LPD 2019 PDF

INDIAN OVERSEAS BANK REF NO; ADV I 35512019-20
CENTRAL OFFICE DATE: 10.04.2019

763, ANNA SALAI ISSUING DEPT: CREDIT SUPPORT
CHENNAI - 600 002 SERVICES (CSSD)
CIRCULAR TO ALL BRANCHES /OTHER OFFICES
Loan Policy Document 2019 & Operational Guidelines on Lending
I. Preamble:
a. The Loan Policy Document covers various aspects of our Bank's policies and
the policies of Reserve Bank of India (RBI) & Government of India (Gol)
forming basis for credit decision and credit administration of advances
Portfolio. The document enables and helps the Bank and its officials to have
firsthand knowledge on the various guidelines which shall help them in better
Credit Administration.
b. The last Loan Policy Document (LPD) was published vide our circular no. Adv I
154/ 2017-18 dated 17.10.2017. The Loan Policy Document has since been
revised and approved by the Board on 28.03.2019. This shall be read along
with our Delegated Financial Powers on Lending advised vide our circular
No. ADV /266/2018-19 dated 16.08.2018. The major modifications in Loan
Policy Document-2019 and Operating guidelines on Lending are discussed
in this circular.
II. Operational Instructions:
1. The Loan Policy Document 2019 & Operational Guidelines on Lending shdll
be operational with immediate effect. The Board approved revised Loan
Policy Document along with the following Annexures are attachep to the
circular:
a) Annexure 1 -Check List for Advances
b) Annexure 2- Rigorous Due Diligence and Appraisal Measures for project
funding above Rs. 50.00 Crores.
Page 1 of 6
2. A copy of this circular enclosing the Loan Policy and Operational Guidelines
on Lending shall be produced wherever required, by RBI inspectors, Statutory
Auditors, CO/ RO Inspectors etc.
3. In the event of any changes consequent upon revision in
guidelines/notifications issued from Reserve Bank of India or Central
Government/CVC/IBA, the same shall be advised from time to time which
shall form part of Loan Policy and Operational Guidelines on Lending-2019.
Ill. Some of the important changes in the Loan Policy Document 2019 are
enumerated below:
a. RBI guidelines: Recent guidelines issued by RBI on Co-Origination of Loans

by Banks and NBFCs for lending to Priority Sector, Large Exposures
Framework, Policy on Stressed Sectors, Loan System for Delivery of Bank
Credit, Discontinuation of Letter of Comfort (LoCs) and Letter of Undertaking
(LoUs) for Trade Credit and Revised framework on resolution of stressed assets
are incorporated in the revised policy.
b. IBA guidelines: Based on the EASE reforms on Clean Corporate Lending

through rigorous due diligence and appraisal measures, Institute practices
for effective coordination in large consortium loans and Tie-up with ASM for
monitoring measures, Bank has adopted IBA guidelines on Standard
Operating Procedures (SOP) for Consortium Financing, minimum threshold of
10% or more for participating in Large Consortium Loans, Appointing of
Agencies for Specialized Monitoring (ASM) for Large Credits and
Engagement of Domain Experts in Selective Sectors and same are
incorporated in the revised LPD.
Further IBA guidelines on Unique Document Identification Number (UDIN) to
verify the authenticity of the documents issued by practicing Chartered
Accountants and guidelines on Inter Creditor Agreement for resolution of
stressed assets are also part of the revised LPD.
c. RERA act [Real Estate (Regulation and Development) Act, 2016]: A reference
to the guidelines with regard to RERA Act is discussed in the revised Loan
Policy Document.
d. Exposure Norms: LPD is updated with the revised exposure norms on Housing
to categorize as priority sector for deployment of credit as per the
Government I RBI's guidelines.
Exposure limits are revisited for the Single and group Borrower in respect of
NFBC registered with RBI (for single NBFC/NBFC-AFC (Asset Financing
Company), NBFCs having old loans to the extent of 50% or more of its total
financial assets.
e. Takeover c)f Borrowal accounts: A review note on all tc ken over accounts
sanctioned by RLCC and above to be placed to MCB on Half Yearly basis
by the respective Credit Verticals ot Central Office. The review should cover
all taken over accounts during the past 3 years with cutoff date 31st March.
f. Exit Policy: Exit clauses like signs of sickness should form a part of sanction
letter and for Accounts with External Rating 'C' and 'D', an individual letter
should be sent to such C and D rated customers stating that in view of the
poor external rating, bank may not be in a position to support their credit
requirement and that they may induct new banks or switch over to other
banks. It may be further stated that in view of capital cost involved in
financing such low rated companies we will be constrained to charge
additional interest rate over and above the applicable interest rate.
g. New Business CommiHee (NBC): Expression of Interest accorded by the NBC

is valid for 3 months as against existing period of 1 month and a complete
proposal must be submitted during that period for considering sanction on
merits.
For new proposal on NBFC of Rs. 10.00 Crores and above, expression of
interest by NBC only is required. All new proposals of NBFCs below Rs. 10.00
Crores and enhancements to the existing accounts require clearance from
HLCC (ED) before sanction of loans.
In respect of advances to self-financing schools and colleges, for all new
proposals of Rs. 10.00 Crores and above, expression of interest only is required
from New Business Committee (NBC) before sanction of loans. All new
proposals of self-financing schools and colleges below Rs. 10.00 Crores and
enhancements to the existing accounts require clearance from HLCC (GM)
before sanction of loans.
Page 3 of 6
h. Delegation of powers:
I. Adhoc Limits: RLCCs and above shall sanction Adhoc limit up to 20% of
the limit in working capital credit facilities sanctioned by any layer of
authority including MCB or 20% of their respective delegated authority
(per borrower limit), whichever is lower. However, the discretionary
powers for Branch Managers for sanctioning adhoc credit facilities for
MSME borrowers shall be as per Kapoor Committee recommendations.
II. RLCC and above will have the discretion to sanction facilities outside
consortium within their per borrower limit.
Ill. Under Bills Financing, Delegated Financial Powers for DA bills not
backed by LC has been included.
IV. For MCB sanctions specific permission may be taken for sanctio,ning of
concessions by CAC at the time of original sanction by MCB. On
sanction, an information note to be put up to MCB. Other than the
above exceptional cases, CAC is not empowered to delegate powers
to grant concessions in case of MCB sanctions.
V. Revised delegation of powers for waiver of SGS clause/ Charter Party
Bill of Lading/ Document dated prior to bill/ LC has been included.
i. Margin/Interest Rate/Review /Renewal:

I. Revised guidelines for release of margin in case of downward revision
of Notional Rate have been included.
II. Revised Parameters for considering concessions in Interest Rate/
Commission/ Charges and LC/LG Margin are discussed.
Ill. Application of Interest rate on internally and externally rated accounts
are included.
IV. Process of Fixing of Interest rate on Loan against FCNR (B) deposit and
Foreign Currency Loans is discussed in the revised LPD.
V. Under Commercial Real Estate Loans, the Purchase of ready built
commercial property is permitted subject to margin o'f 50%. Age of the
building should not be more than 25 years. All other norms as per the
construction of commercial property prevails.
VI. Technical Renewal is withdrawn.
VII. All staff loans and retail term loans up to Rs.25.00 lacs are exempted
from Annual review. All existing and new housing loans with sanctioned
Loan Policy Document-2019 and Operational Guidelines on Lending

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limits of Rs.25.00 lacs and above; including NPA accounts are to be
reviewed once in 3 years.
j. Assessment:
I. In the Infrastructure Project finance, the cost overrun is generally
considered to be one of the greatest risks. In case of default, in a given
project finance, generally the benefits of "tail" period (remaining asset
life after Loan Maturity) can b:; used for full deb-t repayment. The details
of analysis of tail risk are discussed in the revised LPD.
II. Under working capital assessment, the details of Cosh Flow Method of
assessment are discussed in the revised LPD.
Ill. In the case of Trade Credit advances, Balance sheet shall not be
insisted for credit limits up to Rs. 10.00 lacs as against of existing limit of
Rs.S lacs. This shall be applicable for Proprietorship and Partnership firms
only.
k. Due Diligence:
I. Rigorous due diligence for project financing above Rs. 50.00 Crores has
been included.
II. CRCO in bank's prescribed format must be obtained at the time of fresh
sanction as well as renewal of the business loans. However, for business
loans of Rs. 2.00 Lacs and above it must be compulsorily obtained.
Ill. Guidelines on Techno Economic Viability (TEV) are discussed.
IV. Drawing of credit Information reports, verification of CIBIL willful
defaulters, CRILC report, Central Fraud Registry and other information
services companies like Probe 42 etc., and incorporation of the same in
the appraisal note are included in the revised LPD.
I. Miscellaneous:
I. Guidelines on Monitoring and Management of Collaterals are
discussed.
II. Latest revised guidelines on CGTMSE are incorporated in the revised
policy.
Ill. In the Loan against shares, the method and periodicity of valuation
of shares are discussed
IV. Conclusion:
Branches and other Offices are advised to ensure strict compliance of the above
guidelines.
M. M. Sarangi
General Manager
Annexure: Loan Policy Document 2019 & Operational Guidelines on Lending
Loan Policy Document-2019 and Operational Guidelines on Lending

Page 6 of 6
INDIAN OVERSEAS BANK
LOAN POLICY DOCUMENT

2019
Credit Support Services Department

Central Office, Chennai- 600 002
INDEX
LOAN POLICY DOCUMENT 2019
Cha~ter Para PARTICULARS Page No.

1 OBJECTIVES & COVERAGE
1.1 PREAMBLE 1
1.2 OBJECTIVE OF THE POLICY 1
1.3 COVERAGE OF THE POLICY 1
1.4 GENERAL GUIDELINES ON LENDING 2
1.5 COMPLIANCE 2
2 DEPLOYMENT OF CREDIT I THRUST AREAS
2.1 PRIORITY SECTOR CREDIT 3
2.2 CATEGORIES OF PRIORITY SECTOR 3
2.3 TARGETS AND SUB TARGETS 3
2.4 WEAKER SECTIONS 4
2.5 THRUST AREAS 4
3 RISK MANAGEMENT & PRUDENTIAL NORMS
3.1 GENERAL 12
3.2 PRUDENTIAL NORMS 12
3.3 DEFINITION OF GROUP 12
3.4 EXPLANATION FOR CREDIT EXPOSURE 13
3.5 EXPOSURE LIMITS 13
3.6 CEILING FOR SINGLE/ GROUP BORROWER LIMIT 14
3.7 GUIDELINES ON ENHANCING CREDIT SUPPLY FOR 17
LARGE BORROWERS THROUGH MARKET MECHANISM
3.8 PRUDENTIAL MEASURES 17
3.9 CEILING NORMS FOR INDUSTRIAL ADVANCE 19
3.10 CEILING NORMS FOR OTHER INDUSTRIES 21
3.11 EXPOSURE CEILING FOR OTHER SEGMENT/ CATEGORIES 21
3.12 CEILING FOR GOLD (METAL) LOAN -REGULATORY LIMIT 24
3.13 CEILING TO INDIAN JOINT VENTURES BY BRANCHES IN 24
INDIA ..
3.14 LOAN AGAINST NRE RUPEE DEPOSITS AND FCNR(B) 25
DEPOSITS
3.15 OTHER CEILING/EXPOSURE NORMS 26
3.16 UNHEDGED FOREGIN CURRENCY EXPOSURE 27
3.17 REGION/SECTOR SPECIFIC EXPOSURE 28
4 RESTRICTIONS FOR FINANCING
4.1 STATUTORY RESTRICTIONS 31
4.2 REGULATORY RESTRICTIONS 31
5 TAKE OVER OF BORROWAL ACCOUNTS
5.1 EXPLANATION 37
Chapter Para PARTICULARS Page No.
5.2 NORMS/CRITERIA FOR TAKE OVER 37
5.3 TAKE OVER WITH ENHANCEMENT/FRESH/ ADDITIONAL 38
FACILITIES
5.4 OTHER CRITERIA FOR TAKE OVER 38
5.5 INTEREST RATE-AND OTHER CONCESSIONS 39
5.6 REPORTING I MONITORING 40
6 ADVANCES TO BANKS' DIRECTORS I OFFICERS OF BANK
6.1 ADVANCES TO BANK'S DIRECTORS 41
6.2 LENDING TO DIRECTORS AND THEIR RELATIVES ON 41
RECIPROCAL BASIS
6.3 LOANS AND ADVANCES TO OFFICERS OF BANK AND 42
THEIR RELATIVES
6.4 SCOPE OF THE TERM 'CREDIT FACILITY' AND 'RELATIVE' 43
7 EXIT POLICY 45
8 MISCELLANEOUS
8.1 RECOVERY POLICY 47
8.2 FINANCING OF BRAND ACQUISITION 47
8.3 QUOTE CUM SANCTION 47
8.4 LINE OF CREDIT 47
8.5 FINANCING TO CHIT COMPANIES 47
8.6 SHORT TERM LOANS 48
8.7 RISKY VENTRUES 48
8.8 BANKING CODES AND STANDARDS 48
8.9 OTHER ISSUES 49
8.10 CONCLUSION 49
OPERATIONAL GUIDELINES ON LENDING
9 GENERAL LENDING GUIDELINES
9.1 NEW BUSINESS COMMITIEE 51
9.2 DELEGATION OF POWERS 51
9.3 WORK FLOW FOR CREDIT SANCTIONS 54
9.4 VETIING OF DOCUMENTS & RELEASE OF LIMITS 56
9.5 PRECLUSION FROM DISBURSEMENT BY FIELD LEVEL 57
FUNCTIONARIES
9.6 ADHOC LIMITS/GRANTING OF EXCESS IN BORROWAL 57
ACCOUNTS
9.7 DOCUMENTATION STANDARDS 57
9.8 ACCEPTING LIFE POLICIES ISSUED BY PRIVATE 57
INSURANCE COMPANIES LICENSED BY IRDA
9.9 FINANCING TO SECOND HAND MACHINERY 58
9.10 ADVANCES THROUGH SPECIAL PURPOSE VEHICLES 59
9.11 CONSORTIUM 59
9.12 MULTIPLE BANKING ARRANGEMENTS 61
EXCHANGE OF INFORMATION UNDER CONSORTIUM/
9.13 MULTIPLE BANKING ARRANGEMENTS 62
9.14 CAPITAL RESTRUCTURING 62
LENDING BY INTER BANK PARTICIPATION (IBP) WITH RISK
9.15 SHARING 63
.9.16 ELECTRONIC PAYMENTS 65
9.17 LOAN SYSTEM FOR DELIVERY OF BANK 65
10 TYPES OF FACILITIES
10 TYPE OF LOAN 66
10.1 MISCELLANEOUS CASH CREDIT 66
10.2 BILLS FINANCING . 66
10.3 PROJECT FINANCING I TERM LOAN 69
10.4 GOLD (METAL) LOANS 70
10.5 LOAN AGAINST GOLD DEPOSITS 72
10.6 GOLD LOAN I ADVANCES AGAINST GOLD JEWELLERY 72
10.7 FOREIGN CURRENCY LOANS 72
FOREIGN CURRENCY LOANS AGAINST FCNR (B)
10.8 DEPOSITS 74
10.9 NON FUND BASED FACILITIES 74
10.10 STANDBY LETTER OF CREDIT 78
10.11. EXPORT GOLD CARD 78
11 GUIDELINES ON SANCTION OF SHORT TERM LOAN
SHORT TERM LOANS(OTHER THAN THOSE CARVED OUT
11.1 OF WORKING CAPITAL LIMITES) 79
SHORT TERM LOANS. CARVED OUT OF WORKING
11.2 CAPITAL LIMITES 81
12 FINANCE TO VARIOUS SEGMENTS
12.1 MICRO SMALL AND MEDIUM ENTERPRISES 82
12.2 FINANCE TO INDUSTRIES 82
FINANCE TO HOUSING & COMMERCIAL REAL ESTATE
12.3 PROJECTS 85
12.4 LIQUIRENT ADVANCES 89
12.5 CAPITAL MARKET EXPOSURE ' 89
12.6 ADVANCES AGAINST UNITS OF MUTUAL FUNDS 91
12.7 GUIDELINES FOR SANCTIONING BRIDGE LOANS 92
ADVANCES TO SELF FINANCING COLLEGES AND 93
12.8 SCHOOLS
12.9 ADVANCES TO NBFCS 93
12.10 TELECOM INDUSTRY 94
12.11 SUGAR INDUSTRY 95
CO-ORIGINATION OF LOANS BY BANKS UNDER NBFCS .
12.12 FOR LENDING TO PRIORITY SECTOR 95
FINANCIAL INCLUSION TOO FOR BASIC SB I SMALL 96
12.13 ACCOUNT HOLDERS
12.14 PRADHAN MANTRI MUDRA YOJNA 96
12.15 MUDRA 96
12.16 STAND UP INDIA 96
LOAN TO STAFF/EX-STAFF AGAINST DEPOSITS
12.17 STANDING IN THEIR NAMES 96
13 CREDIT APPRAISAL
MARKET INFORMATION I CREDIT REPORTS I PRE- 97
"13.1 SANCTION VISIT
13.2 APPRAISAL 98
13.3 WORKING CAPITAL 100
13.4 TERM LOAN I PROJECT FINANCE 102
13.5 PROJECT FINANCE PORTFOLIO OF BANKS 104
13.6 APPRAISAL OF INFRASTRUCTURE PROJECTS 104
13.7 FINANCING PROMOTER'S EQUITY 105
13.8 APPRAISAL OF PROPOSALS RELATING TO IT 106
13.9 TOBACCO INDUSTRY 107
13.10 SUGAR INDUSTRY 107
13.11 CONSTRUCTION INDUSTRY 108
13.12 DISCOUNTING OF BILLS UNDER LC 108
13.13 COLLATERAL$ 109
13.14 GUARANTEES 113
13.15 ALLOCATION OF SUBLIMITS TO OTHER BRANCHES 114
I.
ACCEPTING NON-LIFE POLICIES ISSUED BY PRIVATE
13.16 SECTOR INSURANCE COMPANIES LICENSED BY IRDA 114
14 TERMS OF FINANCE
14.1 PRICING 115
14.2 MARGIN 117
14.3 OTHER CHARGES I FEES 118
14.4 COLLATERAL SECURITY 120
15 CREDIT MONITORING
15.1 MONITORING SYSTEMS 122
REVIEW OF LOAN SANCTIONS MADE BY EACH
15.2 AUTHORITY 122
15.3 LOAN REVIEW MECHANISM 122
15.4 UNIT I GODOWN INSPECTION] 123
CALCULATION OF DRAWING POWER BASED ON THE
15.5 STOCK STATEMENT I DEBTORS STATEMENT 123
15.6 SUBMISSION OF QIS I CMA 125
' 15.7 SUBMISSION OF AUDITOR'S CE~TIFICATE 125
15.8 STOCK AUDIT 126
Chapter Para PARTICULARS Paae No.
15.9 REVIEW/RENEWAL OF BORROWAL ACCOUNTS 123
15.10 RENEWAL OF STANDALONE TERM LOAN LIMITS 127
EXTENSION OF EXPIRED LIMIT I SHORT REVIEW &
15.11. RENEWAL PROPOSAL (SRRPI 127
15.12 REVALIDATION OF SANCTION 127
15.13 MID TERM REVIEW OF LARGE BORROWAL ACCOUNTS 128
15.14 COMPULSORY AUDIT OF BORROW AL ACCOUNTS 128
15.15 VALUATION OF SECURITIES 128
GUIDELINES FOR OPERATIONS IN NPA ACCOUNT
15.16 WHICH SHOWS SIGNS OF REVIVAL 129
15.17 QUICK MORTALITY 130
REVITALISING DiSTRESSED ASSETS- JOINT LENDERS'
15.18 FORUM AND CORRECTIVE ACTION PLAN 130
REHABILITATION AND RESTRUCTURING OF BORROWAL
16 ACCOUNTS
16.1 PROVISION AVAILABLE FOR FINANCING WEAK UNITS 132
16.2 RESTRUCTURING 132
16.3 REHABILITATION OF SICK I WEAK INDUSTRIAL UNITS 132
GRANTING OF ADVANCES TO AN ACCOUNT THAT WAS
16.4 NPA OR SETTLED UNDER OTS WITH SACRIFICE 133
GRANTING OF ADVANCES TO AN ASSOCIATE IN A
GROUP WHERE ONE OF THE ASSOCIATES IS NPA OR
16.5 GRANTED OTS WITH SACRIFICE 133
RELIEF MEASURES TO BORROWERS IN AREAS AFFECTED
16.6 BY NATURAL CALAMITY 133
REFERENCE CIRCULARS .136
Indian Overseas Bank LOAN POLICY DOCUMENT 2019
Chapter· 1
OBJECTIVES & COVERAGE
1.1. PREAMBLE:
Loan Policy Document is an embodiment of various aspects of Bank's. loan policies
forming the basis for various credit decisions. This document enables and helps the
Bank and its officials to have firsthand knowledge of credit policies and to focus
. credit administration efforts in line with broad policy guidelines. The Credit Risk
Management Policy, Collateral Management and Credit Risk Mitigation Policy of
t~e Bank dovetails the Loan Policy Document. Reserve Bank of India guidelines
have been taken into consideration in this policy, wherever applicable. The
guidelines shall be subject to review for any subsequent changes/modifications
brought out by RBI. Specific operational guidelines relating to credit are
documented separately. The functionaries at various levels in the Bank should
follow both the· policies and various operational guidelines issued for day to day
operations.
1.2. OBJECTIVE OF THE POLICY: The objective of the Loan Policy is to
a) Comply with Government guidelines /RBI regulations on Capital adequacy,

prudential norms, asset classification guidelines, Risk Management
guidelines, Exposure norms, Large Value Exposure Framework etc.
b) To ensure growth under Priority Sector advances including exports, Housing
etc.
c) Provide smooth and timely flow of credit within the ambit of prudential
guidelines.
d) Deploy funds in a prudential and profitable manner.
e l Have a diversified loan portfolio.
f) Facilitate objective decisions in extending credit.
g) Have effective post- disbursement follow up.
h) Revitalize distressed assets.
1.3. COVERAGE OF THE POLICY: This policy document covers the following
aspects.
a) Deployment of Credit /Thrust areas/Exposure Norms
b) Risk Management and Prudential norms .
c) Restrictions for financing
d) Take Over of Borrowal Accounts
e) Advance to Bank's Directors I Officers of Bank
f) Exit Policy
g) Miscellaneous matters
1.4. GENERAL GUIDELINES ON LENDING:

