of the Line of Credit, without detailed re-assessment of risks.
Sanction of ‘Line of Credit for STL’ would permit release of successive Short Term Loans on same terms and conditions on closure of the previous STL subject to the following conditions.o Fresh STL can be released only after specified minimum
gap (say 3 days-one week) of closure of the existing STL.o For interest rate on fresh disbursal, branch has to refer to
Corporate Office. Head Credit will be authorized to take decision on fresh
disbursal on brief reference from branches, incorporating only major developments during intervening period, which may affect credit risk.
Other Parameters
Same as for STLs
Basis of recommendation
This facility will be considered selectively for specific customers with whom Bank proposes to have a long-term relationship; and where there is a specific assurance from the borrower for further business indicating earning potential for the Bank.
ProductDrawer (Sales) Bills Discounting
ProductDescription
Discounting of sales bills drawn by the seller, who is our borrower. The bills are backed by document of title to goods supplied. The bills may or not may not be backed by Letter of Credit of other banks. Not Backed by other banks’ LC Backed by other banks’ LC
Utility of the product to us
Self-liquidating in nature.
Each transaction is short term, though the facility is for Working Capital.
Each transaction is secured by document of title to goods
Comfort is available in the form of confirmation from LC opening bank as regards payment on due date
Default risk is low. (Mainly exposed to operational risk.)
Maximum usance period
Normally 90 days. Usance period exceeding 90 days can be permitted only in specific cases. Approval from Corporate Office required for this deviation)
RBI regulations Bill discounting policy contained in circular CB/358/72/12/2003 dated 11.12.2003 and reiterated in circular CB/237/81/09/20 01.09.2004 will be followed, with following changes :
1. NOC in case of consortium accounts : “NOC may not be obtained if following procedure is followed :
a) Branches obtains CA's certificate specifying details of Lead Bank/ Account No.
b) Branch issues Pay Order/Demand Draft for credit to account with Lead Bank with narration on face of Pay Order /Demand Draft. “
2. Opening of current account in case of Constituents availing limits under multiple banking arrangement
“Current account need not be obtained if similar procedure as for Consortium accounts mentioned above is followed, with Lead Bank read as Bank having largest share.”
ProductDrawer (Sales) Bills Discounting
Discounting of service bills – Additional norms
Extant guidelines will be applicable; Branches will have to refer to Corporate Office for discounting bills of service companies. After the approval, branches have to ensure the following. The bills are accompanied by a certificate (from the entity
which enjoyed the service from our borrower) that the service under the discounted bill has actually been provided to them to their satisfaction and they do not have any objection to make the payment to the service provider.
The genuineness of the certificate should be appropriately verified, depending on the case on hand.
The bill should be accompanied by the agreement for the service between the two parties.
Branch should verify that the amount under the bill is appropriate for the service rendered as per the agreement.
Disbursement guideline
LCBD proceeds shall be disbursed through any of the Working Capital banker of the borrower (preferably Lead bank in case of consortium accounts) under an appropriate covering letter
ProductDrawee (Purchase) Bills Discounting
ProductDescription
Discounting of sales bills drawn on the buyer of goods, who is our borrower. The bills are backed by document of title to goods supplied.
Nature of the transaction
Our borrower purchases goods supplied under bills, accompanied by document of title to goods. The document of title to goods is drawn on our Bank.
At the request of our borrower, Bank discounts the bill and immediately pays the amount directly to the supplier. Our borrower pays the amount on due date.
Maximum usance period
Normally should be restricted to a maximum of 3 months. In special cases, may be extended to 6 months.
Eligibility Limit under this product will be restricted to Rs.25 crores or as stipulated in Credit Risk Policy, whichever is lower.
Disbursement guideline
Proceeds shall be disbursed directly to the supplier’s banker, under an appropriate covering letter
Other guidelines
Normally this facility will be within overall MPBF.
Only bills covering supply of raw materials/stores will be eligible for discounting.
Bank will inform existing banker / consortium leader / members of multiple banking, as the case may be.
ProductChannel Financing
ProductDescription
Basic comfort will flow from recommendation from the reputed and acceptable Company, with whom these parties have been associated for a specified period. An arrangement can be in place where the reputed corporates will agree to delist these parties from business in case of default with Bank to ensure desired discipline.
