Credit Policy,Credit Information Bureau & Principle of
Lending
Credit Policy , Credit Information Bureau & Principle of
LendingPGDM 2012-14Idea Banks Balance sheetAssets
/LiabilitiesTier-I & Tier-II capital,Top Line & Bottom
LineCapital adequacy ratioRisk perception :- Risk = Quantum of
LossTypes of CapitalTier-I : Paid up Cap, Statutary Reserves &
other free Reserves, Cap out of Sale proceeds of Assets Tier II :
Subordinated Debt, Hybrid Debts Revaluation Reserve of F.A. at disc
of 55% ,General Provisions & Loss Resv . to Maxm . Of 1.25%
weighted Risk Assets
Credit Policy[RB 105 -123]Objective : Why Bank Credit,Cardinal
Principles of lending for QualityLoan Policy & Exposure
NormsSector-wise deployment of creditLending RatesMonetary &
Credit Policy of RBI Appraisal TechniquesCredit
Administration.(1)Basic ObjectiveBalanced growth with sound Risk
management culture and practices.Focus on Qualitative creditAttain
Targeted C D RatioEnlarge clientele base through Credit MarketingTo
optimise yield on Advances ,To increase NF & NI businessNew
& Innovative product developmentCredit discipline at all
levelsDue compliance of all regulatory requirements.(2)Cardinal
Principal of lending Safety
SecurityProfitabilityPurposeLiquidityDiversification of Risks
(3)Exposure ManagementIndividual & Group Exposure
limits:Prudential exposure of the bank for its fund and non-fund
based activities for an individual borrower and group should not
exceed 15% & 40% respectively of the Banks capital fund.It may
go up to 20% & 50% for credit to infrastructure projects.The
exposure of a bank to NBFC/NBFC- Asset Finance Company should not
exceed 10%/15% resp., of banks capital funds (5% more for
infrastructure sectors)5% more, in exceptional circumstances with
the approval of MCBOD.
Unsecured Exposure shall not exceed 25% of total outstanding
advances.PSC: 40% of ANBCAgricultural Advances: 18% of ANBC, of
this indirect lending in excess of 40% of ANBC will not be reckoned
for computing perform under 18% targetSmall Enterprise advances
will be under PSC.Micro Enterprises within Small enterprises: 40%
for micro (manufacturing) 5 lacs & micro (service) 2 lacs20% of
SE to micro (manufacturing) 25 lacs & micro (service) 10
lacs.Weaker sections:10% of ANBCDRI: 1% of advances o/s as at end
of the YearExport Credit: 12% of ANBC
Exposure ManagementExposure ManagemntPortfolio basisBased on RBI
guide lines, Internal Caps on aggregate commitment to different
Specific sectors are fixed for even spread of exposure.Depending
upon Economic scenario, downturn in specific sector, GDP growth,
bank fixes exposure level and Caps on different sectors. Exposure /
Targets for (i) Priority sector credit
Exposure management. Contd..(ii) Retail Credit,(iii)
Infrastructure Lending(iv) Commercial Real Estate Finasnce,(v)
Export Credit,(vi) Joint Venture/Wholly own Subsidiaries(vii) to
share and stock brokers.
Exposure CeilingConsidering Banks perception of growth prospects
or downturn of any particular industry, the appropriate action on
extending the required cap or restricting the cap will be
considered from time to time.The exposure to the various products
under Retail Credit Scheme to be monitored based on the annual
budgets under each schemeCustomers guidance to hedge their foreign
currency loan amount.
Prohibited Category of ExposureA. STATUORY RESTRICTIONS
:-Advances against banks own sharesAdvances to Banks
DirectorsRestrictions on holding shares in companies.Restrictions
to companies to buy back their securities.B.REGULATORY
RESTRICTIONS:-Granting loan to relatives of directors. Restrictions
on grant of loans to officers & relatives of senior officers
Loans agst share ,debentures and bondsAdvance agst money market
M.FsLoan to industries producing/consuming Ozone depleting
substances (ODS)Advances against Sensitive Commodities under
SCCWillful defaulters, and Promoters involved in
diversion/siphoning of funds.
Other Restricted Category of loansAgainst FDRs issued by other
banksAdvances to agents based on consideration of Deposit
mobilization,Loans against CDsFinance to NBFCIssue of BG in favour
of FIs,Against Bullion,Loans for acquisition of KVPs,Loans for
speculative purposes.
Thrust Areas For Credit ExpansionPriority Sector Credit Special
Emphasis for SME Finance With CGTSME coverage Direct Agril
Targeted. Govt. Sponsored Schemes,SHGs, Thrust on National Hort
Proj, NABARD proj And Loan against Ware House Receipt. Retail
Credit. Exploring Tie ups with I ) Car/Two wheeler Dealers, (ii)
Edu Institutions (iii) Reputed Builders (iv) Infrastructure Devp
Companies Extending Credit tp Innovative Products Like (i) Open
Term Loan . (ii) Travel loan (iii) Contractor Finance. (iii) Real
Est Sect Finance(iv) Housg fin Schm for NRI/PIOs (v) Banks Vehicle
Loan etc Export Credit Infrastructure Credit.
(4) Sector-wise deployment credit.Corporate FinanceIndustry
finance.Wholesale FinanceRetail lending,Priority Sector LendingFor
further details ref to HB 119-120(5) Lending RateBPLR (2003)Sub-
BPLR - A+ Proponents.Base Rate Concept (wef 1st July 2010) Floating
Rate /Fixed Rate
Monitory &Credit Policy of RBI(7) Appraisal
TechniquesUnderstanding borrowers demand and lenders
abiligyDeciding about appraisal methodology.Sanction terms &
Documentation.Charge creation Disbursement 18Components of Credit
AppraisalVolume & Area of Loan Delivery :Priority, Non
PrGeographical SpreadLoan Evaluation Mechanism (a) Industry
scenario : Ind. Cycle, Demand supply position, Threat from
comprtitors, Govt. Reg Guidelines etc. (b)Op.Efficiency : Optg
margin, Steady growth, Mkt Share, Rm availability,Eco need(8)
Credit Administration.To ensure (i) Strict compliance All the
cardinal principles (ii) Maintenance of Cap Adequacy norms
(iii)Proper Risk assessment (iv)compliance of RBI regulatory
requirements (v) implementation of various Govt Economic
Developmental schemes. Contd (c) Financial Eligibility : Capital
structure, N.W, Asset & Liab position., Gr.company status etc
(d) Financial Efficiency : Cost of Capital, Coverage Ratios,
Financial Leverages, Fund raising Capacity, W.C. Management,
Quality Asset creation, In,tt rate Structure, Intt. Rate Risk
Management, Tax & Div Planning. Profitability. (e) Management
efficiency : Experience, efficiency, (f) Credit Risk Assessment (g)
Security Asessment