1.4. 1 The sanctioning powers are vested. with Branch Managers under individual
capacity and with respective Credit Approval Committees at Regional
Offices. Zonal Offices and Central Office depending on the amount of
loan, rating, type of borrower etc.
1.4.2 The details of financial powers vested with each of the above layers have
been spelt out in the Bank's discretionary powers booklet. The delegated
powers for sanctioning credit faciliti~s below hurdle rate have also been
prescribed. The guidelines and the authorities vested with powers for
granting excess and Adhoc facilities to a borrower account for business
purposes have been laid down.
1.4.3 Norms for takeover of borrowal accounts from other banks. financial
institutions/ agencies have been laid down. Delegation has been
accorded selectively for deviations.
1.4.4 Policy on lending to Bank's directors. Directors and their relatives on
reciprocal basis, loans ·and advances to officers of the Bank and their
relatives have been laid down .
.r.4.5 Credit Information reports from RBI approved agencies shall be drawn. In
case of adverse credit information reports or low scores then such
proposals should be avoided. Similarly, borrowers I guarantors whose name
)
figure in the Defaulters I Caution list of RBI I ECGC should be avoided.
1.4.6 Detailed guidelines are in place for appraisal of need based working
capital facilities and term loan and other credit requirements as
enumerated in the Operational Guidelines and the Bank's book of
instructions with due weightage on the prevailing scope, market conditions
of the industry/sector/ category of the borrower who has sought the credit
limits.
1.4.7 The credit appraisal shall be on the basis of the market information I credit
reports and findings of the pre-sanction visits to the Unit and office of the
applicant. .
1.4.8 Detailed framework is in place on the terms of finance such as margin.
security, pricing, etc.
1.4.9 Discretions have been provided selectively for deviations or concessions.
1.5. COMPLIANCE:
All the functionaries shall comply with the guidelines contained in this policy
document. The guidelines contained in the various master circulars of RBI shall
also be complied with. In case of any doubt about the applicability of any of the
policy guidelines, clarifications/ approval should be obtained from Central Office.
GM (CSSD)/Head of the Department is empowered to interpret the guidelines to
the applicability.
Chapter-2
DEPLOYMENT OF CREDIT I THRUST AREAS
2.1. PRIORITY SECTOR CREDIT:

'
Bank shall strive to achieve the priority sector targets and sub-targets as stipulated
by Reserve Bank of India.
Definition of Priority Sector Advances and related targets have been given as per
the revised and latest guidelines in the latest RBI Master Direction - Priority Sector ·
Lending- Targets and Classification.!
Further guidelines of RBI on Co-origination of loans by Banks and NBFCs for lending
to priority sector.
2.2. CATEGORIES OF PRIORITY SECTOR:

The categories under priority sector are as follows:
a) Agriculture
b) Micro, Small and Medium Enterprises
c) Export Credit
d) ·Education
e) Housing
f) Social Infrastructure
g) Renewable Energy
h) Others
2.3. TARGETS AND SUB TARGETS:

The targets and sub-targets as stipulated by Reserve Bank of India as mentioned
below.
For Domestic Commercial Banks
Total Priority 40 per cent of Adjusted Net Bank Credit (ANBC)* or credit
Sector equivalent amount of Off-Balance Sheet Exposure, whichever is
Advances higher.
18 per cent of ANBC* or credit. equivalent amount of Off-
Balance Sheet Exposure, whichever is higher.
Within the 18 percent target for agriculture, a target of 8 percent
Total of ANBC* or Credit Equivalent Amount of Off- Balance Sheet
Agricultural Exposure, whichever is higher is prescribed for
Advances Small and Marginal Farmers
Micro 7.5 percent of ANBC* or Credit Equivalent Amount of Off-
Enterprises Balance Sheet Exposure.
Advances to
Weaker 10 per cent of ANBC* o'r credit equivalent amount of Off-
Sections Balance Sheet Exposure, whichever is higher.
(Page
ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever Is

higher, as at the corresponding date of the preceding year as per extant RBI
guidelines.
The computation of priority sector targets/sub-targets achievement for the year
will be based on the quarterly average achievement of the corresponding year.
2.3.1. Additionally, Bank shall ensure that the overall lending to non-corporate
Farmers does not fall below the system-wide average of the last three years'
achievement notified by RBI every year which is 11.78 percent for 2017-18.
2.3.2 All efforts shall be maintained to reach the level of 13.5 percent direct lending
to the beneficiaries who earlier constituted the direct agriculture sector.
2.4. WEAKER SECTIONS:

Priority sector loans to the following borrowers will be considered under Weaker
Sections category: -
a) Small and Marginal Farmers
b) Artisans, village and cottage industries where individual credit limits do not
exceed Rs 1 lakh
c) Beneficiaries under Government Sponsored Schemes such as National Rural
Livelihood Mission (NRLMJ, National Urban Livelihood Mission (NULMJ and Self
Employment Scheme for Rehabilitatio,n of Manual Scavengers (SRMSJ
d) Scheduled Castes and Scheduled Tribes
e) Beneficiaries of Differential Rate of Interest (DRI) scheme
f) Self Help Groups ,
g) Distressed Farmers indebted to non-institutional lenders
h) Distressed persons other than Farmers, with loan amount not.exceeding Rs1
lakh per borrower to prepay their debt to non-institutional lenders
i) Individual women beneficiaries up to Rs 1 lakh per borrower
j) Persons with disabilities.
k) Overdrafts upto Rs 10,000/- under Pradhan Mantri Jan-DhanYojana (PMJDY)
accounts, provided the borrower's household annual income does not
exceed Rs 100,000/- for rural areas and Rs 1,60,000/- for non-rural areas
I) Minority communities as may be notified by Government of India from time
to time.
2.5. THRUST AREAS:
The Government I RBI's guidelines in respect of lending to priority sector &

Exports will receive focused attention.
2.5.1 AGRICULTURE:
2.5.1.1. The lending to agriculture sector has been defined to include (i) Farm
Credit (ii) Agriculture Infrastructure and (iii) Ancillary Activities. Bank shall finance.
eligible activities under the three sub-categories listed out in the RBI Master
Directions' dated 07.07.2016 and last updated on 01.08.2018 & 04.12.201~. as
given in ANNEXURE- ADVANCES ELIGIBLE TO BE CLASSFIED UNDER AGRICULTURE.
a) Thrust will be given for achieving National norms and C<?mpliancewith sub-
sector allocations by intensifying credit flow.
b) Efforts will be taken to accelerate the issuance of Kisan Credit cards to all
eligible Farmers·, both existing and new.
c) Fillip and thrust will be given for promoting and eventual credit linkage of
more number of Self Help Groups. ·
d) Loans for investment credit and allied activities shall be extended keeping
in tune with the Government guidelines.
e) lOB Krishi-Samridhi, new scheme launched; to meet several investment
credit need of the farming community will be effectively marketed. This
scheme is a hassle free security based investment credit scheme that allows
Farmers to have flexibility and choice in regard to the amount, use of
finance and insurance of Prime Security.
f) More focus will be given to finance Food & Agro Processing units, rural
godowns, cold storage units and advances against Ware House I Cold
storage receipts.
g) Preference will be given for self-liquidating nature of advances wherein
repayment will be forthcoming from Procuring I Marketing Agencies like
Sugar Mills, Milk Societies, Collateral Management Services, Corporates etc.
h) Thrust will be given for financing Farmers for purchase of Farm equipments
under the MOU signed with reputed Farm Equipment Manufacturers Cluster
approach will be explored for Food & Agro Processing units and Allied
Activities.
2.5.1.2. Small and Marginal Farmers:

For the purpose of computation of achievement of the sub-target, Small and
Marginal Farmers will include the following: -
a) Farmers with landholding of up to I hectare (Marginal Farmers). Farmers with
a landholding of more than 1 hectare and up to 2 hectares (Small Farmers).
b) Landless agricultural labourers, tenant Farmers, oral lessees and share-
croppers, whose share of landholding iswithin the limits prescribed for small
and marginal Farmers
c) Loans to Self Help Groups (SHGs) or Joint Liability Groups (JLGs), i.e. groups
of individual Small and Marginal Farmers directly engaged in Agriculture
5I Page
and Allied Activities, provided banks maintain disaggregated data of such

loans.
d) Loans to Farmers' producer companies of individual Farmers, and co-
operatives of Farmers directly engaged in Agriculture and Allied Activities,
where the membership of Small and Marginal Farmers is not less than 75
per cent by number and whose land-holding share is also not less than 75
per cent of the total land-holding.
2.5.2 MICROCREDIT:
a) Micro Credit is the emerging segment of Rural Credit which will receive
Bank's focused attention and greater thrust will be given for credit linking
SHGs, preferably through 'Direct Bank-SHG Linkage Model'
b) Bank will lay special emphasis for credit linking Group Specific SHGs Viz.
Women SHGs, Youth SHGs, SHGs of Ex-Servicemen, SHGs comprising of
physically handicapped I visually impaired etc.
2.5.3 MSMI: FINANCE:

Bank will strictly adhere to the RBI guidelines listed out in RBI Circular2 .
Limits for investment in plant and machinery/ equipment: The limits for investment
in plant and machinery/equipment for manufacturing I service enterprise, as
notified by Ministry of Micro, Small and Medium Enterprises, vide S.O.l642(E)
dated September 9, 2006 are as under: -
Category of Enterprise Investment In Plant and machinery
Manufacturing Sector@
Does not exceed twenty five lakh
Micro Enterprises rupees
More than twenty-fiv~ lakh rupees but
Small Enterprises does not exceed five crore rupees
More than five crore rupees but does
Medium Enterprises not exceed ten crore rupees
Service Sector
Micro Enterprises Doesnotexceedtenlakhrupees
More than ten lakh rupees but does not
Small Enterprises exceed two crore rupees
More than two crore rupees but does
Medium Enterprises not exceed five crore rupees
@?In case of . the manufacturing enterprises, investment in plant and
machinery is the original cost excluding land and building and the items
specified by the Ministry of Small Scale lndustries3 (Annex I of above referred RBI
Master Circular}.
·- ........ .
GIPage
2.5.3.1. Bank loans to Micro, Small and Medium Enterprises, for both
manufacturing and service sectors are eligible to be classified under the priority
sector as per the following norms:
2.5.3.2. Manufacturing Enterprises
The Micro, Small and Medium Enterprises engaged in the manufacture or

production of goods to any industry specified in the first schedule to the Industries
(Development and Regulation) Act, 1951 and as notified by the Government
from time to tin:'e. The Manufacturing Enterprises are defined in terms of
investment in plant and machinery.
2.5.3.3. Service Enterprises
Bank loans up to Rs 5 crores per unit. to Micro and Small Enterprises and Rs 10
crores to Medium Enterprises engaged in providing or rendering of services and
defined in terms of investment in equipment under MSMED Act, 2006.
2.5.3.4. Khadi and Village Industries Sector (KVI)
All loans to units in the KVI se.ctor will be eligible for classification under the sub-
target of 7.5 percent prescribed for Micro Enterprises under priority sector.
2.5.3.5. Other Finance to MSMEs ·
i. Loans to entities involved in assisting the decentralized sector in the supply

of inputs to and marketing of outputs of artisans, village and cottage
industries.
ii. Loans to co-operatives of producers in the decentralized sector viz.
artisans, village and cottage industries.
iii. Loans sanctioned by banks to MFis for on-lending to MSME sector as per
the conditions specified in the RBI Master Directions.
iv. Credit outstanding under General Credit Cards (including Artisan Credit
Card, Laghu Udyami Card, Swarojgar Credit Card, and Weaver's Card etc.
in existence and catering to the non-farm entrepreneurial credit needs of
individuals).
v. Overdrafts extended by banks after September 17, 2018 up to Rs 10,000/-
under Pradhan. Mantri Jan Dhan Yojana (PMJDY) accounts provided the
borrower's household annual income does not exceed Rs 100,000/- for rural
areas and Rs 1,60,000/- for non-rural areas. These overdrafts will qualify as
achievement of the target for lending to Micro Enterprises.
71Page
vi. Outstanding deposits with SIDBI and MUDRA Ltd. on account of priority
sector shortfall.
vii. Loans under "Stand Up India" and "MUDRA" scheme.
2.5.3,6. To ensure that MSMEs do not remain small and medium units merely to
remain eligible for priority sector status, the MSME units will continue to enjoy the
priority sector lending status up to three years after they grow out of the MSME
category concerned.
2.5.3.7.1n tune with the national priorities, financing MSME sector would be a thrust
area for the Bank by
a) Encouraging coverage of MSME loans under CGTMSE scheme within the
overall permissible limits
b) Finance to Micro units of Retail trade sector sanctioned under MUDRA
scheme, coverage from CGFMU is available on a portfolio basis.
c) Adopting cluster based financing to bring in more number of units under our
financing.
d) The Bank has separate policy for MSME.
2.5.4 EXPORT CREDIT:

2.5.4.1. The Export Credit extende_d as per the details below will be classified as
· priority sector: Incremental export credit over corresponding date of the
preceding year, up to 2 percent of ANBC* or Credit Equivalent Amount of Off-
Balance Sheet Exposure, whichever is higher, effective from April 1, 2015 subject
to a sanctioned limit of up to Rs 25 crores per borrower to units having turnover of
up to Rs. 100.00 crores. Export credit includes pre-shipment and post shipment
export credit (excluding off-balance sheet items).
2.5.4.2. Bank will endeavor to provide timely and adequate credit and also render
essential customer services/guidance in regard to procedural formalities and
export opportunities to exporter cust~mers
2.5.4.3. Bank will issue Gold cards to eligible export borrowers with line of credit for
3 years to exporters with satisfactory track record as per laid down procedure
which will encourage export finance. At present issuance of physical Gold Cards
is not in vogue.
(* Adjusted Net Bank Credit)
...
SIPage
2.5.5. EDUCATION; HOUSING; SOCIAL INFRASTRUCTURE; RENEWABLE ENERGY AND

OTHERS:
Bank shall end~avour to increase exposure to the following sectors coming under
Priority Sector in terms of National Goals and Socio-economic objectives.
2.5.5.1. EDUCATION:
Loans to individuals for educational purposes including vocational courses up to

Rs. 10.00 lakhs irrespective of the sanctioned amount.
2.5.5.2. HOUSING:
a) Loans to individuals up to Rs. 35 lakhs in metropolitan centres (with

population of ten lakhs and above) and loans up to Rs. 25 lakhs in other
centres for purchase/construction of a dwelling unit per family provided the
overall cost of the dwelling unit in the metropolitan centre and at other
centres should not exceed Rs. 45 lakhs and Rs. 30 lakhs, respectively. The
housing loans to Bank's own employees will be excluded.
b) Lqans for repairs to damaged dwelling units of families up to RsS lakhs in
metropolitan centres and up to RS. 21akhs in other centres
c) Bank loans to any governmental agency for construction of dwelling units
or for slum clearance and rehabilitation of slum dwellers subject to a ceiling
of RslO lakhs per dwelling unit.
d) The loans sanctioned by banks for housing projects exclusively for the
purpose of construction of houses for economically weaker sections and low
income groups, the total cost of which does not exceed Rs. 10 fakhs per
dwelling unit. For the purpose of identifying the economically weaker
sections and fowincome groups, the family income limit of Rs. 31akhs and
Rs. 6 Lacs per annum respectively, irrespective of the location, is prescribed.
e) Bank loans to Housing Finance Companies {HFCs), approved by NHB for
their refinance, for on-lending for the purpose of
purchase/construction/reconstruction of individual dwelling units or for slum
clearance and rehabilitation of slum dwelle:s, subject to an aggregate loan
limit of RslO lakhs per borrower.
f) The eligibility under priority sector loans to HFCs is restricted to five percent
of the Bank's total priority sector fending, on an ongoing basis. The maturity
of Bank loans should be co-terminus with average maturity of loans
extended by HFCs. Bank shall maintain necessary borrower-wise details of
the underlying portfolio.
2.5.5.3. SOCIAL INFRASTRUCTU~E:
2.5.5.3.1. Bank loans up to a limit of Rs 5 crores per borrower for building social
infrastructure for activities namely schools, health care facilities, drinking water
facilities and sanitation facilities including construction/ ~efurbishment of
household toilets and household level water improvements in Tier II to Tier VI
centres.
2.5.5.3.2. Bank credit to Micro Finance Institutions (MFis) extended for on-lending
to individuals and also to members of SHGs/ JLGs for water and sanitation facilities
will be eligible for categorization as priority sector under 'Social Infrastructure',
subject to the criteria laid down in the aforesaid RBI Master Directions.
2.5.5.4. RENEWABLE ENERGY:
Bank loans up to a limit of Rs. 15 crores to borrowers for purposes like solar based
power generators, biomass based power generators, wind mil_ls, micro-hyde!
plants and for non-cQnventional energy based public utilities viz. street lighting
systems, and remote village electrification. For individual households, the loan limit
will be Rs. 10 lakhs per borrower. Term Loan to staff (for individuals) under lOB
SURYA (SCHEME A) to be treated as priority sector advance.
2.5.5.5. OTHERS~
a) Loans not exceeding Rs. 50,000/- per borrower provided directly by banks
to individuals and their SHG/ JLG, provided the individual borrower's
household annual income in rural areas does not exceed Rs. l ,00,000/-and
for non-rural areas it does not exceed Rs. 1,60,000/-.
b) Loans to distressed persons other than Farmers not exceeding Rs. 1,00,000/-
per borrower to prepay their debt to non-institutional lenders
c) Loans sanctioned to State Sponsored Organizations for Scheduled Castes/
Scheduled Tribes for the specifi<:= purpose of purchase and supply of inputs
and/or the marketing of the outputs of the beneficiaries of these
organizations.
2.5.6. SPECIAL CREDIT SCHEMES:
Bank has various credit schemes to cater to the different sectors of the economy
which are as under:
a} Housing loans for individuals, both residents· and NRis for
purchase/construction of new/old house;
::\~%
' .. :~~._0~et~o~~ att.~,L
~t~~i' 'r 10 I Page
..$!
b) Repair/renovation of existing houses,

c) Vidyajyothi educational loan scheme,
d) Pushpaka scheme for purchase of new as well as used cars/two-wheelers
e) Sahayika Loan to meet expenditure on social/financial commitments such
as marriage etc., to individuals in employment, business, professionals and
self-erY)ployed with regular income,
f) Pensioners' Loan scheme to all pensioners receiving pension through our
branches except Malaysian Government pensioners,
g) Sanjeevini scheme for registered medical practitioners for the purpose of
construction of nursing home, hospitals, purchase of equipment; vehicle
and ambulance etc.
h) Clean loan to salaried employees and LIC Agents.
2.5.7. OTHER THRUST AREAS:
d) Bdnk will increase its exposure towards working capital finance with more
focus on self-liquidating bill finance I short term loans.
b) Trade credit advances which yield good interest income shall be given
more thrust.
c) Arrangement with NBFC-ND-Sis to co-originate loans for the creation of
priority sector assets.
------000----.o-
Chapter-3 ·
RISK MANAGEMENT & PRUDENTIAL NORMS