Suppliers of reputed companies
Extending pre supply and post supply finance to suppliers (outside their regular borrowing arrangements) of reputed and well-known companies. Post supply finance may or may not be backed by bills.
Post supply finance (if backed by bills) is comparable to ‘Drawee Bills Discounting’ since acceptance will be available from buyer in the form of bills or accepted delivery challans or other documents.
However, pre-supply stage finance will not be backed by any tangible comfort from the buyer. Case specific mitigants for firming up the arrangement to ensure that supply bills are routed though the bank for liquidating the advance, will have to be built in while sanctioning broad scheme of financing.
Buyers /Dealers of reputed companies
Extending post supply finance to buyers/dealers of reputed and well-known companies. Post supply finance may or may not be backed by bills.
In case of post supply finance not backed by bills, tenor will be decided based on credit period extended by reputed corporate.
In both the cases, nature of finance will be purely short term and transaction related.
Based on the comfort with focal corporate, the lending program will be finalised with template driven appraisal formats for the suppliers/buyers/dealer.
Utility of the product to us
Multiple borrowers can be financed relying on strength of one Corporate with a simplified appraisal format for each supplier / buyer / dealer.
ProductChannel Financing
Maximum period
Period of advance (whether bills/STL) should be restricted to 3 months In special cases, may be extended to 6 months.
Eligibility Individual suppliers/buyers need not be rated. However, focal corporate will be preferably rated.
Maximum exposure
Total exposure together (a) under Channel financing to suppliers/dealers/buyers of particular buyer and (b) our direct lending to the focal corporate should be within the prudential exposure limit relevant to individual borrower as stipulated in Credit Risk Policy.
ProductForward cover exposures and other derivative exposures
Product Description
Off-balance sheet items which do not involve lending or borrowing
Nature of risk These exposures do not involve default risk for face value of contracts/deals.
In case default happens, exposure is restricted to cancellation charges, early delivery charges, etc. There could be gains or losses to the extent of small percentages of face value of contracts/deals. Therefore, credit exposure in these transactions is usually a specified percentage (say 2% or 5%) of the notional limit sanctioned.
Equivalent credit exposure
As per our scheme of DOP and Credit Risk Policy, 5% of value of Forward Cover limit is treated as exposure. As regards other derivative limit, it is specified that a specific percentage of the limit (depending on nature of limit) will be treated as exposure.
RBI has revised the risk weights for Forward Cover and derivative exposures. Credit risk policy is under review and risk weights are likely to be revised in line with RBI guidelines, which will be followed.
Utility of the product to us
As these are fee-based products, opportunity for profits is significantly high.
Rating 1. If these exposures are accompanied by other regular credit limits to the same borrower, rating and appraisal process as applicable for the said advances will be applicable for these exposures also.
2. Such exposures could be sanctioned on stand-alone basis to only customers of exceptionally good standing.
3. Simplified process has been put in place vide Corporate Office circular CR/141/87/05/2005 dated 04.05.05 for cases where (i) the customer is offered ‘only forward cover limits’ and (ii) exposure is upto Rs.2 crores, as under: Proposals need not be submitted in RAM / rating exercise
need not be carried out in RAM Proposals should be submitted in simplified format attached
with circular For such proposals, branches need not send financial
statements to Corporate Office.
ProductLease Rental Discounting
Product Description
Structured Term Loan, which is repayable from future lease rentals.
Purpose Can be for any business purpose. Utility of the product to us
Repayment is assured, if o The premises under finance is occupied by a lessee ando Rent is regularly paid by the lessee through the Bank
Besides identified repayment source, exposure is usually backed by mortgage of property.
As tenor of the loan progresses, (a) exposure reduces (b) value of the property usually goes up. Therefore, asset cover goes up continuously.
Rating As the exposure is structured, borrower need not be rated Margin Minimum 10% on Lease rentals pertaining to loan tenor, and
Minimum 20% on market value of property,whichever is higher in absolute terms
General Guidelines
Lease rent amount less TDS would be considered. Reasonable maintenance charges would be reduced from lease
rental, based on lease terms. Future lease rentals would be discounted at the interest rate at
which loan is proposed. If lessor has taken any refundable deposit from lessee, such
deposit should be reduced from loan amount. Assessment of loan will be primarily on the comfort of lease
rentals, unless there are any specific negative points to be addressed in a particular proposal. Therefore, detailed appraisal as required for loans and advances need not be carried out.
This product can be used only if (a) the premises are ready for occupation at the time of the proposal or within 3 months (b) lessee has been identified and lease terms have been finalised.
The loan can be released only after the lease rental agreement is executed and all other documentation is completed.
Rent should generally be routed through the Bank. Other guidelines
Amount of loan under this product is linked to (a) lease rental amount, (b) period of the loan and (c) interest rate.
Maximum period of the loan (for exposures over Rs.2 crores) shall not exceed 7 years or 3 times the lock-in period, whichever is lower.
ProductSecuritisation of receivables (or other structured exposures)
Product Description
Structured Term Loan, which is repayable from securitised receivables of underlying Retail assets such as Personal Loans, Housing Loans, and Vehicle Loans.
Credit enhancement
Credit enhancement is offered through the following.o Subordination of Excess Interest Spread (EIS). EIS is equal
to “Interest earned on the underlying assets” less “Interest offered for the securitised exposure”
o Cash Collateral for securitised receivables o Charge off, which means buyback of overdue assets (say for
more than 90 days) from the surplus in the pool.
Nature of risk These exposures are hybrid in nature and hence will not fall
under one category. Our risk primarily depends on the underlying retail assets and
hence these are not corporate exposures. The diversification benefit available for retail assets is available for this exposure too.
However, our risk is much lower than that associated directly with underlying retail assets, on account of the credit enhancement explained above.
Rating Issue is preferably rated by an external credit rating agency, (No internal rating).
Minimum rating “A” (Adequate safety)
General Guidelines
Exposure is without recourse to originator
Maximum exposure
Exposure under this product will not be governed by INTERNAL Single borrower exposure norms stipulated in Credit Risk Policy.
Total exposure under this product, including all categories of underlying retail assets of all the originators, should not exceed normally 40% of the total fund based advances of the Bank.
RBI regulations RBI guidelines contained in circular DBOD No. BP.BC.60/21.04.048/2005-06 dated 01.02.06, will be adhered to.
Other guidelines
Loans against securitisation of receivables in respect of retail assets should be sanctioned by an authority not below the level of Joint Managing Director
ProductBridge Loans
Product Description
Bridge Loans are normally sought by corporates pending receipt of proceeds from issues of equity shares and / or pending disbursement of loans by banks / FIs. This is sought to avoid delays in implementation of projects.
Purpose For financing projects under implementationUtility of the product to us
Enables financing projects for short term, backed by an assurance that the loan will be repaid out of the equity and/or debt sanctioned by other banks or FIs.
RBI regulations
RBI guidelines issued from time to time will be followed. Specific guidelines in this regard are listed below: Banks should not grant bridge loans to any category of Non-
Banking Financial Companies (NBFCs). Bridge loans against expected equity flows/issues :
Period of bridge loans should not exceed one year. Such loans should be included within the ceiling of 5 per
cent of the banks’ total outstanding advances (including Commercial Paper) as on March 31 of the previous year prescribed for total exposure including both fund based and non-fund based to capital market in all forms.
Banks may also extend bridge loans against expected proceeds of Non-Convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/or funds in the nature of Foreign Direct Investments, provided banks are satisfied that borrowing company has already made firm arrangements for raising aforesaid resources/funds.
In case of Bridge loans against Term loans sanctioned by other banks / FI:
Should obtain prior approval of the other bank / FI, which has sanctioned the term loan
Should also obtain an irrevocable commitment from other bank / FI that the latter would directly remit the amount of term loan to it at the time of disbursement
Period of such bridge loan/interim finance should not exceed 4 months. Under no circumstances, should banks allow extension of time for repayment of bridge loan/interim finance; and
Banks should ensure that bridge loan/interim finance sanctioned and disbursed is utilised strictly for the purpose for which term loan has been sanctioned by another bank/FI.
ProductInter-Bank Participation Certificate (IBPC)
Product Description
A bank, which has originated loans from its clients, issues IBPCs that are subscribed by other banks. On due dates of the IBPC, the issuing bank repays the amount to the participating banks.
Such participation can be with or without risk sharing. The risk for participating banks is on underlying clients, if IBPC is
with risk sharing. The risk will be on the issuing bank, if the IBPC is without risk sharing.
Purpose Issuing banks issue IBPC to manage their portfolio risk in terms of concentration and capital requirements.