3.1 GENERAL:
Risks are inherent in any financial intermediation and hence the bank is exposed
to certain risks that arise from its business and the environment within which it
operates. Bank has laid down separate policy for Credit Risk Management, which
shall be adhered to while lending.
3.2 PRUDENTIAL NORMS

Bank will adhere to the prudential ceiling norms prescribed by the Reserve Bank of
India on Single and Group Borrower exposures as per their Master circular on
Exposure Norms4 and RBI guidelines on Large Exposures Frameworks. Besides
Single/Group Borrower limits, Bank shall adhere to the exposure ceilings fixed
internally for the following Categories of exposures.
3.3 DEFINITION OF GROUP:

a) As per RBI guidelines, the concept of "Group" and the task of identification
of the borrowers belonging to specific industrial group is left to the
perception of banks I financial institutions. Banks and financial institutions
are, generally aware of the basic constitution of their clientele. The group
to which a particular borrowing unit belongs should therefore, be decided
by them on the basis of relevant information available with them, the
guiding principle in this regard being commonality of management and
effective control.
b) A group is defined by invoking associate/sister concern concept.
c) Where a proprietor or partner of a firm/director of one company is proprietor
or partner of another firm/director of another company, they are called as
associates falling within the purview of group concept.
d) Where a proprietor or partner of a firm /a director of one company/ a
company is the guarantor of another partnership firm/another, company
where the guarantor has no financial stake (or has no commonality of
management and effective control), then they are not to be treated as
associates falling within the purview of group concept.
e) Where common director /partners are employees/ institutional nominees/
or. have no financial stake, the group concept will not apply.
f) In case of common guarantors if they have substantial interest i.e 51% or
more stake in one or any of the common concerns, then the account will
be treated as associate concern.
,.
Indian Overseas Bank LOAN POLICY DOCUMENT 20~ 9
g) Even after complying with the above directions, if a sanctioning authority is

of the opinion that the borrower should be considered as an associate
concern, then the provisions of associate shall be applicable (such as very
closely connected family members, say, wife, son, daughter etC. under one
family umbrella).
3.4 EXPLANATION FOR CREDIT EXPOSURE:
a) Exposure will include credit exposure (funded and non-funded credit limits)
.and investment exposure (including underwriting and similar commitments).
b) The sanctioned limits or outstanding, whichever are higher, will be reckoned
for arriving at the exposure limit.
c) However, in the case of fully drawn term loans, where there is no scope for
re-drawal of any portion of the sanctioned limit, Bank will reckon the
outstanding as the exposure. In case of partly drawn term ioans where there
is no scope of further drawal, outstanding shall be considered as exposure
(projects stalled, borrower not interested to draw further release etc.)
d) The Bank will compute credit exposure arising on account of interest rate &
foreign exchange derivative transactions and gold using the 'Current
Exposure Method' as prescribed by RBI and also Credit Conversion Factor
for Forward Contract.
e) In general, the guidelines of RBI on exposure norms will be complied with.
3.5 EXPOSURE LIMITS:
a) Exposure limit for single/group b.orrower will be calculated based on Capital

Funds as per RBI guidelines as on 31st March of preceding year
b) Capital funds for the purpose will comprise Tier I and Tier II capital as defined
under capital adequacy standards and as per the published accounts as
on March 31 of the preceding year. Other accretions to capital funds by
way of quarterly profits etc. would not be eligible to be reckoned for
· determining the exposure ceiling. Bank shall not take exposure in excess of
the ceiling in anticipation of infusion of capital at a future date.
c) Aggregate exposure ceiling for each industry/sector/segment shall be
calculated on the gross domestic exposure as at the end of the previous
quarter.
3.6 CEILING FOR SINGLE/ GROUP BORROWER LIMIT:

3.6. l(a) SINGLE BORROWER LIMIT: (OTHER THAN INFRASTRUCTURE PROJECTS):
Category of borrower Maximum Limit Maximum
llmltwlth
approval
of Board
Individual /Proprietary Concerns/ Rs. 100 Crore 5%of ·
Trust /Society Capital
Partnership firms Rs.400 Crore Funds
Ship Breaking Industry Rs.400 Crore
Film Industry Rs. 50 Crore
Aviation Industry Rs.SOO Crore
NBFCS"' registered with RBI. {for single External Ceiling 7.5%of
NBFC/NBFC-AFC (Asset Financing rating Capital
Company)} NBFCs havi'ng gold loans to AAA 7% of capital funds or Funds
the extent of 50% or more of its -total Rs. 1000 Cr whichever
financial assets. is lower.
AA 6% of capital funds or
Rs. 800 Cr whichever
is lower.
A 4% of capital funds or
is lower.
Others 2% of capital funds or
is lower.
NBFCs, which have been exempted from 12.5% of
the requirement of registration by RBI viz. Capital Funds
i) Insurance Companies
registered under Section 3 of the
Insurance Act, 1938;
ii) Nidhi Companies notified under
Section 620A of the Companies Act,
1956;
iii) Chit Fund Companies carrying on Chit
Fund business as their principal business
as per Explanation to Clause (vii) of
Section 45-1 (bb) o the Reserve Bank of
.India Act, 1934.
iv) Stock Broking Companies/ Merchant
Banking Companies registered under
Section 12 of the Securities & Exchange
Board of India Act; and v) Housing 17.5% of
Finance Companies being regulated by Capital
the National Housing Bank (NHB). Funds
All other borrowers 12.5% of Capital Funds 17.5% of
Capital
Funds
3.6.1 (b) SINGLE BORROWER LIMIT: (FOR INFRASTRUCTURE PROJECTS)
Category of borrower Maximum Limit Maximum limit with

approval of Board
Individual /Proprietary Rs.1 00 Crore 5%of
Concerns/Trust/Society Capital Funds
Partnership firms Rs. 400 Crore
NBFCs Registered with External Ceiling
RBI. Rating
{for single NBFC/NBFC- AAA 7% of capital
AFC (Asset Financing funds or Rs. 1000
Company} if the NBFC is Cr whichever is
lending to Infrastructure} lower.
AA 6% of capital
AND funds or Rs. 800 7.5% of
Cr whichever is Capital Funds
NBFCs having. gold loans
to the extent of 50% or lower.
more of its total financial A 4% of capital
assets. funds or Rs. 500
Cr whichever is
lower.
Others 2% of capital
funds or Rs. 300
Cr whichever is
.lower.
All other borrowers 15% of Capital funds 20%of
Ca~ital
funds
Generally, the ceiling fixed for the single borrower mentioned above shall not be
exceeded. However, in deserving cases, and depending on the risk appetite of
the Bank, Management Committee of the Board is empowered to consider higher
limits subject to single borrower exposure not exceeding the ceiling fixed by RBI
under the prudential norms.
3.6.1 (c) SINGLE BORROWER LIMIT FOR OIL COMPANIES:

Single borrower Limit for Oil Maximum Limit Maximum limit with
companies approval of Board
For Oil Companies who have been
12.5%of 17.5% of
issued Oil Bonds (which do not
Capital Funds Capital Funds
have SLR status} by Govt. of India
lSI Page
3.6.2 GROUP BORROWER LIMIT:
Group borrower limit Maximum Limit Maximum limit with

approval of Board
For projects other 20% of capital Funds. 25% of Capital Funds
than Infrastructure. However aggregate limits to
Proprietary and partnership
firms in the group shall not
exceed Rs. 500 crore.
For Infrastructure 25% of capital Funds. 30% of Capital Funds
projects However, aggregate Limits to
Proprietary and partnership
firms' in the group shall not
exceed Rs. 500 crore.
3.6.3 EXEMPTIONS FOR CEILING ON SINGLE/GROUP EXPOSURE LIMITS:

The above ceilings on single/group exposure limits do not apply if the credit facilities
proposed fall under the following categories:
a) Existing/additional credit facilities (including funding of interest and

irregularities) granted to weak/sick industrial units under rehabilitation.
b) Borrowers, to whom limits are allocated directly by the Reserve Ba~k of India,
for food credit.
c) Principal and interest fully guaranteed by the Govt. of India.
d) Loans and advances granted against the security of Bank's own term deposits.
e) Exposure to NABARD.
3.6.4 .EXCESS OVER PRUDENTIAL NORMS:

a) Reserve Bank of India has discontinued the practice of case to case basis
approval for exceeding the Single I Group borrower risk exposure ceiling.
However, with the approval of the Board, Banks have been permitted to
consider enhancement up to a maximum of further 5 percent of capital funds
in exceptional circumstances, subject to disclosure in Annual Reports with the
consent of the borrower.
b) The Bank will make appropriate disclosures in the 'Notes on Accounts' to the
annual financial statements in respect of such exposures where the Bank had
exceeded the prudential exposure limits during the year.
Indian Overseas Bank LOAN POLICY DOCUMENT 2019 .
3.7. GUIDELINES ON ENHANCING CREDIT SUPPLY FOR LARGE BORROWERS THROUGH

MARKET MECHANISM:
3.7.1. While considering sanction of credit limits to large borrowers, the Bank shall give
due consideration to the guidelines enumerated in RBI Circular on Guidelines on
Enhancing Credit Supply for Large Borrowers through Market Mechanism6.
3.7.2. These guidelines will be applicable on all single counterparties of the Bank
except other Scheduled Commercial Banks, Non-Banking Financial Companies
registered with RBI, All India Financial Institutions (National Housing Bank, SIDBI, EXIM
Bank and NABARD) and Housing Finance Companies registered with NHB.
3.7.3. Bank shall apply proper due-diligence while deciding the NPLL (Normally
Permitted Lending Limit) as given below for a single borrower in order that borrowers
do not circumvent the cut-off ASCL (Aggregate Sanctioned Credit Limit as given
below) criteria by borrowing through dummy/fictitious group companies.
3.7.4. These guidelines will come into effect from the financial year 2017-18 onwards.
3.7.5. Bank shall ordinarily keep its future incremental exposures to the specified
borrowers within the NPLL to avoid additional provisioning and higher risk weight
which are as given below.
3.8. PRUDENTIAL MEASURES:
From 2017-18 onwards, incremental exposure of the banking system to a specified

borrower beyond NPLL shall be deemed to carry higher risk which shall be recognised
by way of additional provisioning and higher risk weights as under:
i. Additional provisions of 3 percentage points over and above the applicable

provision on the incremental exposure of the banking system in excess of NPLL,
which shall be distributed in proportion to each bank's funded exposure to the
specified borrower.
ii. Additional Risk weight of 75 percentage points over and above the applicable
risk weight for the exposure to the specified borrower. The resultant additional
risk weighted exposure, in terms of risk weighted assets (RWA), shall be
distributed in proportion to each bank's funded exposure to the specified
borrower.
171Page
3.8.1. DEFINITIONS:
For the purpose of this Framework, the following terms shall have the meaning
qssigned to them herein below:
i. Aggregate Sanctioned Credit Limit (ASCL) means the aggregate of the fund
based credit limits sanctioned or outstanding, whichever is higher, to a
borrower by the banking system. ASCL would also include unlisted privately
placed debt with the banking system.
ii. 'Specified borrower', means a borrower having an ASCL of more than
a) Rs. 25,000 crores at any time during FY 2017-18:
b) Rs. ·15,000 crores at any time during FY 2018-19;
c) Rs. 10,000 crores at any time from April 1, 2019 onwards;
iii. 'Reference date', means the date on which a borrower becomes a 'specified
borrower'.
iv. Normally permitted lending limit (NPLL), means 50 percent of the incremental
funds raised by the. specified borrower over and above its ASCL as on the
reference date, in the financial years (FYs) succeeding th·e FY in which the
reference date falls. For this purpose, any funds raised by way of equity shall be
deemed to be part of incremental funds raised by the· specified borrower (from
·outside the banking system) in the given year: Provided that where a specified
borrower has already raised funds by way of market instruments and the
amount outstanding in respect of such instruments as on the reference date is
15 per cent or more of ASCL on that date, the NPLL will mean 60 percent of the
incremental funds raised by the specified borrower over and above its ASCL as
on the reference date, in the financial years (F.Ys) succeeding the FY in which
the reference date falls. ·
v. Banking system, means all banks in India including RRBs and co-operative
banks and branches of Indian banks abroad.
vi. Market instruments, shall include bonds, debentures, redeemable preference
shares and any other non-credit liability, other than equity.
3.8.2 For the purpose of determining exposure beyond NPLL, subscription by the
banking system to market instrumen'ts shall be included except any subscription
made by the bankin0 system to the market instruments issued by a specified borrower
in 2017-18 and held within the permissible prudential limits by a bank.
3.8.3 Banks shall at its discretion, subscribe to bonds issued by the specified borrowers
{over and above NPLL) in the first year ofthis framework taking effect, i.e., 2017-18
subject to extant investment guidelines and these being divested in the subsequent
three years as per the following milestones:
i) Not less than 30 percent by March 31, 2019
ii) Not less than 60 percent by March 31, 2020
iii) Not less than 100 percent by March 31, 2021.
All holdings by the Bank of market instruments issued by a 'specified borrower'. after
the 'reference date' shall be held in the AFS/HFT category and marked to market as
applicable thereto. However, banks shall, at its discretion, value its holdings of market
instruments issued by the specified borrowers in 2017-18 at book value. ·
3. 9 CEILING NORMS FOR INDUSTRIAL ADVANCES:

a) The Bank shall have a well-diversified credit portfolio under different sectors I
Industries. Bank shall periodically carry out analysis on various industries based
on the reports/data published by different rating agencies like CRISIL, ICRA etc.
and place the same to the Board. The findings in the study along with internal
guidelines relating to the ceilings for specific industries shall be examined
periodically, and identify the promising sector where fresh/additional exposure
can be considered and also industries/sectors that are not doing well and
where cautious approach is to be adopted .
. b) The bank shall endeavour to restrict gross exposure (Fund Based + Non Ful')d
based + Investments) to a particular domestic manufacturing industry to a
maximum of certain percentage of the Bank's gross domestic exposure as
under subject to single borrower exposure not exceeding the ceiling fixed
under prudential norms.·
Maximum Cap fixed

(% OF GROSS DOMESTIC FB and
NFB EXPOSURE as at the end of
Industry previous quarter) .
Infrastructure 25%
Sub-
(Classification as per the RBI definition) limit
Energy: 14%
Of which
· Electricity Generation &
Transmission: (10%)
Electricity Distribution: ( 3%)
191 page
Non-conventional energy: (1%)
Transport: 5%
Water & Sanitation: 1%
Communication : 3%
Social & Commercial Infrastructure 2%

~ lnterchangeabili,ty is permiHed by
MD&CEO
Basic Metal &Metal Products 15%
OTHER INDUSTRIES:
Maximum Cap fixed (% OF GROSS
DOMESTIC FB and NFB EXPOSURE
Industry of
as at the end previous quarter)
1. Mining &Quarrying 4%
All engineering incl. Electronics
2. computer etc. 5%
3. TextilesJCotton, Jute) 6%
Food processing(Sugar +Edible oil
4. &Vegoil) 4%
5. Beverage & Tobacco products. 1%
6. Paper &Paper products. 2%
7. Rubber &plastics and their products. 2%
8. Leather &Leather products. 2%
9.1 Chemicals and Chemical products. 5%
10. Cement & cement products. 2%
11. Construction 2%
12. Petroleum, coal products and
Nuclear Fuels. 2%
13. Vehicles, Vehicle parts & Transport
~quip_ment 4%
14. Gems &Jewellery 2%
15. Glass & Glass ware. 1%
16. Wood & Wood products. 2%
17. Other Industries 2%
c) In a particular industry where Bank's exposure has exceeded the ceiling fixed,
MD&CEO is authorized to permit exceeding overall exposure for each industry
by 10% depending upon the risk appetite of the Bank.
d) Bank shall endeavour to restrict gross exposures (Fund Based+Non-Fund
Based+lnvestment) to a particular manufacturing Industry at Bank's Overseas
Branches as decided in the centre specific lending policies. Since Industrial
activities are different from the domestic Industry classifications, Overseas

Centers Industry Exposures shall be monitored by respective centers and
concerned department at Central Office.
3.10 CEILING NORMS FOR OTHER INDUSTRIES:
3.1 0.1 SHIP-BREAKING INDUSTRY:

The aggregate exposure to Ship-breaking Industry shall not exceed 2% of gross
domestic exposure as at the end of previous quarter subject to single borrower
exposure not exceeding Rs. 400 Crore. MD & CEO is authorized to permit exceeding
overall exposure by 10% (i.e. up to 2.2% of gross domestic exposure}. The exposure
limits shall be updated as per Bank's Ship Breaking Policy.
3.10.2 FILM INDUSTRY:

The aggregate exposure to Film industry shall not exceed 1% of gross domestic
exposure as at the end of previous quarter subject to single borrower exposure not
exceeding Rs. 50 Crore. MD & CEO is authorized to permit exceeding overall exposure
by 10% (i.e. up to 1.1% of gross domestic exposure).
3.1 0.3 AVIATION INDUSTRY:

The aggregate exposure to aviation industry shall not exceed 3% of gross domestic
exposure as at the end of previous quarter subject to single borrower exposure not
exceeding Rs. 500 Crore. MD & CEO is authorized to permit exceeding overall
exposure by 10% (i.e. up to 3.3% of gross domestic exposure).
3.11 EXPOSURE CEILING FOR OTHER SEGMENTS I CATEGORIES:
3.11.1 REAL ESTATE ADVANCES:
As per RBI's guidelines, Real Estate Sector includes Housing Loans also. Our exposure
ceiling to Real Estate Sector has been fixed at 30% of gross domestic exposure as at
the end of previous quarter. The real estate sector loans consist of
1 8 MAR 1019
Sub-sector under Real Estate Advances Sub-ceiling
Commercial Real Estate excluding liquirent CRE: - Lendings

secured by mortgages on commercial real estates (office
buildings, retail space, multipurpose commercial premises,
multifamily residential buildings, multi-tenanted commercial 7%
premises, industrial or warehouse space, land acquisition,
development and construction. etc.) (excluding liquirent
CRE).
of which CRE- Residential Housing (CRE-RH) (3%)
1
'to builders & developers)
Liquirent CRE 3%
Commercial Real Estate (Total) 10%
Liquirent- Non-CRE 3%
Hotels, Hospitals and investment in Mortgaged Backed
Securities (MBS) 3%
and other securitised exposures
Housing direct (includes total of residential mortgages- 10%
except indirect housing loans)
Housing Indirect 4%
Non-Commercial Real Estate (Total) 20%
Real Estate- CRE & Non CRE (Total) 30%
3.11.2 EXPOSURE LIMIT FOR TRUST/SOCIETY:
The aggregate exposure to Trust and Society put together shall not exceed 3% of gross
domestic exposure as at the end of previous quarter subject to single borrower
exposure not exceeding Rs. 100 Crore. Existing accounts with exposure more than this
ceiling shall continue. MD&CEO is authorized to permit exceeding overall exposure
by 10% (i.e. up to 3.3% of gross domestic exposure).
The ceiling of Rs. 100 crore fixed for Single Trust/Society and 3% fixed for aggregate
Trust/Society accounts are not applicable in the following cases.
i. In the case of exposure to Trusts/Societies ·constituted by State I Central
Governments including Port Trust(s) or under Special Statutes for specific
purposes like infrastructure development etc~, and
ii. To accounts specifically exempted by the Board.
In cases mentioned under i & ii above, the exposure can be up to single borrower limit
under prudential norms.
3.11.3 EXPOSURE LIMIT FOR NBFCs:'

a) The exposure to NBFCs shall not exceed 10% of gross domestic exposure as at
the end of previous quarter subject to single borrower exposure not exceeding
2% of capital funds or Rs. 300 Cr whichever is lower for accounts rated below
1
A'. The exposure ceiling is 7% of capital funds or Rs. 1000 Cr whichever is lower,
6% of capital funds or Rs. 800 Cr whichever is lower & 4% of capital funds or Rs.
500 Cr whichever is lower respectively for I AAA 1 , 'AA I, and 1 A' rated borrowers.
Existing accounts with exposure more than this ceiling shall continue.
b) Such ceiling for NBFCs shall also include NBFCs established by the Government
of India and State Governments or under SpeCial statut~ for specific purposes
like infrastructure development etc. ·
c) Sub ceiling for all NBFCs predominantly engaged in lending against gold: Within
the above ceiling a sub ceiling of 1% of gross domestic exposure for all such
NBFCs, having gold loans to the extent of 50% or mor~ of its total financial assets,
taken together.
3.11.4 CAPITAL MARKET EXPOSURE:
Bank will adopt the following norms relating to exposure to Capital Market.
3.11.4 (a) LOAN AGAINST SHARES:

Loans against the security of shares, debentures and PSU bonds if held in physical form
will not exce·ed the limit of Rs.l 0 lakhs per borrower and Rs.20 lakhs if shares are held
in demat form.
3.11.4 (b) lOANS TO SHARE AND STOCK BROKERS AND MARKET MAKERS:
National Securities Clearing Corporation Ltd (NSCCL) has fixed a limit for each of their
members for bank guarantees to be submitted by them based on the Net worth of
the Bank. The maximum loan including guarantee that can be granted to a single
Stock brokers and market makers including its associates/ interconnected companies
shall not exceed the limit fixed by NSCCL.
3.11.4. (c) REGULATORY liMIT:
The Bank shall adhere to the following regulatory limits stipulated by RBI.
a) The aggregate exposure of the Bank to the capital markets in all forms (both
fund based and non-fund based) shall not exceed 40 per cent of its net worth,
as on March 31 stof the previous year.
231Page
b) Within this overall ceiling, the Bank's direct investment in shares, convertible
bonds I debentures, units of equity-oriented mutual funds and all exposures to
Venture Capital Funds (VCFs) [both registered and unregistered] shall not
exceed 20 per cent of its net worth.
3.11.4. (d) INTERNAL LIMIT:
The Ceiling for Aggregate advances against shares including Advances to share
brokers and market makers, and issuance of guarantees on behalf of brokers, will be
as mentioned above under Regulatory Limit.
Further, aggregate advances to share brokers and market makers and issuance of
guarantees on behalf of brokers, shall not exceed 10% of the net worth of the Bank.
3.11.4. (e) FINANCE for PROMOTER'S CONTRIBUTION,
Bank will restrict its aggregate exposure at Rs. 200 Crore under the category -
acquisition of equity in overseas joint ventures/wholly owned subsidiaries or in other
overseas companies.
3.12 CEILING FOR GOLD (METAL) LOAN -REGULATORY LIMIT:
The aggregate of gold loan borrowing I other non-funded commitments for the
purpose of providing gold loans to domestic jewellery manufacturers and exporters
shall not exceed 25% of Tier-1 capital of the Bank.
3.13 CREDIT FACILITIES GRANTED TO INDIAN JOINT VENTURES I WHOLLY OWNED

SUBSIDIARIES ABROAD AND OVERSEAS STEP DOWN SUBSIDIARIES OF INDIAN
CORPORAlES- BY BRANCHES IN INDIA:
Maximum limit that
Particulars can be sanctioned
by the Bank
·Aggregate exposure [credit and non-credit
facilities (viz. letters of credit and guarantees) of the 20% of Bank's
Bank to Indian Joint Ventures where the holding by unimpaired capital
the Indian Company is more than 51% Wholly Funds (Tier I and Tier II
Owned Subsidiaries abroad Capital)
241 Page
3.14. LOANAGAINST NRE RUPEE+DEPOSITS and FCNR (B) DEPOSITS (FB & NFB}:
Please refer RBI Master Circular of Instructions Relating to Deposits held in FCNR(B)
Accounts?.
a) Rupee loans may be allowed to depositor/third party without any ceiling

. subject to usual margin requirements.
b) Foreign Currency loans may be allowed to depositor/third party without any
ceiling subject to usual margin requirements.
c) In case of FCNR deposits, the margin requirement shall be notionally calculated
on the rupee equivalent of the deposits.
d) Further, the facility of premature withdrawal of NRE/FCNR deposits shall not be
available where loans against such deposits are to be availed of. This
requirement may specifically be brought to the notice of the depo~it holder at
the time of sanction of the loan.
The existing loans which are not in conformity with the above instructions shall
continue for their existing term and shall not be rolled over/renewed.
e) Credit Sanctioning authorities shall take the cost of foreign currency funds from
treasury and shall add appropriate premia and margin based on the tenor and
risk rating of the client before finalizing the lending rates. Basis for fixing the
Interest rate for Rupee loan against Foreign Currency Deposits:
(i) The prevalent cost of swapping the Foreign Currency to Rupees for the
corresponding maturity period of the Rupee Loan is added with the
interest cost of the FCNR deposit and the applicable spread or
(ii) The cost of a domestic deposit for the corresponding period as on the
date of opening of the FCNR deposit is added with the applicable
spread.
(Ill} The higher of (I} and (li} Is the rate applicable for Rupee loan against
Foreign Currency Deposits.
(iv) This interest rate is not linked to MCLR.
f) Foreign Currency Loans sanctioned cannot be repatriated outside India and
can be used in India only for the purposes specified in the regulations.
g) In case of loans sanctioned to a third party, there should be no direct or indirect
foreign exchange consideration for the non-resident depositor agreeing to
pledge his deposits to enable the resident individual/ firm/ company to obtain
such facilities.
h) In case of the loan sanctioned to the account holder, it can be repaid either
by adjusting the deposits or through inward remittances from outside India
through banking channels or out of balances held in the NRO account of the
account holder.
25 I Page
3.15 OTHER CEILING I EXPOSURE NORMS
3.15. 1 UNSECURED EXPOSURES:
a) Bank will limit its commitments by way of global unsecured exposures in such a
manner that Bank's outstanding unsecured guarantees, plus total outstanding
unsecured advances shall not exceed 30% of its total outstanding global
advance~ as at the end qf previous quarter.
b) Unsecured exposure is defined as an exposure where the realizable value of
security, as assessed by the Bank/ Approved valuers/Reserve B~nk's inspecting
officers is not more than 10 per cent, ab-initio, of the outstanding exposure.
c) Exposure shall include all funded and non-funded exposures including
underwriting and similar commitments.
d) Security will mean tangible security, properly charged to the Bank and will not
include intangible securities like guarantees, comfort letters etc.
e) The above definition is for the purpose of arriving at the exposures in such
unsecured category as per RBI guideline. For the purpose of exercising the
discretionary powers the sanctioning authorities shall be guided by the
·definition given in the. discretionary power booklet with regard to unsecured
advances.
3.15.2 LOANS WITH RESIDUAL MATURITY OF OVER 3 YEARS:

In order to monitor loans having longer maturity period effectively, a ceiling is fixed for
Bank's exposure to loans with residual maturity of over 3 years to 35% of gross domestic .
advances outstanding as at the end of previous quarter;
3.15.3 SUBSTANTIAL EXPOSURE LIMIT:
Bank will ensure that the substantial exposure limit i.e. sum total of exposures assumed
in respect of those single borrowers enjoying credit facilities in excess of a threshold
limit, say 10% of capital funds, does not exceed 500% of the Bank's capital funds or
25% of total advances outstanding whichever is lower.
3.15.4. GUARANTEES IN FAVOUR OF BANKS:
a) In tune with liberalisation and deregulation of the banking sector, and in view
of the adoption of risk management systems in bank, RBI has allowed Banks to
issue guarantees favouring other banks/Fis/other lending agencies for the loans
extended by the latter.
. - ·······
261 Page
b) A cap of 10% on Bank's Tier 1 capital is fixed for the bank as a' whole for issuing
such guarantees. Of this . 'guarantees favouring single bank/FI will not exceed
1% of Tier 1 capital. CAC is empowered to sanction up to the ceiling of 20% of
Tier 1 Capital for the bank as a whole and 2% of Tier 1 Capital for single Bank/Fl.
Sanction of this facility is restricted to ZLCC (GM} and upwards.
c) RBI Guidelines in this regard as contained in RBI Master Circular- Loans and
Advances- Statutory and Other Restrictionsa shall be strictly adhered to. ·
3.16 UNHEDGED FOREGIN CURRENCY EXPOSURE:
3.16.1. The Bank will recognize and take in to account the risks arising out of foreign
exchange exposure of its clients.
Foreign currency loans above USDlO million, (or such lower limits as may be deemed
appropriate from time to time vis-a-vis the Bank's portfolios of such exposures), will be
extended by the Bank only on the basis of appropriate hedging of such foreign
currency loans, excluding the following.
a) Where forex loans are extended to finance exports, Bank will not insist on
hedging but will assure itself that such customers h·ave uncovered receivables
to cover the loan amount.
b) Where the forex loans are extended for meeting forex expenditure. For arriving
at the aggregate unhedged foreign exchange exposure of clients, their
exposure from all sources including foreign currency borrowings and External
Commercial Borrowings should be taken into account.
c) The review of unhedged exposure for SMEs shall be done on a monthly basis. In
all other cases, Bank shall monitor and review such position on a quarterly basis.
d) In the case of consortium/multiple banking arrangements, the lead role in.
monitoring unhedged foreign exchange exposure of clients, as indicated
above, would have to be assumed by the consortium leader/bank having the
largest exposure.
3.16.2 Bank will also adhere to the instructions relating to information sh~ring among
Banks as indicated in RBI circular on 'Lending under Consortium Arrangement I
Multiple Banking Arrangements'9 and on Non-Performing Assets and Restructuring of
Advanceslo.
27 I Page
3.16.3 Bank shall evaluate the risks arising out of unhedged foreign currency exposure
of corporates and price them in the credit risk premium while extending fund based
and non-fund based credit facilities to corporates. Bank may also consider stipulating
a limit on unhedged position of corporate.
3. 16.4: Bank will also adhere to the instruction relating to Government of India
guidelines on PSB reforms agenda aimed at Enhanced Access and Service
Excellence (EASE).
3.17 REGION/SECTOR 'sPECIFIC EXPOSURE:

a) In regard to credit exposure in the various States/ Regions of the country, no
quantum ceiling is fixed. However, in view of the need to be a catalyst ill the
development of under developed areas of the c·ountry, the Bank would, as a
conscious policy, prefer additional credit deployment in those States/ Regions
where the credit deposit ratio of the Bank is low; this would, of course, be
contingent upon viable, acceptable credit proposals forthcoming from those ·
underdeveloped States/Regions. In other words, if many acceptable viable
credit proposals were available, preference will be given to proposals
emanating from regions where our Credit Deposit Ratio is low.
b) District Credit Plans are formulated and placed before SLBC to facilitate
achievement of district I region specific targets. For advances to different
sectors based on the geographical region, tar'get is fixed taking into account
the potential available in the region.
c) Geographical Boundaries: It is prudent to extend finance within proper
boundaries, which are easy to monitor. The below mentioned guidelines should
be adhered to while extending credit to a borrower:
SINo Loan Amount Guidelines

The Borrower Residence I Registered Office/ Corporate
Office/Factory either one of them should be located
within 10 km of the branch premises. Deviation, if any, in
this regard to be permitted by Regional Level Credit
1 Up toRs. 1 Cr Committee.
2 Above Rs. 1 Cr The Borrower Residence I Registered Office/ Corporate
and Up to Rs 10 Office/Factory either one of them should be located
Cr within 25 km of the branch premises. Deviation, ifany, in
this regard to be permitted by Zonal Level Credit
Committee.
Above Rs. 10 Cr
and Up to Rs. The Borrower Registered Office/ Corporate
3 100 Office/Factory either one of them should be located
·····-· ..._
' ..
Indian Overseas Bank LOAN POLICY DOCUMENT 2019 .
Cr within 50 km of the branch premises. Deviation, if any, in

this reQard to be permitted bv HLCC(GM) and above.
Such borrowal accounts will be sanctioned at Central
Office level only. The sanctioning authority to decide on
Above Rs. 100 the acceptability of serving branch vis-a-vis the location
4 Cr of the borrower based on merits.
The above guidelines shall be applicable for corporate borrowai accounts (Business
Loans) excluding retail loans.
3.18: A bank's exposures to its counterparties may result in concentration of its assets
to a single counterparty or a group of connected counterparties. As a first step to
address the concentration risk, the Reserve Bank, iri March 1989, fixed limits on bank
exposures to an individual business concern and to business concerns of a group. RBI's
prudential exposure norms have evolved since then and a bank's exposure to a single
borrower and a borrower group is currently restricted to 15 percent and 40 percent of
capital funds respectively.
In order to align the exposure norms for Indian banks.with the BCBS standards, and
based on comments and feedback received on the Discussion Paper on the Large
Exposures Framework {LEF), final guidelines issued by RBIS and advised Banks for full
implementation by March 31, 2019. The LEF is effective from April 1, 2019.
Bank shall apply LEF as guided in the above RBI circular and report periodically to RBI.
Definition of a large exposure and regulatory reporting Under the LEF, the sum of all
exposure values of a bank {an exposure to a counterparty will constitute both on and
off-balance sheet exposures Included in either the banking or trading book and
instruments with counterparty credit risk and measured as specified in RBI circular on
Large Exposure frameworks to a counterparty or a group of connected
counterparties {as defined in paragraph 6 of Large Exposure FrameworkS) is defined
as a 'Large Exposure{LE)', If it Is equal to or above 10 percent of the bank's eligible
capital base (I.e., Tier 1 capital as specified In paragraph 5.3 of the circulars). ·
The Large Exposure limits

1. Single Counterparty: The sum of all the exposure values of a bank to a single
counterparty must not be higher than 20 percent of the bank's available eligible
capital base at all times. In exceptional cases, Board may allow an additional 5
percent exposure of the bank's available eligible cdpital bcise.
2 Groups of Connected Counterpartles: The sum of all the exposure values of a bank
to a group of connected counterparties {as defined In the clrcular5) must not be
higher than 25 percent of the bank's available eligible capital base at all times.
3. The eligible capital base for this purpose Is the effective amount of Tier 1 capital
fulfilling the criteria defined in Master Circular on Basel Ill- Capital Regulation I Master
Direction on 'Basel Ill Capital Regulations' as per the last audited balance sheet.
······000······
ge
Chapter-4
RESTRICTIONS FOR FINANCING
Banks will strictly adhere to various statutory and other restrictions listed out in RBI
Circulars.
4.1 STATUTORY RESTRICTIONS:

4.1.1 Advances Against Bank's own shares:
a) In terms of Section 20{ 1) of the Banking Regulation Act, 1949, Bank shall not
grant any loans and advances on the security of its own shares.
b) Bank shall not extend advances to employees I Employees' Trusts set up by
them for the purpose of purchasing Bank's shares under ESOPs I IPOs or from
the secondary market. This prohibition will apply irrespective of whether the
advances are secured or unsecured.
4.1.2 Holding Shares in Companies:

a) In terms of Section 19{2) of the Banking Regulation Act, 1949, banks should
not hold shares in any company except as provided in sub-section {1)
whether as pledgee, mortgagee or absolute owner, of an amount
exceeding 30 percent of the paid-up share capital of that company or 30
percent of its own paid-up share capital and reserves, whichever is less.
b) Further, in terms of Section 19{3) of the Banking Regulation Act, 1949, the
banks should not hold shares whether as pledgee, mortgagee or dbsolute
owner, in any company in the management of which any managing
director or manager of the bank is in any manner concerned or interested.
c) Accordingly, while granting loans and advances against shares, statutory
provisions contained in Sections 19(2) and 19(3) will be strictly observed.
4.1.3 Credit to Companies for Buy-Back of their Shares/Securities:

Bank will not provide loans to companies for buy-back of shares/securities except
buy back of FCCB as per extant RBI guidelines.
4.2 · REGULATORY RESTRICTIONS:
4.2.1. Commodities covered under Selective Credit Control:
With a view to preventing speculative holding of essential commodities with the

help of bank credit and the resultant rise in their prices, in exercise of powers
·conferred by Section 21 & 35A of the Banking Regulation Act, 1949, the Reserve
1 li Mt-.R 1019
Bank of India, being satisfied that it is necessary and expedient in the public
interest to do so, issues, from time to time, directives to all commercial banks,
stipulating specific restrictions on bank advances a~ainst specified sensitive
commodities. The commodities, generally treated as sensitive commodities are
the following:
a) food grains i.e. cereals and pulses,

b) selected major oil seeds indigenously grown, viz. groundnut,
rapeseed/mustard, cottonseed, linseed and castor seed, oils thereof,
vanaspati and all imported oils and vegetable oils,
c) raw cotton and kapas,
d) sugar/gur/khandsari,
e) Cotton textiles which include cotton yarn, man-made fibres and yarn and
fabrics made out of man-made fibres and partly out of cotton yarn and
partly out of man-made fibres.
Sanctioning authorities are free to fix prudential margins· on advances against

these sensitive commodities. However, in case of advance against Levy Sugar, a
minimum margin of 10% will apply.
Valuation of sugar stocks:

a) The unreleased stocks of the levy sugar charged to the Bank as security by
the sugar mills shall be valued at levy price fixed by Government.
b) The unreleased stocks of free sale sugar including buffer stocks of sugar
charged to the Bank as security by sugar mills, shall be valued at the
average of the price realised in the preceding three months (moving
average) or the current market price, whichever is lower; the prices for this
purpose shall be exclusive of excise duty.
4.2.2. Loans and advances against shares, debentures and bonds:

Bank shall strictly observe regulatory restrictions on grant of loans and advances
against shares, debentures and bonds. The restrictions, inter alia, on loans and
advances against shares and debentures, are
Jo> No loans to be granted against partly paid shares ..
Jo> No loans to be granted to partnership/proprietorship concerns against the
primary security of shares and debentures.
Bank will comply with the extant guidelines.
The valuation of shares/debentures lodged as security for arriving at the eligible

loan amount should be made at the average of market prices for the past 12
months or current mar~et prices whichever is lower.
Looking at the volatility of share market the valuation of the shares should be done
on monthly basis and if any shortfall in the margin is observed, the same to be
recovered from the borrower immediately.
4.2.3.Advances against fixed deposltrecelpts Issued by other banks:

Advances against FDRs, or other term deposits of other Banks will not be granted.
4.2.4. Advances to Agents/Intermediaries based on Consideration of Deposit

Mobilisation:
Bank will desist from being party to unethical practices of raising of resources
through agents/intermediaries to meet the credit needs of the
existing/prospective borrowers or from granting loans to intermediaries, based on
the consideration of deposit mobilisation, who may not require the funds for their
genuine business requirements.
4.2.5. Loans against Certificate of Deposits (CDS):

Bank will not grant loans against Certificate of Deposits.
4.2.6. Non Fund Based Facility to Non Constituent Borrowers of the Bank:
RBI vide their circular on Non-Fund Based Facility to Non-constituent Borrowers of
Bankll have permitted Scheduled Commercial Banks to sanction non-fund based
facilities including Partial Credit Enhancement (PCE) to those customers, who do
not avail any fund based facility from any bank in India, subject to the following
conditions and based on a comprehensive Board approved loan policy for grant
of non-fund based facility to such borrowers The modality is included here.
a) Bank shall consider sanctioning non-fund based facilities to non-constituents
who require Non-Fund based facilities like Letter of Credits (LCs), Bank
Guarantees, but do not avail of any Fund based facility from any bank.
b) Verification of Customer credentials
Bank shall ensure that the borrower has not availed any fund based facility
from any bank operating in India. However, at the time of granting non-fund
based facilities, Bank shall obtain declaration from the customer about the
non- fund based credit facilities already enjoyed by them from other banks.
c) Credit Appraisal and due-diligence
Bank shall undertake the same level of credit appraisal as has been laid
down for fund based facilities.
331 Page
d) Compliance with Know Your Customer (KYC) Norms I Anti-Money

Laundering (AML) Standards I Combating of Financing of Terrorism (CFT) I
Obligation of banks under PMLA, 2002
The instructions/ guidelines on KYC/ AML/ CFT applicable to banks, issued by
RBI from time to time, shall be adhered to in respect of all such credit facility.
e) Submission of Credit Information to CICs
Credit information relating to grant of such facility shall mandatorily be
furnished to the Credit Information Companies (specifically authorized by
RBI). Such reporting shall be subject to the guidelines under Credit
Information Companies (Regulation) Act, 2005.
f) Exposure Norms
Bank shall adhere to the exposure norms as prescribed by RBI from time to
time.
As per the RBI restriction, Bank will not negotiate unrestricted LCs of non-
constituents in terms RBI Master Circular on Loans and Advances-Statutory
and Other Restrictionss ..
In cases where negotiation of bills drawn under LC is restricted to our Bank
and the beneficiary of the LC is not a constituent of our Bank, the Bank shall
have the option to negotiate such LCs, subject to the condition that the
proceeds will be remitted to the regular banker of the beneficiary.
4.2.7. Finance against banned article:

No finance will be made for dealing in/against security of any banned article
including articles possession/production of which are banned under Wild Life
Protection Act, 1972.
4.2.8. Advances against bullion I primary gold:

a) Bank will not grant any advance against bullion/primary gold except gold
coins purchased from banks.-
b) Bank shall ensure that the weight of the coin(s) does not exceed 50 grams
per customer and the amount of loan to any customer against gold
ornaments, gold jewellery and gold coins (weighing up to 50 grams) should
be within the Board approved limit.
c) Restriction on grant of loan against 'gold bullion' stipulated as per extant

instructions will also be applicable to grant of advance against units of gold
ETFs and units of gc;,>ld Mutual Funds.
d) Bank will not grant advances to the silver bullion dealers which are likely to
be utilized for speculative purposes.
e) However, finance may be provided for genuine working capital

requirements of jewelers The scheme of Gold (Metal) Loan advised by
Precious Metal Section as amended from time to time shall continue to be .
in force.
4.2. 9. Bridge Loans to NBFCs

Bridge loans of any nature, or interim finance against capital I debenture issues
and I or in the form of loans of a bridging nature will not be granted pending
raising of long-term funds from the market by way of capital, deposits, e_tc. to any
category of Non-Banking Financial Companies and also Residuary Non- Banking
Company.
4.2.10. NBFCS In Partnership Firm:

Bank will not grant any advance to partnership firms In which NBFC is a partner.
4.2.11. Indian Depository Receipts (lOR):

Bank shall not grant any loan/advances for subscription to lOR's Bank also shall
not grant any advance against security (either as prime or collateral) of IDRs
issued in India.
4.2.12 Granting of loans for acquisition of Klsan Vlkas Patras (KVPs):

As per RBI Guidelines given in Master Circular on-Loans and Advances- Statutory
and Other Restrictionsa, Banks should ensure that no loans are sanctioned for
acquisition of/investing in Small Savings Instruments including Kisan Vikas Patras.
It may be noted that this guideline does not prohibit sanctioning loans against
small saving instruments already acquired and held by individuals out of their own
funds.
It is clarified that loans can be granted. to individuals against small savings

instruments acquired by them . out of their own funds and held ·by them.
Appropriate margin norms depending upon nature of small saving instrument shall
be maintained.
4.2.13 Financing HUF:

i. No fresh I additional advance can be considered to firms having HUF as a
partner. However, in an. existing partnership firm in which HUF is .a partner
that is already financed by the Bank, the renewal of the credit limits at the
existing level may be done by RLCC and above under their powers.
ii. The property /securities in the name of HUF shall be accepted only for the
respective HUF and shall not be accepted for any other borrowers- whether
a member of the HUF or other category of borrowers- either as collateral or

otherwise.
4.2.14 Finance for purchase of Gold:

No advances shall be granted by the Bank for purchase of gold in any form,
including primary gold, gold bullion, gold jewellery, gold coins, units of gold
Exchange Traded Funds (ETF) and units of gold Mutual Funds. However, finance
may be provided for genuine working capital requirements of jewelers The
scheme of Gold (Metal) Loan advised by Precious Metal Section as amended
from time to time shall continue to be in force.
4.2.15 Polley for Stressed Sectors:

As advised by RBI circ;:ular dated 18.04.2017 Bank has put in place a policy for
"Stressed Sectors" with the approval of Board. The policy requires a review of the
performance of various sectors of the economy to which the bank has an
exposure to evaluate the present and emerging risks and stress therein. The review
may include quantitative and qualitative aspects like debt-equity ratio, interest
coverage ratio, profit margins, ratings upgrade to downgrade ratio, sectoral non-
performing assets/stressed assets, industry performance and outlook, legal/
regulatory issues faced by the sector, etc. The reviews may also include sector
specific parameters.
Accordingly, Bank has a policy on Stressed sectors and Lending to these identified
Stressed sectors should be as per th~ Policy.
.------000······
Chapter-S
TAKE OVER OF BORROWAL ACCOUNTS:
5.1 Explanation:
a) If the borrowal account with the existing bankers is liquidated out of
advances extended by us, it is to be treated as takeover.
b) All other cases will not be treated as take over.
c) In the cases of working capital finance through consortium or multiple
Banking, increasing our share as well as taking over of the share of other
Bank or induction of our bank by taking over of the share of other bank shall .
not be reckoned as takeover of the advances from other Banks.
d) When a bank does Down Selling of part amount of the loan of a borrower,
and our bank takes the exposure, the same shall not be construed as "take
over", subject to that bank maintains a hold position till maturity of the loan
e) Accounts Closed Within 3 Months: If the applicant approaches the Bank
within 3 months after closing the account with the other Bank, though it is
not treated as takeover, credit report should be obtained from that Bank in
the format prescribed by RBI and to be processed as regular proposal. (Take
over norms are not applicable).
Before taking over an account, credit information from the transferor Bank
shall be obtained as per the prescribed format. However, for retail
advances like housing loans, Pushpaka, Sahayaka, Home Improvement
Scheme etc., credit report may be obtained with only relevant columns
pertaining to Retail loans.
f) In case of takeover of housing loans from reputed Banks and Housing
Finance Companies, where the credit. opinion is not forthcoming/or not
sub.mitted in the standard format of RBI, sanctioning authorities from the
level of RLCCs and above and branches with prior approval of Regional
Office may accept such credit opinion/waive obtention of credit opinion
after satisfying themselves about the asset quality and account status by
cross verifying with the statement of account and sanction letter issued by
the financing institution. This may be resorted to only in exceptional cases.
5.2 Norms I Criteria for takeover of Borrowal accounts:

a) Banks may take over borrowal accounts from Banks, Financial
Institutions/Agencies.
b) Only borrowal accounts which are standard and performing during the past
one year shall be taken over. No NPA account shall be taken over. Even
371 Page
SMA-2 account should not be taken over. Such accounts can be taken over
in exceptional circumstances only with the prior approval of MCB.
c) Takeover of account should not be below BBB (if externally rated).
d) No borrowal accounts shall be taken over from any Bank where any of our
ED or MD&CEO has work~d earlier. In case, any such cases arise to be taken
over, the proposals need to be put up to the Board with specific reasons
justifying the need for taking over the accounts.
e) Account should have recorded cash generation I profit for the preceding
two years out of three years unless the account is not in operation for three
years and business conditions should indicate improvement in profitability.
f) Companies that are established recently, all precautions that are being
taken, while extending credit facilities to a new borrower will be taken for
takeover. The project should not be in the implementation phase at the time
of takeover of the loan. In other words, it should have commenced
commercial production and surpassed the .breakeven level and the
moratorium period for repayment of the loan should be over. The
repayment of the loan proposed to be taken over should not have been
rephased by the existing Fl I Bank after commencement of comm~rcial
production.
5.3. Take Over with enhancement I fresh or additional facilities:

a) RLCC and above are vested with powers to take over borrowal accounts
from other lenders within their single/ group borrower limits.
b) Ta~eover of account should not be with any enhancement. Enhancement
of limits shall be considered only after completion of 6 months of satisfactory
conduct. However, under exceptional cases, enhancement can be
considered only at Central Office by HLCC (ED) & above.
5.4. Other Criteria:

a) Proper due diligence including pre-Inspection visit to the premises of the
customer shall be conducted before the account is considered for taken
over.
b) The financial benchmarks stipulated for sanctioning credit facilities, in the
normal circumstances, will be adhered to & deviations in exceptional cases
will be justified in the note put up for sanction.
c) Before taking over an account, credit information from the transferor Bank
shall be obtained as per the prescribed format. No waiver Is permiHed
(except for retail advances as mentioned above).
d) The reasons for shifting over to our bank will be mentioned in the appraisal
note.
e) Independent market enquiries, oral /written, will be made and recorded in
the appraisal note.
f) Satisfactory credit report on the borrow.er/promoters from any credit rating
agency or any credit information provider like CIBIL.
g) Statement of accounts of the erstwhile bank generated from Internet
Banking in the presence of Credit Officer/Branch Manager can also be
accepted. Such statement of accounts, at least for t~e last 6 months, shall
· be studied and commented upon in the appraisal note.
h) The genuineness of statement of account, credit sanction, credit reports
given by the existing Bank shall be verified by personal visit to the existing
Bank by the Branch Head himself.· However, in AGM/DGM headed
branches, genuineness of statement of account, the verification shall be
done by Officers not below the rank of Scale IV. In the absence of Scale IV
officer in the Branch, it has to be necessarily verified by the Branch Head
only. Such verification shall be recorded on such statements I sanctions I
reports under full signature of the Branch Head and the Officer who has
verified the same with his authority.
i) The financial discipline of the borrower shall in no way be compromised at
the time of take over and their credit' requirements are to be independently
assessed.
j) Bank shall take over accounts ·without any dilution in securities/margin
offered to the other Bank. Powers are delegated to select authorities for
approval of deviations in this regard. (Refer Revision in Financial
Discretionary powers 2015, Para 1.6 Sanction of Limits to Hurdle Rate
Accounts for sanctioning authorities)
k) Powers are delegated to select authorities for financing additional facilities
in the case of take over accounts.
I) While taking over of the account the remaining repayment period shall not
be extended. No waiver shall be permitted at any level for this.
m) The formalities such as fresh documentation, transfer of securities etc. are to
be expeditiously completed.
5.5. Interest Rate & Other Concession:
a) The concessionary facilities like interest rate and other charges can be
extended only in extremely deserving cases with specific reasons recorded
in writing by the appropriate authorities. Branches/ROs/ZOs should refer to
Indian Overseas Ba'nk LOAN POLICY DOCUMENT 2019
the latest Financial Discretionary Power circular (or any other latest issued
circular) for the parameters to be complied for Interest concession.
b) In the case of taken-over accounts where sanctioning authorities· have
already considered concession in pricing /charges etc. at the tim~ of
takeover, generally no further concession can be considered till completion
of one year from the date of sanction. However, the next immediate higher
authority can consider any further concession inCluding interest/charges on
case-to-case basis and on merits.
5.6. Reporting/Monitoring:
a) Whenever borrowal accounts are taken over, the details of the taken over
accounts shall be grouped and highlighted, in the report submitted to the
higher authorities under relative CAF returns.
b) Regional Office/Central Office shall call for the details of accounts taken
over at quarterly intervals in the prescribed format and shall review the
accounts for a period of two years from the date of take over.
c) All taken over borrowal ac:counts with total exposure of Rs. 5 Crore and
above sanctioned by any authority are subject to Credit Compliance Audit
as per Credit Risk Management policy.
d) When the takeover account becomes a quick mortality (accounts that
become NPA within a year of its sanction is treated as quick mortality), the
staff accountability shall be examined thoroughly. ·
e) Credit Verticals at CO shall place a review note on all taken over accounts
sanctioned by RLCC and above, to MCB half yearly. The review should
cover all taken over accounts during the past 3 years with cutoff date 31st
March.
------000------
40IPage
Chapter-6
ADVANCES TO BANK'S DIRECTORS I OFFICERS OF BANK
Bank shall follow RBI guidelines in this regard. vide RBI/2015-16 /95 DBR.No.
Dir.BC.I 0/13.03.00/2015-16 July l, 2015.
6.1. ADVANCES TO BANK'S DIRECTORS:
As per Section 20 (1) of the Banking Regulation Act 1949, Banks are proh.ibited from
entering into any commitment for granting any loans or advances to or on behalf
of:
a) any of its Directors or,
b) any firm in which any of its Directors is interested as partner, manager,
employee or guarantor or,
c)· any Company (not being a subsidiary of the Banking Company or a
Company registered under section 25 of the Companies Act 1956 or a
Government Company) of which, or the subsidiary or the holding company
of w.hich any of the Directors of the Bank is a Director, managing agent,
manager, employee or guarantor or in which he holds substantial interest
or,
d) any individual, in respect of whom any of its Directors is a partner or
guarantor.
e) The above restrictions, however, will riot be applicable to loans and
advances exempted by RBI from time to time.
6.2. LENDING TO DIRECTORS AND THEIR RELATIVES ON RECIPROCAL BASIS:

a) Unless sanctioned by the Board of Directors /Management c;:ommittee,
banks will not grant loans and advances aggregating Rs. 25 lakhs and
above to ·
i. Directors (including Chairman /Managing Director) of other banks
ii. Any firm in which any of the directors of other banks are interested as a
partner or guarantor
iii. Any company in which any of the directors of other banks hold
.substantial interest or is interested as a director or as a guarantor.
b) The restrictions as contained in Section 20 of the Banking Regulation Act,
1949 would apply to grant of loans and advances to spouse and minor I
dependent children of the Directors of banks.
However, bank may grant loan or advance to or on behalf of spouses of

their Directors in cases where the spouse has his I her own independent
411 Page
source of income arising out of his I her employment or profession and the
facility so granted is based on standard procedures and norms for assessing
the creditworthiness of the borrower. Such facility should be extended on
commercial terms. All credit proposals for Rs. 25 lakhs and above shall be
sanctioned by the bank's Board of Directors I Management Committee of
the Board. The proposals for less than RS 25 lakhs may be sanctioned by the
appropriate authority !n terms of the powers delegated to them and
sanctions will be reported to the Board. .
c) Unless sanctioned by the Board of Directors /Management Committee,
banks will also not grant loans and advances aggregating Rs. 25 lakhs and
above to:-
i. any relative other than spouse and minor I dependent children of their
own Chairman/Managing Director or other Directors
ii. any relative other than spouse and minor I dependent children of the
Chairman/Managing Director or other directors of other banks
(including directors of Scheduled Co-operative Banks, directors of
subsidiaries/trustees of mutual funds/Venture capital funds; .
iii. any firm in which any of the relatives other than spouse and minor I
dependent children as mentioned in (i) & (ii) above is interested as a
partner or guarantor; and
iv. any company in which any of the relatives other than spouse and minor
I dependent children as mentioned in (i) & (ii) above hold substantial
interest or is interested as a director or as a guarantor.
d) The review I renewal of such facilities also have to be reported to the board.
6.3. LOANS AND ADVANCES TO OFFICERS Of BANK AND THEIR RELATIVES:

a) No officer or any committee comprising inter alia, an officer as member,
shall, while exercising powers of sanction of any credit facility, sanction any
credit facility to himself or to his /~er relative. Such a facility shall ordinarily
be sanctioned only by the next higher sanctioning authority.
Credit facilities sanctioned to Senior Officers of the financing bank will be
reported to the Board. The term "Senior Officer" will refer to any officer in
Senior Management in grade IV and above in the Bank.
b) Proposals for credit facilities to the relatives of Senior Officers of the Bank
sanctioned by the. appropriate authority will be reported to the Board.
c) Further, when a credit facility is sanctioned to the following constituents by
an authority other than the Board, such sanctions shall be reported to the
Board:
Indian Overseas Bank LOAN POLICY DOCUMENT 201(/
i. any firm in which any of the relatives of any Senior Officer of the financing
Bank holds substantial interest or is interested as a partner or guarantor,
or
ii. any Company in which any of the relatives of any Senior Officer of the
financing bank holds substantial interest, or is interested as a director or
as a guarantor.
6.4 SCOPE OF THE TERM 'CREDIT FACILITY' & 'RELATIVE': .

a) In the case of Advances to Directors and their relatives, the term 'credit
facility' will not include loans or advances against -
i. Government securities'
ii. Life Insurance policies
iii. Fixed or other deposits
iv. Stocks and Shares
v. Temporary overdrafts for small amount i.e. up toRs. 25,000/-
vi. Casual purchase of cheques up to Rs. 5,000/- at a time.
vii. ' Housing loans, car advances, etc. granted to an employee of the bank
under any scheme applicable generally to employees.
b) In the case of Advances to Officers of Bank and their relatives, the term
'credit facility' will not include loans or advances against -
i. Government securities
ii. life Insurance policies
iii. Fixed or other deposits
iv. Temporary overdrafts for small amount i.e. up toRs. 25,000/-
v. Casual purchase of cheques up toRs. 5,000/- at a time.
vi. Loans and advances such as housing loans, car advances,
consumption loans, etc. granted to an officer of the bank under any
scheme applicable generally to officers.
c) In both the above categories, the scope of the term 'relative' will be as
under: ·
i. Spouse
ii. Father
iii, Mother (including step-mother)
iv. Son (including step-son)
v. Son's Wife
vi. Daughter (including step-daughter)
vii. Daughter's Husband
viii. Brother (including step-brother)
ix. Brother's wife
x. Sister (including step-sister)

xi. Sister's husband
xii. Brother (including step-brother) of the spouse
xiii. Sister (including step-sister) of the spouse
d) The above norms relating to grant of credit facility will equally apply
to awarding of contracts. The definition of "credit facility", "substantial
interest" and "Relatives" as prescribed by RBI will be complied with.
------000----~-
441Page
Chapter-7
EXIT POLICY
7.EXIT POLICY:
7.1 Diversion of funds: Whenever it is found that funds of the bank are diverted for
the activity not associated with the activity of the borrower, efforts shall be made
to liquidate the outstanding in borrowal accounts. Exit Clauses like signs of sickness
shall be incorporated as part of Sanction letter.
7.1.1 For Accounts with External Rating 'C' and 'D', an individual letter should be
sent to. such C and D rated customers stating that in view of the poor external
rating, Bank may not be in a position to support their credit requirement and that
they may induct new banks or switch over to other banks. It may be further stated
that in view of capital cost involved in financing such low rated companies our
bank will be constrained to charge additional interest rate over and above the
applicable interest rate.
7.1.2 Signs of sickness: Advances granted shall be renewed every year. At the time
of renew~!, if the following irregularities are noticed then bank shall treat these
signals as warning signals and examine the need to exit from the exposure to these
accounts.
a) Cash Credit account remaining stagnant without operations or with
negligible operations for a period of 6 months preceding the date of review..
b) Continuous irregularities in cash credit accounts such as drawings frequently
exceeding sanctioned limits, periodical interest debited remaining
unrealised.
c) Non-submission or undue delay in submission of stock statements or
submission of incorrect stock statements and other financial statements
d) Rating grade slipping to lOB 9 and below
e) Recurring overdue (continuous for 3 quarters} and frequent overdue (most
part of the year)
f)· Failure to make timely payment of installments of principal and interest on
term loans
g) Strictures I penalties on the company by authorities like SEBI. Enfprcement
Directorate, Income tax etc.
h) Non-payment of statutory dues, viz. PF dues, dues to suppliers of raw
materials, water, power,· etc. Bills sent on collection basis/ bills purchased
/discounted.
i) Diversion of sale proceeds.