Utility of the product to us
We can issue and/ or subscribe IBPC. We may issue for managing portfolio risk in terms of
concentration and capital requirements. We may participate in IBPC with or without risk. This would
enable building quality portfolio without undergoing marketing rigours.
The product will also be useful for managing short-term liquidity.
Concerns in the product
Usually IBPC is resorted for short-term purposes. It may not lead to relationship with Corporates, as the arrangement is between two banks.
RBI guidelines RBI guidelines issued from time to time will be followed (DBOD circular No. BP.BC.57/62-88 dated 31.12.1988 contains guidelines and IBA has prepared “uniform code for participations” which includes documentation). Specific guidelines in this regard are listed below:
1. Exposure with risk sharing Period : Minimum 91 days and maximum 180 days Amount of participation : Maximum of 40% of outstanding in
said account. Only in respect of standard accounts
2.Exposure without risk sharing Period : Not exceeding 90 days
Sanctioning authority
All IBPCs will require to be approved by COD/BOD
ProductLoans against the guarantees issued by other banks / Financial Institutions
RBI Restriction RBI guidelines issued from time to time, latest being master circular No.DBOD.Dir.BC.32/13.03.00/2005-06 dated September 05, 2005 will be followed. Specific guidelines are reproduced below :
Exposure against guarantee of another bank/FI will be deemed as an exposure on guaranteeing bank/FI.
Exposures assumed by way of credit facilities extended against guarantees issued by other banks should be reckoned within the inter bank exposure limits prescribed by Board of Directors. Since exposure assumed by bank against guarantee of another bank/FI will be for a fairly longer term than those assumed on account of other inter-bank dealings in money market, foreign exchange market and securities market, Board of Directors should fix an appropriate sub-limit for longer term exposures since these exposures attract greater risk.
Banks should monitor the exposure assumed on guaranteeing bank/FI, on a continuous basis and ensure strict compliance with prudential limits/sub limits prescribed by Board for banks and prudential single borrower limits prescribed by RBI for FIs.
Banks should comply with the recommendations of Ghosh Committee and other internal requirements relating to acceptance of guarantees of other banks to obviate possibility of frauds in this area.
Sub limit for these exposures
25% of exposure limit on counter party exposure limit as per Bank Risk policy or Rs.25 crores, whichever is lower
ProductLoans against Deposits / Certificate of Deposits
RBI Restriction Guidelines for loans against deposits are issued separately and are outside the purview of this policy.
However, in terms of RBI guidelines, banks are prohibited from granting advances against the deposits of other banks.
Further, in terms of RBI guidelines, banks are prohibited from granting advances against Certificate of Deposits also.
Evaluation & Conclusion
As per the study, I find that Corporate Credit deals with the industry financing and
servicing part of the banking operations. The bank provides various kinds of
services to its corporate clients. Corporate credit plays a large contributory role
towards the income of bank. It is most important and profitable product of the
bank. IndusInd Bank Limited plays important role towards the society i.e.
Industry, Agriculture, Trade, Small business houses, etc. by providing credit at
reasonable rates and for longer tenure. It provides a large range of credit
facilities under its corporate credit structure to attract different corporate clients.
Bank offers Fund Based services which form the largest part of the banking
business. Though the margins and profits in these services are getting squeezed
in recent times, they still remain the primary business of the banks. The Non-
Fund Based Services or Fee- based services, is the high growth and high profit
part of the commercial banks. These services comprise of standard trade
products (like bill discounting) and other services like LCs, etc. banks also offer
to their clients Specialized Services which are very innovative and special kind of
services. These are essentially non-fund based and deliver superior value to the
customers.
References and Sources
Books and Journals:
1. Banking Laws and Practice
By P.N. Varshney
2. Banking and Foreign Trade
By Niti Soni
3. Banking Theory and Practice
By K.C.Shekhar
Newsletter and Journals:
1. Newsletter and Journals as provided by IndusInd Bank Limited, Mall Road,
Amritsar.
2. Leaflets of different credit schemes.
Other Sources:
1. Internet Sites
http://www.indusind.com
http://www.hindujagroup.com
http://www.hamldubai.com/corporate finance.html
http://en.wikipedia.org/wiki/corporate_finance
http://en.wikipedia.org/wiki/banking_in_india
2. Library
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