·j) Downward trend in credit summations in the account I poor turn-over.
k) Frequent return of cheques I bills
I) Steep decline in production
m) Downward trends in sales and fall in profits and other adverse features
noticed in the financial statements.
n) Any other . serious irregularities noticed by the various field level
functionaries/ Inspectors etc., jeopardising the safety of advance.
------000------
Chapter-8
MISCELLANEOUS
8.1. RECOVERY POLICY:

The Bank is aiming to reduce the level of NP A to the barest minimum and
taking all out efforts· for recovery of NPA by various methods. Bank has
Recovery Policy approved by the Board for recovery of Non-Performing
Assets.
8.2. FINANCING OF BRAND ACQUISITION:

In the scenario of economic liberalization, where mergers and acquisitions
are the order of the day, many companies may go in for acquiring and
taking over popular brand names. Bank will consider financing for
acquisition of reputed brand names.
8.3. QUOTE FOR LARGE BORROWAL ACCOUNTS:

a) In case of some of the large borrowal accounts, Bank has to offer its quote
for taking large limits falling under MCB powers within a short period of time.
In such cases,. it may not be possible to submit full-fledged proposal to
obtain sanction before we submit our quote. MD&CEO is authorized to
quote and the proposal will be placed to MCB for confirmation.
b) Companies with LTl to LT 3 or equal rating enjoying credit limits with us with
unblemished track record for minimum five years, Public Sector
Undertakings and well reputed corporates will be offered this facility.
c) In case of new connections where the external rating of the borrower is of
investment .grade and above the Bank will offer this facility.
d) In case of accounts with state government ·guarantee I central
government guarantee, the ba!lk will offer this facility. .
e) Such quote shall be treated as quote cum sanction and shall be placed for
ratification to the appropriate committee, if not placed to the appropriate
committee.
. 8.4. LINE OF CREDIT:

The Bank shall consider Line of Credit. for speedy delivery of credit to
·reputed corporate/Public sector undertakings.
8.5. FINANCING TO CHIT COMPANIES:

There is no ban on financing Chit Fund Companies. However, it should be
ensured that the chit company, to whom finance is made, is not engaged
in schemes which attract the provisions of the prize chits and money
circulation schemes (Banning) Act 1978. The Memor~ndum and Articles of
Association of the company have to be studied thoroughly and necessary
declaration has to be obtained from the company.
Further credit facilities could be considered by the bank purely on individual

merit of applicants and be guided by commercial judgment.
8.6. SHORT TERM LOANS:

Short Term Loans are extended to Corporates for general corporate
purposes for which detailed guidelines are in place. (Refer Chapter II for
detailed guidelines).
8.7. RISKY VENTURES (VENTURE CAPITAL):

a) Venture Capital is normally defined as an equity investment in a high risk
.project related to some innovations or new technological developments
contemplated by a company. The main purpose of venture capital funding
is thus to exploit new and untried or advanced technologies and turn them
into commercially viable propositions naturally with an expectation of high
returns later. ·
b) Risky venture refers to venturing into activities which are not tested, which
are relatively unknown, and which are new. Proposals involving new,
innovative or relatively untried technology being risky will not normally be
entertained in as much as Venture Capital Funds exist to provide financial
assistance to such enterprises. _
8.8. BANKING CODES AND STANDARDS:

a) Banking Codes and Standards are. the voluntary codes set by the Bank for
its commitment to customers The Code has been developed by the Bank to
promote good and fair banking practices by setting minimum standards in
dealing with customers; to increase transparency so that customers can
have a better understanding of what customer can reasonably expect of
the services; encourage market forces, through competition, to achieve
higher operating standards; . promote a fair and cordial relationship
between the customers and the Bank; foster confidence in the Banking .
system. These codes are being monitored by Banking Codes and Standard
Board of India (BCSBI), an independent and autonomous watch dog which
also ensures that these codes adopted by the Banks are adhered to in true
spirit while delivering services.
b) With regard to lending, the codes and standards set by Bank such as
i. Communicating to the applicant the reasons for rejection of a
proposal where the loan amount applied for does not exceed Rs 2.00
lakhs,
ii. Information to the borrower regarding the fees I charges payable for
processing, pre-payment options and any other matter which may
affect the interest of the borrower, And ·
iii. Communicating to the borrower the limits sanctioned with terms and
conditions thereof etc., are put in place for strict compliance.
8.9. OTHER ISSUES:

a) The maturity profile of loan book is taken care of by the Asset Liability
Management System (ALM) which is being placed to ALCO. Once in a
month report is submitted to RBI.
b) The Investment Committee decides the investments to be made by the
Bank. Bank has separate policy for Investment.
c) In respect of forex forward contracts, guidelines framed by Treasury Dept.,
C.O. will be in operation. .
d) Counter party exposure limits, including exposure against LC Bills, and
country exposure limits on global basis, will be reviewed whenever felt
necessary and Treasury Department will fix the limits.
8.1 0. CONCLUSION:
a) Based on this, loan policy document and taking into account the extant
guidelines of RBI I Government of India from time to time, the Bank will
. issue detailed operational instructions to Branches I Regional Offices
periodically.
b) As and when modifications are made and a change in· Loan Policy is
announced by RBI I Government of India, the respective changes will form
part of this policy. GM(CSSD) I HOD is empowered to make changes in
policy based on changes in regulatory guidelines from time to time. Apart
from the above GM (CSSD)/HOD is empowered to make changes in the
Policy based on observations/recommendations of any advisory agencies
like IBA, CVC etc., with the approval of Top Management.
c) The ,revised Loan Policy Document is valid for 1 year from the date of
approval by Board and can be extended by another six months by
MD&CEO.
------000····--
Indian Overseas BanJ< LOAN POLICY DOCUMENT 2019
Indian Overseas Bank

Credit Support Services
Department
Central Office, Chennai- 600 002'
OPERATIONAL
GUIDELINES
FOR
LENDING
Chapter-9
GENERAL LENDING GUIDELINES .
9.1. NEW BUSINESS COMMITTEE·
It has been decided that all fresh proposals for sanction of credit limits of Rs.l 0
crores and above (both fund based and non-fund based) should be referred to
the new business group at c.entral Office to get in principle approval for taking up
the proposal. This approval is required even if the group/ associate concerns are
banking with us. However, it the group/associate concerns are doing the same
activity or upstream or downstream activities, the approval of NBC is not
necessary. If the group/associate concerns are diversifying. and entering an
entirely new business activity, then the approval of NBC is required.
Permission accorded by NBC is only an "expression of interest" to take up the

proposal for consideration on merits and should not be construed as "In Principle
Sanction".
The proposal seeking expression of interest should have the concurrence or

recommendation by Branch, Regional and Zonal Managers and respective credit
verticals in case the sanction vests with Central Office. Expression of Interest
accorded by NBC is valid for 3 months·and complete proposal must be submitted
during that period for considering sanction on merits.
Wherever quote cum sanction is given by our bank for reputed PSUs/Government
undertakings/ well reputed corporates, it is exempted from routing through NBC.
For new proposal on NBFC of Rs. l 0.00 Crores and above, expression of interest by
NBC only is required. All new proposals below Rs. l 0.00 Crores and enhancements
to the existing accounts require clearance from HLCC (ED) before sanction of
.loans.
?.2. DELEGATION OF P.OWERS:

a) With the approval of the Board, the Bank has delegated financial and
administrative powers to the various layers of authority. As per the
communication from Ministry of Finance, Govt. of India, various Committees
at Central Office {viz. CAC, HLCC (ED) and HLCC (GM)}; Zonal Office (viz.
ZLCC) and Regional Office (viz. RLCC) are constituted for taking decision on
the credit and compromise/write off proposals.
· b) There is no individual delegated power above the Branch Manager level.
Bank will ensure that these powers are exercised judiciously and in
accordance with the conditions prescribed for exercising such delegated
powers frequent deviations will be. closely monitored and remedial action
will be taken wherever necessary.
c) In case of deviations from the loan policy guidelines, account specific
actions to be put up to the MCB for approval/ratification provided such
deviations are not in violation of RBI guidelines. In case of modification of
norms, the same is to be placed to the Board for approval.
d) Delegated powers are restricted to select authorities for sanction of facilities
to accounts rated below the hurdle rate (IOB6 for Priority Sector advances
and lOBS for Non Priority Advances as per internal rating RAM) and/or
externally rated BB and below.
Application of Interest Rate

I. Large Corporate account (rated under Large Corporate, NBFC models)
would be priced on the basis of External Rating, if external rating is available.
If external rating is not available, then they will be priced on the basis of
internal rating.
II. SME/Traders/Agri accounts would be priced on the basis of internal rating
only.
Role Functions of various committees
Following are various credit sanctioning authorities/committees at various layers,

viz. Central Office, Zonal Offices, Regional Offices and Branches:
I. MANAGEMENT COMMITTEE OF THE BOARD (MCB):
MCB is constituted in the Bank as per the provisions of the Nationalized Banks
(Management and Miscellaneous Provisions} Scheme, 1970. The functions and
duties of the MCB are as under:
•!• Sanctioning of credit proposals (funded and non-funded) as per the

quantum fixed by the Board.
•!• Loan and Interest Compromise I Write off proposals - as per quantum fixed
by the Board
•:• Proposals for approval of capital and revenue expenditure

•:• Proposals relating to acquisition and hiring of premises, including deviation
from norms for acquisition and hiring of premises
•:• Filing of suits I appeals, defending them etc.
•:• Investments in Government and other approved securities, shares and
debentures ofcompanies, including underwriting Donations
•:• Any other matter referred to the Management Committee by the Board.
Next to MCB, as directed by Ministry of Finance (MoF}, Government of India (GOI},

Bank has constituted following committees with the approval of the Board to take
decision on the credit and compromise/write off proposal.
Functions and Scope of the various committees at Head Office/Zonal/Regional

Level forms as per Mof, GOI guidelines as approved by our board on 30th May
2012:
a} To sanction credit proposals under their power and to consider

compromise/ write off proposals as per the recovery policy of the Bank and
powers delegated to them.
b) To ensure compliance of alll~nding norms/ policy guidelines issued by the
Bank including regulatory guidelines and other instructions.
c) The decision of these committ~es shall be unanimous.
d) The committees shall also review the pending credit proposals under their
powers to expedite action and ensure that the proposals are disposed
within the time norms prescribed.
e) Minutes of the meetings of various committees at RO and CO shall be duly
recorded and signed by the Head and other members of the respective
committees.
II. Committees at Head Office level:

1. Credit Approval Committee (CAC)
2. Head Office Level Credit Approval Committee-Executive
Director~- (HLCC.,ED)
3. Head _Office Level Credit Approval Committee - General
Manager- (HLCC-GM)
Ill. Committee at Zonal Office:
Zonal Level Credit Committee- (ZLCC)
.........
!Page
IV. Committee at Regional Office:

Regional Level Credit Committee- (RLCC)
In our Bank there is no individual delegated power above the Branch Manager
level. Bank ·will ensure that these powers are exercised judiciously· and in
accordance with the conditions prescribed for exercising such delegated powers.
Based on business segment, our bank is having following departments at Central

Office only:
a) Large/Mid Corporate
b) MSME
c) Agriculture and Rural Initiatives
d) Retail
Apart from the above credit committees, there are following two committees
which are formed for clearance of fresh proposals:
a) New Business Committee {NBC): It is a Central Office level committee. All

fresh proposals of Rs. 10.00 crores and above are referred to this committee
which in turn communicate whether Bank can evince interest in the
proposal or not.
b) IT Screening Committee: Proposals for financing development of software
shall be cleared by Screening Committee in Central Office.
For MCB sanctions specific permission may be taken for sanctioning of concessions
by CAC at the time of sanction by MCB. Information note to be put up to MCB.
Other than the above exceptional cases, CAC is not empowered to delegate
powers to grant concessions in case of MCB sanctions.
9.3. WORK FLOW FOR CREDIT SANCTIONS:

The work flow for credit sanctions by other sanctioning authorities is detailed here
below {The work flow for Large Corporate branches and those identified as
"Large Corporate" will be as given in circular ADVI 116/2017-18 dated
28.06.2017):
Sanctioning Authority: MCB/CAC/ HLCC CEDl

Type of All branches other than Specialized L~rge Corporate and
Branch other Notified branches
Work Flow Proposed and recommended by Credit Dept at Branch ~
Recommended by Branch Head ~ Recommended by
Regional and Zonal Heads along with submission of full-
fledged proposal ~ Proposal vetted by Credit Dept. at
CO and recommended by Vertical GM ~ put up to
ED/MD&CEO ~placed to MCB/CAC/HLCC (EDl.
Sanctioning Authority\ HLCC CGMl
Type of All branches other than Specialized Large Corporate and
Recommended by Branch Head ~ Recommended by
Regional and. Zonal Heads along with submission of full-
fledged proposal ~Proposal vetted by Credit Dept. at
CO and recommended by Vertical GM ~ placed to HLCC
(GM)
Sanctioning Authority: ZLCC CGMl
Recommended by Branch Head. ~ Recommended by
Regional Head along with submission of full-fledged
proposal ~ Proposal vetted by Credit Department at
Zonal Office and Recommended by Zonal Head -~ Zonal
Head/GM accords permission to place in ZLCC with his
observations ~ placed to ZLCC
Sanctioning Authority: RLCC
WorkFlow Proposed and recommended by Credit Dept at Branch ~
Recommended by Branch Head ~ Proposal vetted by
Credit Department at Regional Office and Recommended
by Regional Head ~ Regional Head accords permission to
place in RLCC with his observations ~ placed to RLCC
Sanctioning Authoi'lty: Branch Head

Type of Branch All Branches
Workflow Proposed and recommended by Credit Department at
Branch~ Sanctioned by Branch Head
Sanctioning Authority: 2nd Line of Branch
lY~e of Branch All Branches
Workflow Proposed and recommended by Credit Department at
Branch~ Sanctioned by 2nd line~ Review/Ratification by
Branch Head
55( Page
Notes:
a) In View of introduction of New Business Committee (NBC) the system of
advising Customer Acceptability stands withdrawn
b) Whenever the Zonal Head is not in station for more than one week
proceeding on leave or on duty, the 2nd line functionary in Scale V/VI at
Zonal Office shall convene the ZLCC and the Official in Scale V can exercise
the financial powers 1 of RLCC (SRM) and Scale VI can exercise the financial
powers of RLCC (CRM) respectively. The sanctions made in such meetings
should be placed for ratification in the subsequent ZLCC headed by the
Zonal Head.
c). Similarly, whenever the CRM is not in station ·for more than one week
proceeding on leave or on duty, RLCC shall be convened by the 2nd line
functionary in Scale V at the RO and the financial powers of RLCC (SRM)
shall be exercised. The sanctions made in such meetings should be placed
for ratification in the subsequent RLCC headed by CRM.
d) However, such arrangement· RLCC headed by 2nd line is not applicable for
ROs headed by SRM during his/her leave period.
e) Standard Operating Procedure: SOP for processing· of loan from
procurement of applications: namely (i) Preliminary assessment of
customer; (ii) Accepting of proposal; (iii) Processing of proposal; and (iv)
Post sanction/disbursement formalities are given in Annexure 2.
9.4. VETIING OF DOCUMENTS & RELEASE OF LIMITS:

No advance shall be released without first obtaining proper documents
complete in all respects. The second in command of the Branch shall give a
certificate to the Branch Head before disbursement of advances thaj all the
relevant documents for releasing the facility(ies) have been executed properly.
The Branches manned by only one officer (i.e. Branch Head), the Manager shall
send the certificate to the Regional Head.
Complete vetting of documents to be done by Bank's panel lawyers before

release of funds under sanctions at various levels ·aggregating RS 1 crore and
above.
For credit sanctions aggregating Rs. 10 Crore and up to Rs. 50 Crore, permission for
release of the limits shall be obtained from RO upon receipt of the Certificate by
second in command of the Branch and ensuring the vetting of documents by the
Bank's panel lawyers. For credit sanctions above Rs. 50 Crore, permission for
release of the limits shall be obtained from ZO.
9.5. PRECLUSION FROM DISBURSEMENT BY FIELD LEVEL FUNCTIONARIES WITHOUT

COMPLIANCE OF PRE-RELEASE TERMS OF SANCTION: .
Branches and other offices shall ensure that the disbursement of the sanctioned
limit shall not be made without compliance of significant pre-release terms and .
conditions stipulated by the respective sanctioning authority.
9.6. ADHOC LIMITS/GRANTING OF EXCESS IN BORROWAL ACCOUNTS:
Branch Heads* do not have powers to sanction Adhoc limits. RLCCs and above
-shall sanction Adhoc limit up to 20% of the limit in working capital credit facilities
sanctioned by any layer of authority including MCB or 20% of their respective
delegated authority (per borrower limit), whichever is lower. In case of
Miscellaneous Cash Credit and·Easy Trade Finance accounts, Adhoc shall not be
permitted if the maximum amount of limit based on the Forced Sale Value of the
prime security is sanctioned. However, in cases where there is surplus available in
the FSV of the security offered after deducting the margin stipulated under the
Scheme of finance, including the Adhoc limit sought, Adhoc limit shall be
. permitted up to 20% of the limit or the surplus DP available,_ whichever is lower, by
ZLCC (GM) and above within their delegated authority.
*The discretionary powers for Branch Managers for sanctioning adhoc credit
facilities for MSME borrowers shall be as per Kapoor Committee recommendations.
Detailed guidelines are in place for extending temporary excess in borrowal

accounts with discretionary powers vested with various layers of authorities. (Refer
Revision in Delegated Financial Powers 2018, for detailed guidelines)
Excess and adhoc cannot be allowed simultaneously in the same facility.
9.7. DOCUMENTATION STANDARDS:

Bank has a documentation manual prescribing the documents to be taken for
various types of advances~ The documentation manual is being updated
periodically. In addition, circulars dre issued from time to time for any addition or
modification to the documentation manual. Bank will ensure that the branches
obtain the documents prescribed and that the documents are enforceable.
9.8. ACCEPTING LIFE POLICIES ISSUED BY PRIVATE INSURANCE COMPANIES LICENSED

BY IRDA:
Life policies issued by the new private insurance companies licensed by IRDA can
be accepted as prime securities once they acquire surrender value and as ·
collateral securities for the credit facilities extended to industrial, non-industrial and
personal borrowers.
However, loans should not be· sanctioned against market linked insurance policies
where the surrender valu·e fluctuates based on market value of securities and life
policies with lock in period for liquidation.
9.9. . FINANCING TO SECOND HAND MACHINERY:

a) Financing for the purchase of second han.d machinery (both indigenous as
well as imported) will be considered subject to the following conditions.
i. The value, working condition and residual life of the existing asset
/machinery should be valued /assessed by our approved valuer, or a
reputed valuer. .
ii. The margin should be sufficient to cover the value that is decided
based on wear and tear, depreciation, marke,t value etc of the
machinery/asset to be financed against.
iii. The repayment of the term loan should be restricted to a maximum
period of 5 years or the residual life period of ·machinery/ass'et
whichever is lower.
b) Detailed guidelines are in place with regard to financing to NBFCs, against
the security of second hand assets /second hand machinery /second hand
vehicles financed by NBFCs. . In exceptional. cases longer repayment period
can be permitted by HLCC {GM) and above.
9.9.1. Term Loan for Reimbursement of the cost of already purchased machinery:
Term Loans are usually sanctioned for· acquiring capital assets and generally
disbursed directly to the suppliers of machinery and other assets for which term
loan is sought.
In a few instances, the borrowers themselves purchases the machinery and

equipment directly, to take advantage of the lower price prevailing in the market
in anticipation of our sanction and seeks reimbursement by way of term loan.
Under such circumstances, depending upon the custom and genuineness of the
request, term loans can be sanction~d for reimbursement of the cost of machinery
or other equipment (should not be more than one year from the date of purchase)
after-verification of invoices and bills and inspection of the assets for which term
loan is being sanctioned.
Appropriate margin shall be stipulated.
A certificate from the statutory auditor of the borrower should also be obtained in ·
this regard. Such discretionary powers to sanction term loans on reimbursement
basis may be exercised by RLCC and above only.
I Page
9.10. ADVANCES THROUGH SPECIAL PURPOSE VEHICLES (SPV):

a) The Special Purpose Vehicle should preferably be a company registered
under Indian Companies Act.
b) Credentials of the sponsor should be ascertained.
c) All the norms for financing Limited companies are applicable to SPVs also.
d) The Sponsor of the SPV should also be a Limited Company registered under
Indian Companies Act.
e) The shareholding of the Sponsor should be maintained at least at original
·level till the closure of the loan.
f) It shall be ensured that the advance is utilized for· the principal business
activities of the SPV and Bank shall explore the possibility of getting the
guarantee of the sponsor.
g) For group exposure, the exposure of both the sponsor and the SPV should
be taken into account.
9.11. CONSORTIUM:
a) In case of consortium lending, independent appraisal and due diligence
shall be done notwithstanding the leader ba,nk's appraisal note/report.
Where the bank is a member of cons-ortium the assessment shall be in line
wi~h the leader bank and if the leader bank has not framed guidelines then
the bank will apply its existing norms under consortium, for determining its ·
share of lending.
b) In respect of the terms and conditions for consortium advances, Bank will
fall in line with consortium and o·ther Banks.
c) Due Diligence Report shall be obtained froin agencies/ firms such as Dun &
Bradstreet, CRISIL, Experian Services P Ltd., etc. on suppliers of
machineries/equipments notwithstanding the procedure followed by the
leader bank. If ~he machineries/equipments are large in number to be
purchased/installed, exemption of Due Diligence shall be made for
machineries/equipments with value of below RS50 lakhs or 5% of total cost
of machineries, whichever is less. If leader bank or any other member bank
has obtained due diligence report on suppliers of machineries I equipments,
a copy of_ the same shall be obtained and kept oh record. Wherever TEV
Study is obtained, a certificate from the TEV Consultant shall be obtained
. on the antecedents of suppliers of equipment technology, capacity, its
maintenance, life of equipment.
d) Wherever credit appraisal reports prepared by outside consultants
(including a subsidiary of any bank) or !n-house consultants of the borrower,
a certificate shall be obtained from the consultant stating. that they have
verified the technical and financial aspects of the project and based on
their assessment, the project is technically viable and economically feasible.
e) The parent bank of the consultant subsidiary which has appraised the
)
project shall take a share in the project funding. Deviations in this regard can
be permitted by HLCC(ED) and above.
f) Standard Operating Procedure (SOP) for coordination among participating
Banks/Institutions under Consortium Lending should be followed for
consortium loans. Standard Operating Procedures (SOP) for Consortium
Lending covering inter alia -
);> Timelines of disbursement,
);> Enhancement I reduction of limit,
);> Valuation matters - synchronization of date, periodicity, sharing of
report, etc.
);> Resolution in cases of stress, .
);> Mandate for recovery action
);> Decision regarding forensic audit and timely decision on such audit
reports.
Standard Operating Procedures for Consortium lending to be followed as

per guidelines issued12.
g) Agencies for Specialized Monitoring (ASM)
);> For all new Multiple/Consortium credit exposures of Rs. 250 crores and above
from the Banking System, Agencies for Specialized Monitoring (ASM) are to
be appointed.
);> In case of new accounts solely banking with us and with an exposure of Rs.
100 crores and above, ASM may be appointed based on the requirement
and complexity of the project on a case-to-case basis.
);> In case of existing Borrowal accounts (Sole/Multiple/Consortium) having
working capital Large Credit Exposures of Rs. 250 crores and above from the
Banking System, ASM may be appointed as and when required.
);> Wherever, our Bank is leader in consortium or the borrower is solely banking
with us, the respective sanctioning authority has to appoint ASM.
);> In case of Multiple Banking, the Bank which is having the highest share of
exposure should generally appoint ASM, and in case of Consortium where
our Bank is member, ASM are to be appointed by the Leader Bank or as
discussed in the ·consortium.
);> For new projects, ASM may be appointed at the time of sanction of limits by
the respective sanctioning authority to monitor the progress of project from
the initial stages itself.
..-.---···
GO I Page
Separate guidelines for Scope of work of ASMs are already in place13,

h) Large Credit Exposure · Engagement of Domain Experts In Selective Sectors
Henceforth, all Fresh exposures of more than Rs.250 crores under Sole and
Consortium where our Bank is leader are to be engaged with the services of
Domain Experts in the following selected sectors.
1} Infrastructure (Roads & Ports},
2} Telecom,
3} Power (Generation & Distribution},
4} Basic Metals (Iron & Steel, other Metals}
5} Textiles (Cotton, Jute}
6} Chemicals & Chemical Products, Fertilizers
7) Automobiles
8} Any other sector as required from time to time
i) Regarding exposure In consortium loans following guidelines to be adhered
to:
•!• For all new connections, minimum threshold of 10% exposure to be
adhered for participating in consortium lending.
•!• For existing accounts where our exposure is less than 10% of Consortium
lending and the rating is non-investment grade, Option of exit route to be
explored.
•!• However, for existing account wherein our exposure Is Less than 10% of
consortium lending with Investment grade rating having good track
record & satisfactory past performance, we may explore option to
Increase our share up to minimum of 10%, subject to compliance of laid
· down norms and achievement of key ratios and excluding stressed
sectors as decided by the bank from time to time.
•!• In the above process, it is to be ensured that. single/group borrower
exposure ceiling as prescribed in our Board approved Loan_ Policy
Document is not breached.
9.12. MULTIPLE BANKING ARRANGEMENTS:

In case of multiple banking arrangements, independent appraisal shall be made
and it· shall be ensured that of security/charge is available including personal
guarantee of promoters/stake holders, wherever feasible. The guidelines
mentioned in 9.11 (d) and (e) are applicable for MBA also. The· following are the
guidelines for lending under MBA.
i. Where we are the sole Bankers and the borrower desires to avail credit
facilities from other Banks without a formal consortium arrangement, the
611 Page
reasons for the borrower to approach another Bank for their credit
requirements should be ascertained and recorded.
ii. The borrowers may be permitted to borrow. from other Banks provided they
agree to furnish from time to time the details of the various facilities availed
from other Banks and also provided that the total working capital limits·
availed by the borrowers are within 10% tolerance of the working capital
limits assessed by us.
iii. Appraisal of credit limits to be done independently.
iv. Documents will be taken independently. However, charge on assets is to be
created on pari-passu basis.
v. Stock statements should contain the outstanding with other banks.
vi. Independent inspection to be conducted as per norms. Joint inspection at
least once in a year shall be ensured
vii. Adverse features shall be shared among Banks.
viii. Normally Interest and commission to be charged as per rating of individual
Banks. However, on merits of the cases, the Bank will fall in line with the
interest rates and charges stipulated by majority of the Banks/Banks having
major share.
ix. Details of collateral securities offered to other banks and credit limits
enjoyed with other banks duly certified by the auditors are to be obtained.
x. RLCC and above will have the discretion to sanction facilities outside
consortium within their per borrower limit.
9.13. EXCHANGE OF INFORMATION UNDER CONSORTIUM/MULTIPLE BANKING

ARRANGEMENTS:
RBI has issued guidelines on lending under Consortium arrangement/Multiple

Banking Arrangements. These guidelines are with an intention to
share/disseminate the information among the Banks about the status of the
borrowers enjoying credit facilities from more than one Bank. These guidelines shall
be followed without deviation.
Bank will also adhere to the instructions relating to information sharing among
Banks as indicated· in RBI circular on 'Lending unde~ Consortium Arrangement I
Multiple Banking Arrangements'14 and on Non-Performing Assets and Restructuring
of Advancesls.
9.14. CAPITAL RESTRUCTURING:

The following cases shall be treated as Capital Restructuring:
a) Any change in share capital of the company either by issue of shares to

existing shareholders and or to public by way of equity or preference share ·
and debt instruments.
b) Any reduction of share capital by cancelling shares or reducing the face
value of shares or buy back of shares.
c) Capital restructuring also takes place among group companies by transfer
of share capital from one to the other, while retaining the promoters' stake
at the same level.
d) In all the above cases, the borrower company is required to obtain "No
Objection" from the Bank.
9.14.1. GUIDELINES FOR ISSUE OF NOC FOR CAPITAL RESTRUCTURI.NG:

a) If the borrower is a Company, then NOC can be permitted by the Branch
Manager irrespective of the Sanctioning Authority for Capital Restructuring
(other than debt-restructuring, merger and acquisition and reduction in
share capital)
b) If the capital restructuring takes place among group companies by transfer
of share capital from one to the other, while retaining the promoters' stake
at the same level duly protecting the undertakings and commitments given
earlier, then NOC can be permitted by Branch Head.
c) In other cases, only the sanctioning authorities from RLCC and above can
permit issuance of NOC.
d) The format of NOC should be vetted by our approved panel lawyer.
9.15. LENDING BY INTER BANK PARTICIPATION CERTIFICATE (IBPC) WITH RISK

SHARING:
The Bank may issue/participate in IBPCs with Risk sharing with Scheduled
Commercial Banks with the approval of MCB to decrease I realign the credit
portfolio as and when required as per the guidelines for the scheme outlined by
RBI from time to time.
Further, if bank gets suitable opportunity, Bank may sell advances by way of
securitization/Collateralized Loan Obligation (CLO) as per the ·guidelines for the
scheme outlined by RBI. MCB shall be the approval authority for undertaking such
transactions.
The major guidelines at present are as under:
a) The interest rate shall be mutually agreed between the issuing and
participant banks.
Indian Overseas Bank lOAN POLICY DOCUMENT 2019
b) The IBPCs are not transferable and the tenor shall be minimum 91 days and
maximum of 180 days.
c) The underlying advances shall be Standard and Performing Assets.·
d) The aggregate amount of such participation in any account shall not
exceed 40% of the outstanding in the account at the time of issue and it
shall be maintained during the currency of participation.
'e) In case where there is default in the underlying advances, the issuing bank
will take necessary action, in consultation with the participating bank and
share the recoveries proportionately.
f) The accounting, repayment and documentation etc. shall be as per the
guidelines prescribed by RBI from time to time. J
Polley on Transaction involving transfer of assets through direct assignment of cash

flows and underlying securities. -
a) Securitisation involves pooling of homogeneous assets and the subsequent sale

of the cash flows from these asse~ pools to investors. The securitisation market is
primarily intended to redistribute the credit risk away from the originators -to a
wide spectrum of investors who can bear the risk, thus aiding financial stability
and provide additional source of funding.
b) Assets Eligible for Securitisation: Under these guidelines, our bank can transfer a
single standard asset or a part of such asset or portfolio of such assets to
financial entities. through an assignment deed. (In a single securitisation
transaction, the underlying assets should represent the debt obligations of a
homogeneous pool of obligors) Subject to this condition, all on-balance sheet
standard assets, except the following, will be eligible for securitisation by the
originators:
(i) Revolving credit facilities (e.g. Cash Credit accounts, Credit Card receivables
etc.)
(ii) Assets purchased from other entities
(iii) Securitisation exposures (e.g. Mortgage-backed/asset-backed securities)
(iv) Loans with bullet repayment of both principal and interest.
c) Detailed policy on Transaction involving transfer of assets through direct
assignment of cash flows and underlying securities approved by the board is in
place.
Priority Sector Lending Certificates
The outstanding priority sector lending certificates bought by banks will be eligible
for classification under respective categories of priority sector provid~d the assets
are originated by banks, are eligible· to be classified as priority sector advances

and fulfil the Reserve Bank of India guidelines16 on Priority Sector Lending
Certificates.
9.16. ELECTRONIC PAYMENTS:

As per the Government (MoF) guidelines, all institutions, corporate or otherwise
which avail any loans shall make payments to staff, vendors and clients
electronically except for office petty cash requirement. They should also receive
all payments electronically except when cheques are drawn on banks which are
not on NEFT/RTGS. Further in the Agreement, appropriate condition/clause will be
provided for this purpose and also for getting such borrowing entities inspected for
compliance of these guidelines of the Govt. Any default of this will be treated as
major default as notified by the Department of Financial Services, Ministry of
Finance.
9.17 Loan System for Delivery of Bank Credit: With a view to enhance credit
discipline among the larger borrowers (borrowers having aggregate fund based
working capital limit of Rs. 150 crores and· above from the banking system),
Reserve Bank of India (RBI) has issued guidelines on loan system for delivery of bank
credit.' Operational lnstructions17 are also issued by our bank on the same. The
guidelines stipulate a minimum level of 'loan component' in fund based working
capital finance and a mandatory Credit Conversion Factor (CCF) for the undrawn
portion of c~sh credit/ overdraft limits availed by large borrowers. Accordingly, for
such borrowers, the outstanding 'loan component' (Working Capital Loan) must
be equal to at least 40 percent of the sanctioned fund based working capital limit,
including ad-hoc limits and·TODs. Effective from Ap~il1, 2019, the undrawn portion.
of cash credit/ overdraft limits sanctioned to the aforesaid large borrowers,
irrespective of whether unconditionally cancellable or not, shall attract ·a credit
conversion factor of 20 percent. The above guidelines will be effective from Apr.il
1, 2019 covering both existing as well as new relationships. The 40 percent loan
component will be revised to 60 percent, with effect from July 1, 2019.
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Chapter-10
TYPES OF FACILITIES
10. TYPES OF LOANS:

loans are generally granted in the form of Working Capital, Term loan and Non
Fund Based facilities. Working Capital facilities are granted by way of Demand
loan, Cash Credit, and Bill Purchase. Term loans are sanctioned for creating or
acquisition of fixed assets.· Since RBI has given Banks the flexibility to fix the loan
and Cash Credit component, sanctioning authorities shall fix Working Capital
Demand loan and Cash Credit in any proportion/ratio on case to case basis.
10.1. MISCELLANEOUS CASH CREDIT:

a) To encourage trade credit to those who cannot submit financial statements
and to those, who find it difficult to submit stock statement or where
monitoring/inspecting of current assets are difficult on an ongoing basis,
Bank is extending credit against immovable properties to the extent of 50%
of the forced sale value of the property.
b) Bank may at its discretion delegate authority to prescribe lower margin.
c) MCC limit can also be extended to· Jobbers/Service oriented
units/Manufacturers MCC. shall also be extended to contractors in real
estate business.
d) Sanction of MCC limit is to be originated from RlCC and above.
10.2. BILLS FINANCING

10.2.1 BILLS PURCHASED AND DISCOUNTED (INLAND)
l_n DA bills no t b ace

k db>Y lC
I
up to 90days It can be considered by the branch head (Scale Ill

and above) within 50% of their per borrower limit for
unsecured exposure. Beyond this, the same can be
considered by RlCC.
up to 120 days RlCC can consider within their per borrower limit for
unsecured exposure.
Up to 180 days ZlCC and above can consider within their per
borrower limit for unsecured exposure
a) Detailed guidelines viz., sanction of credit limits, precautions to be taken",

scrutiny of bills handling of documents, follow up etc are in place.
b) Bills financing facilities will be treated as a part of working capital finance

and accordingly, the bills limit shall be assessed and appraised within the
overall working capital limits sanctioned to the borrower.
c) Bank will ensure that appropriate credit limits are fixed for parties who
require Bills purchased/discounted facilities by following the procedure
prescribed for appraisal of a credit proposit!on and fixing of credit limits.
d) Bank will allow purchase/discount of bills representing genuine trade
transactions, under Branch discretion, where regular limits are not
sanctioned to parties, whenever such facility is required occasionally by the
Bank's good customers, strictly adhering to norms laid down for bills
purchase /discount.
e) In addition to the above the following guidelines will be adhered to with
regard to discounting I rediscounting of bills. .
f) While discounting/purchasing bills drawn by front (finance) companies set
up by large industrial groups, on other group companies, branches will be
circumspect and t9ke utmost care to ensure that there is no kite flying and
bills are not of accommodation nature.
g) Bank will rediscount only usance bills discounted by other banks. Bank will
not rediscount the bills already discounted by non-banking financial
companies (NBFCs) except in respect of bills arising from sale of light
commercial vehicles and two/three wheelers.
h) While purchasing/discounting such bills in respect of "services", Bank will
exercise their commercial judgment and will ensure that actual services are
rendered and no scope ·will be given to purchase/discount
accommodation bills.
i) The Bills purchased/ discounted in respect of 'services" will be treated as
unsecured advances (or the purpose of exercise of discretionary powers
However, wherever such facilities are supported by collateral securities, they
will be construed as secured advances only for balance -sheet /audit
purposes.
j) Bank will discount bills under LC as it attracts lesser risk weight I lesser
counter party risks, counter party being LC opening Bank.
k) Bank will open letters of credit (LC) and purchase/discount/negotiate bills
under LCs only in respect of genuine commercial and trade transactions of
the Bank's borrower constituents, who have been sanctioned regular credit
facilities.
I) Generally, no finance will be extended for in house bills (inland bills drawn
on associates/sister concerns etc) nor for receivables due from
associates/sister concerns.
·Indian Overseas Bank LOAN POLICY DOCUMENT 2019
m) However, in cases of backward/forward integration where new companies

are formed to whom goods and services are supplied, inland bills drawn on
/domestic receivables from those companies will be financed.
n) In all other cases, where there is no backward /forward integration, house
bills on a single drawee will be restricted to fO% of the bills limit and total of
such bills to associates will not exceed 25% of the bills limit. Relaxations in the
above ceiling of 10% I 25% may be permitted by the next higher sanctioning
authority on merits.
o) In addition to bills drawn covering supply of goods, the bills drawn by/on
Electricity Boards covering transmission/distribution of electricity to
'trade/industrial consumers and bills drawn by IT Software Companies are
permitted to be discounted/purchased. This ·provision will cover bills raised
by private power producers also.
10.2.2. NEGOTIATION OF BILLS DRAWN UNDER LC RESTRICTED TO A PARTICULAR

BANK:
a) Bank generally does not extend fund based (including bills financing) or
non-fund based facilities like opening of LCs, providing guarantees and
acceptances to non-constituent borrowers and non-constituent member of
a consortium /multiple banking arrangement. However, guidelines as
enumerated in para 4.2.6 may also be referred for extending NFB facilities
to a non-constituent borrower not having any FB facility from the banking
system and negotiption of bills under LCs restricted to our Bank.
b) Bill purchase I discounting facility may be extended to beneficiary of an LC
even though the beneficiary is not our constituent, provided the negotiation
of the bills under such LCs is restricted to our Bank.
c) In such cases the .following guideljnes will be followed.
i. Where negotiation of bills drawn under LC is restricted to our Bank and
the beneficiary of the LC is not a constituent of our Bank, the Bank shall
have the option to negotiate such LCs,.subject to the condition that the
proceeds will be remitted to the regular banker of the beneficiary.
ii. While purchasing/discounting bills under such LCs restricted to our Bank
the aggregate amount of the bills purchased in a year will be in
commensurate with average turnover of last 3 years for the existing
company and average of last 3 years turn over.
iii. An introductory I consent letter identifying the beneficiary from the
existing Banker of the beneficiary will be obtained clearly mentioning the
account number and name oj the beneficiary.
iv. Credit report on the beneficiary will also be obtained.

v. The beneficiary will clearly be made known about the applicable
commission, postages, interest and also that the proceeds will be directly
remitted to his account with the existing Banker after netting these
charges. A suitable undertaking letter to this effect will be obtained from
the beneficiary.
vi. All other general guidelines as applicable for negotiating bills under LC.
vii. If the negotiation under LC is not restricted to our Bank, then no bills
discounting facility under LC will be extended to Non- constituents.
10.2.3 DISCOUNTING· OF BILLS UNDER LC with 'WITHOUT RECOURSE 'CLAUSE.
Bank shall discount bills under LC having "without recourse" clause provided the
following guidelines are adhered to.
a} Bills under LC with 'without recourse' clause may be permitted where
counte·r party lim.its are available on the LC issuing Bank .
. b) Credit reports on the applicant (buyer) should be satisfactory.
c) All other general guidelines for negotiating bills under LC will
be scrupulously
complied with.
d) Bills, not drawn under LC, but with restrictive clause 'without recourse' will
not be purchased I discounted.
HLCC (GM) and above are empowered for considering the above.
10.3 PROJECT FINANCING I TERM·LOAN
a). The onset of financial reforms has opened up a competing arena for the
banks as well as other financial institutions. There is a change in the concept
that commercial· banks extend only working capital I short term loans.
Loans granted with repayment period (including holiday period) of 12
months and below are classified as Short Term Loans.
b) Loans granted with repayment period (including holiday period} of more
than 12 months are classified as Term Loans.
For project funding above Rs. 50.00 Crores, rigorous due diligence and appraisal
measures are given as Annexure 2 of this LPD.
Tall Risk in Project Fitiance:

The cost overrun is generally considered to be one of the greatest risk faced in
Infrastructure Project Financ.e. Knowing the probability of their occurrence and
69IPage
'
impact on financials of the Project is the key importance in project planning and
execution.
Significant and unique financial risks may occur in the final years of a project arising
from the project coming to the end of its life (such as reduced productivity or
decommissioning), contractual obligations (such as handover), or renewal of
licenses, leases, or ccmcessions. Decreased revenue or increased capital
expenditure may occur with an associated rise in default risk.
In case of default, in a given Project Finance, generally the benefits of "tail" p~riod
(remaining asset life after Loan Maturity) can be used for full debt repayment. The
tail period in the context of the impact.in estimation of such financial risks, for
which Bank is exposed and to understand what are th~ determinants of .tall risk
are helpful in Project Funding. Detailed tail risk analysis should be discussed in the
appraisal note.
10.4. GOLD (METAL} LOANS

a) Our Bank is a nominated Bank by RBI to extend Gold (Metal) loans. Gold
(Metal) loan can be extended to domestic jewellery manufacturers and
jewellery exporters for a period not exceeding 180 days by ZLCC and
above.
b) Gold (Metal) Loan will be extended after proper credit appraisal. The Bank
will assess the overall risks on granting of such facilities and miti~ate the
same by complying with the guidelines which are in place, like selection of
customers having good credentials .and standing in ·the market,
compliance of KYC norms, eligibility, purpose of the facility, quantum of
limit, source of repayment, follow up and monitoring with regard to end use
of funds etc. While assessing the credit requirement of the borrower the
bank will also take into account the track record of the borrower, trade
cycle of the manufacturing activity, credit worthiness of the borrower,
collateral security offered, etc.
c) The Bank will ensure that adequate margin is available to it at all times
consistent with the volatility of the gold prices. ·
d) Gold (metal) loan will also be extended to domestic jewellery
manufacturers who are customers of other scheduled commercial Banks
against their Standby LC (SBLC) I Bank Guarantee (BG) only after seeking
counter party clearance from Treasury Dept., C.O. The funds shall be
arranged by the borrower by opening a current account with our bank with
the consent of the SBLC I BG issuing bank, for servicing of monthly interest
and repayment of loan on due date.
e) In such cases mentioned in (d) independent credit appraisal of the

borrower shall be done without relying solely on SBLC I BG issued by other
banks.
f) In the case of Gold Metal Loan against revolving stand-by LC I BG where
the original loan limit is restored after repayment of previous loan,
confirmation of the SBLC/BG issuing bank shall be sought to monitor the
borrowing arrangement and verifying the genuineness of the SBLC I LG.
10.4.11SSUE OF SBLC/8(,7 FOR AVAILING GOLD (METAL) LOAN:

a) When the Bank is ·not able to extend the Gold (Metal) loan, Standby LC I
Bank Guarantee will be issued on behalf of the eligible domestic jewellery
manufacturers for their availing Gold (Metal) Loan with other nominated
Bank, after proper credit appraisal as mentioned above. Sanction of such
facility will be by ZLCC and above.
b) The credit appraisal of SBLC limit shall be carried out rigorously at par with
the fund based limit.
c) The validity of the Bank guarantee/stand by LC shaiLnot exceed 180 days
as the maximum tenor of the Gold Metal Loan permitted is 180 days.
d) The validity period of the standby LC I Guarantee may be extended
suitably if the borrower wishes to avail the loan again after obtaining a
· confirmation from the lending Bank that the gold (metal) loan for which the
SBLC I BG has been issued has been adjusted in full within the stipulated
period of 180 days .
. e) Margin as applicable to financial guarantees will be prescribed_.
f) All other guidelines with regard to issue of guarantees including the
standard limitation clause will be followed.
g). The stand-by LC 1 BG shall cover a't all times the full value of the quantity of
gold borrowed by these entiti~s.
h) The stand-by LC I BG shall be in favour of another Bank nominated by RBI
.only and not to any other entity which may otherwise be having permissi.on
to import gold.
i) The stand-by LC I BG facility extended to .domestic jewellery manufacturers
will be denominated in Indian Rupees and not in foreign currency.
j) Stand-by LC I BG issued, will attract appropriate risk weight as per extant
guidelines.
10.5. LOAN AGAINST GOLD DEPOSITS:

Rupee loans will be granted against security of gold deposits under the Gold
Deposit Scheme introduced by Govt. of India for mobilizing gold. at select
branches to the Resident Indian Public. Detailed guidelines are in place.
Gold Monetization Scheme

A new scheme for monetization of gold was introduced for mobilizing the gold
held by households and institutions in the country and putting this gold into
productive use. This will replace the existing Gold Deposit Scheme 1999. The new
Gold Monetization Scheme comprises of 'Revamped Gold Deposit Scheme (R-
GDS)' and Revamped Gold Metal Loan (R-GML)" linked together.
Rupee Loans will be granted to Resident Indian public against security of gold
deposits mobilized under the Gold Monetization Scheme - Short Term Bank
Deposits (GMS-STBD). Operating Guidelines are available on Gold Monetization
Schemets. ·
10.6. GOLD LOAN/ADVANCES AGAINST GOLD JEWELLERY:
10.6.1 AGRICULTURAL JEWEL LOAN I JEWEL LOAN (OTHERS}

Gold loan can be granted against jewellery only. No gold loan can be granted
against bullion I primary gold. However. gold loan is permitted against gold coins
purchased from Banks. However. gold loan is permitted against gold coins
purchased frqm banks for coins up to 50 grams only.
10.6.2 COMMERCIAL CASH CREDIT AGAINST JEWELLERY UNDER SPECIAL CREDIT

SCHEME.
Detailed Guidelines are in place for the above Loans.
10.7. FOREIGN CURRENCY LOANS:

WORKING CAPITAL LOAN IN FOREIGN CURRENCY (WCFC}/ FOREIGN CURRENCY
TERM LOAN (FCTL):
a) Bank shall extend Foreign Currency Loans subject to availability of foreign

currency funds as under:
i. Working Capital Lo~m in Foreign currency (WCFC) to meet the working
capital needs of the borrowers towards cost of raw materials acquired
locally or imported from abroad
ii. Foreign Currency Term Loans (FCTL) for capital expenditure.
iii. Packing Credit I Bills purchase and discounting in Foreign Currency

towards export credit as working capital
b) While WCFC Loan and FCTL are granted out of the resources of FCNR(B)
funds, PCFC and Bills in FC facilities are sanctioned. out of (i) funds sourced
from FCNR (B), {ii) Borrowing in Foreign Currency and (iii) Swapping Indian
Rupee subject to prevalent regulatory guidelines.
c) Foreign currency loan shall originally be sanctioned in Indian Rupees and
shall be converted to foreign currency at Notional Rate fixed by Treasury
Dept.
d) The rollover of foreign currency loans (recalculation of rupee liability) may
be done half yearly to ensure that· the rupee liability of the borrower is
·marked to market.
e) The reset clause (spread reset) for pricing can be done every roll over /at
the time of renewal of limits.
f) If at the time of roll over, foreign currency is not available then pricing for
the loans in Indian Rupees will be based on the rate applicable for rupee
f<;:tcility, if any I based on rating.
g) The excess over DP in Indian rupee liability at Notional Rate due to upward
revision in NR need not be treated as an irregularity/overdue till the
forthcoming roll over of FCTL. Also, for WCFC carved out of CC, if the
outstanding in"WCFC is more than the Rupee liability due to upward revision
of NR, the same need not be recovered from CC or reduced from the DP of
CC, till next roll over, _in case the faGility is continued.
h) At the time of each roll over only the Foreign currency eligible for the limit or
drawing power (whichever is less) at the prevailing Notional rate shall be
extended as loan. The excess due to. NR variation, if any, shall be recov€?red
to ensure that the FCL rupee equivalent at NR is within the limit/DP as per
·the terms of sanction denominated in INR.
Downward Revision of NR - Release of margin
If the notional value of bank guarantees in INR decreases due to decline in
exchange rate, then the excess money held in form of margin may be
released to the borrower subject to availability of hedging under the
following condition:
"The difference between the actual margin held by the branch and margin
requirement as on date due to decrease In Notional Rate works out to be
5% or more and the difference Is nilnfmum of Rs. 1.00 Crore".
73 I Page
)> If the above condition is fulfilled, the branch after getting a confirmation
from respective ROs (irrespective of the sanctioning authority) may release
the difference amount to the borrower's account.
)> The margin to be released only upon specific written request of the
borrower. In such cases the borrower/depositor must be informed about
pre-closure penalty, if any and a written request must be obtained from
them to close the deposit prematurely to release excess margin.
i) WCFC/fCTL: Credit SanCtioning authorities shall take the cost of foreig_n

currency funds from treasury and shall add appropriate premia and margin
based on the tenor and risk rating of the client before finalizing the lending
rates.
10.8. FOREIGN CURRENCY LOANS AGAINST FCNR(B) DEPOSITS:

Bank shall extend Foreign Currency Loan against FCNR (B) deposits with 10%
margin on face value of deposits. Such loans shall be given to the deposit holders
or third parties. The rate of interest shall be decided by Treasury Dept., C.O. based
on RBI directives from time to time. Credit Sanctioning authorities shall take the
cost of foreign currency funds from treasury and shall add appropriate premia and
margin based on the tenor and risk rating of the client before fin"alizing the lending
rates.
10.9. NON FUND BASED FAqUTIES:

a) Bank shall provide NFB facilities to its customers based on the past
performance and evaluation of the future need for the same as per
borrower's business plan. Non Fund Based facilities are sanctioned by way
of Letters of Guarantee, Letters of Credit, Standby Letters of Credit for
imports and domestic procurements, Trade Credits etc. Letters of
Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits are
discontinued by RBJ20,
b) Bank will follow the same precautions as are normally followed in the case
of FB facilities, including analysis of financial data, production cycle, ability
of the borrower to meet commitments, performance of the industry, market
trends etc.
10.9.1. LETTER OF CREDIT:
a) Letter of Credit is established on behalf of the customers for working capital

needs such as procurement of indigenous and imported raw materials, etc.
LCs are also established for capital expenditure of the constituents. The LCs
are issued on Document against Payment (DP) or Document against
Acceptance (DA) terms based on the requirements of the borrowers:
b) While issuing Letter of Credit, the Bank shall ensure that the applicant has
adequate resources to meet the commitments under the LC on the
respective due date and wherever necessary, amortization schedule is
stipulated. Detailed operational guidelines are in place. No Post Import
Finance I funding should be extended as a matter of routir_1e, without
proper assessment. Genuineness of the trade transaction shall be ensured.
c) Normally Inland LC under DA Terms shall be restricted to 20% of the assessed
working capital limit. This ceiling shall not be applicable to the following
beneficiaries (i)Central Government, (ii) State Government, (iii) Public
Sector undertakings, (iv) Listed Companies dealing with the particular
commodities. For other borrowers the cap of 20% may b~ waived by HLCC
(GM) and above.LC under DA limit should be within the arrived or assessed
maximum permissible bank finance or estimated/projected level of sundry
creditors whichever is less. ·
d) There may be occasions where the nature of industry or the trade practice
or the specific need of the borrower may be for. a higher Inland LC limit.
ZLCC (GM) and above may sanction such limits under their delegated
powers Such instances by sanctioning up to RLCC shall be referred to ZLCC
(GM) for clearance.
e) Inland Revolving Letter of Credit:
While establishing I opening Inland revolving Letters of Credit, care should
be taken that the Letter of Credit contains reinstatement clause positively.
This means .that the Letter of Credit amount would get reinstated only on
payment of the earlier drawings under the Letter of Credit. In other words,
such L/Cs has to be non-auton:tatic revolving L/Cs.
Import Letters of Credit - Certiflcat~ issued by Societe Generale De
Surveillance (SGS):
Till now Regional Managers have the powers to permit branches, to waive
SGS clause for pre-shipment inspection, report on vessel and age of vessel,
while establishing Foreign Letter of Credit, on behalf of their importer
customers, on a case to case basis and on merits, in those borrowal
accounts sanctioned by branches under their control and also by their
offices. General Managers in Zonal Office have powers to permit such

waiver in all other cases including accounts sanctioned by MCB.
Now powers are vested with the following for one-time sanction of SGS
<?louse waiver (valid for 1 year) for pre-shipment inspection,. report on vessel
and age of vessel, while establishing Foreign Letter of Credit, on behalf of
their importer customers -
a) AGM headed by a branch may permit waiver for his/her branch
sanctions.
b) Regional Managers have the powers to permit waiver for branches
under their control for branch sanctions (other than AGM headed
branches) and RLCC sanctions.
c) Zonal Managers have power to permit waiver in· all ~ther cases
including CO committees sanction.
The above waiver sanction will be valid for one year and for specific
. suppliers submitted/ declared by the importer customer at the time of
sanction and will be subject to following-
i. · Past track record on the importer in honoring documents is good.
ii. The·beneficiary of credit is internationally well reputed and satisfactory
current credit report on the beneficiary is held by the branch which is
not more than 1-year-old.
iii. The import is being done on a regular basis from a known supplier over
a period of time.
iv. An undertaking from the importer customer to be obtained with a
clause that Bank will not be liable for any loss arising out of the said
waiver of Pre-Shipment Inspection Clause.
Notwithstanding the above, it should be borne in mind that the need for
insisting on submission of Pre-Shipment Inspection Certificate by a
renowned International Agency is obviously to ensure the quality and true
value I price of merchandise or item imported and thereby safeguard the
importer's as well as Bank's interests. In other words, the authority, who
permits waiver of pre-shipment inspection certificate, should give
importance to the above aspect and should be selective while permitting
such waiver after weighing the balancing considerations involved. In this
connection, the guidelines issued/ restrictions imposed by other statutory
bodies from time to time on the quality of goods to be imported which
needs pre-inspection certificate (as in the case of metal scrap), have also
to be kept in mind, while examining requests for such waiver.
' -·-· "··~ " ~. .•.. .. ... . .. ... -··

76( Page
Indian Overseas Bank· LOAN POLICY DOCUMENT 2019
f)· In view of the large number of maritime frauds, branches should not issue
LCs accepting charter party bills of lading. Hence, LC applications with such
clauses should not be entertained by branches.
Similarly, caution should be exercised for deletion/modification of certain
mandatory clauses in the LC application like Transport documents
indicating as the consignor of th~ goods a party other than the beneficiary
of the credit are acceptable, Charted party Bill of lading acceptable,
document dated prior to the· date of LC etc.
Any waiver in this connection, should be with the prior approval of RLCC.
10. 9.2. LETTER OF GUARANTEE.

a) Guarantees ·shall be issued by the Bank on behalf of customers only. Various
Guarantees issued by the Bank depend upon the purpose (such as
Per~ormance, Bid Bond, Security deposit, Advance Payment, Shipping
Guarantee etc.),
b) Guarantees are issued on behalf of the customers, in favour of the
beneficiary for fulfillment of commitments or for due performance of a
contract or for due payment of monetary obligations by the customer.
c) While issuing the guarantees, the Bank will ensure that
i. Customer has the necessary experience, capacity and means to
perform the obligations under the contract.
ii. Customer is in a position to _reimburse the guaranteed amount in case
of invocation by the beneficiary.
e) In case of guarantees issued in favour of private companies (other than
State/Central Govt. department/listed companies), credit reports on
beneficiaries to be obtained before issuance of the guarantee.
f) ·No bank guarantee will normally have duration of more than 10 years.
g) lss()ance of such guarantees with duration more than 10 years is permitted
.in exceptional cases subject to the following conditions:
1. The sanctioning authority is satisfied about the requirement, purpose,
custom· and credibility of the applicant.
2. Such guarantees are issued in favour of Central I State Governments
Departments/ Organizations or other reputed institutions.
3. Sanctioning authorities up to RLCC shall obtain prior permission from
ZLCC(GM) for issuing such guarantees.
h) Detailed operational guidelines are in place for issue of guarantees and
projects related performance guarantees.
• •• ··~·' ~ • - • •·•~ • • > •• •~• • ''• '' ••• ,•••,\<',':"•',",,,,,_,,.., .,..... ~ ~..,_ 0 >'' •>•••• o ~_,,,.. • ''" ~·· ,.4, ••-, ~ ••• •-·· ·~'"'''''• •oW -~•""•
Guidelines for Expired Guarantees
It is mandatory to eliminate the expired guarantees from the books as well as the
system. Standard Operating Procedurel9 to be followed for Expired Guarantees.
10.10. STANDBY LETIER Of CREDIT(SBLC)

a) Standby Letters of Credit shall be issued in connection with payment of margin
money in respect of approved commodity hedging transaction subject to terms
and conditions as stipulated by the Reserve Bank of India from time to time.
b) Standby letters of credit favouring overseas lenders for purpose of such as

raising buyer's credit/ to facilitate wholly owned subsidiaries I Joint Venture (JV)
abroad owned by our customers shall be issued as per RBI guidelines issued from
time to time. SBLC shall not be issued for purposes which are prohibited by RBI
guidelines. .
Letters of Undertaking (LoUs) and Letters of Comfort (LoCs) for Trade Credits are
discontinued by RBJ20,
10.11. EXPORT GOLD CARD:
Bank will issue Gold cards to eligible export borrowers with line of credit for 3 years
to exporters with satisfactory track record. The rating assigned to such exporter
shall be lOB 5 and above, wherever the account is rated under CRISIL RAM. For
lower rated accounts- HLCC (ED) & CAC are empowered to sanction Gpld card
on merits under their respective per borrower limits.
Type of Credit facilities as regards Retail Credits, Agricultural Credit & Allied
Activities, Priority Credit, Govt Sponsors Schemes shall be as per guidelines issued
separately for each of the above categories from time to time.
------000------
Chapter- 11
GUIDELINES ON SANCTION OF SHORT TERM LOAN
11.1. SHORT TERM LOANS (other than those carved out of Working Capital Limits):
Corporates shall be looking for loans from Banks and Financial Institutions for
general corporate purposes. In order to meet their short term requirements short
term loans are granted by the Banks. The guidelines to be adhered to while
granting short term loans to Corporates are enumerated herein below.
a) Eligibility:
I) Constitution:
Listed companies, Societies, Government Departments, Institutions,
Statutory Corporations, Unlisted Corporates with a record of growth in sales
and profit for the last 3 years
II) Rating:
Rating should be atleast notless than lOBS (Internal rating) or BBB
(External rating).
iii) Asset Status:

The account should not have been classffied as NPA during last three years
b) Purpose:
1) To meet short term requirements of Corporates.
2) To meet Working Capital requirements.
3) For project related expenses.
4) To repay/swap high cost debts.
5) To meet on-going capital expenditure.
6) For acquisition of commercial ass.ets.
7) Short term cash flow mismatches.
8) Any other business related purposes.
9) Other general corporate purposes.
10) Not for investment in capital markets.
11) Not for any speculative purposes.
12) Not for any diversion of funds for any unapproved purposes.
13) Not for investing in unrelated real estate.
14) Not for investment in Associate firms.
15) Not for any purpose restricted by RBI/Govt. guidelines.
·-·····"
791Page
c) Assessment:
Apart from regular appraisal, the assessment includes the following.
i. Financial strength of the company, repayment capacity should be
looked into.
ii. The requirement of the company shall be assessed based on the
cash flow statement.
d) Margin:
10-15%.
e) Interest Rate:
Interest rate applicable for Working Capital limits shall be charged. Finer
interest rate may be considered on case to case basis as per the delegated
powers and guidelines in force.
a) Processing Charges:
As applicable for Working Capital limits
g) Commitment Charges: As· per guidelines in force
I) Repayment period:
i. For fully secured advances, the repayment period shall be maximum 12
months.
ii. For partially secured or not fully secured short term loans, the repayment
period shall be maximum six months; however, if collateral security has
been created within this period the loan may be extended for another
six months.
J) Renewal:
Bank at its discretion can renew the facilities for a period not exceeding similar
period after the existing short term loan is fully recovered.
k) Security:
i. Prime I Collateral - Equivalent to the loan amount.
ii. MCB only can S(.mction without adequate prime/collateral security.
I) Delegated Powers:
HLCC (ED) and above has powers to sanction Short Term Loan.
SOl Page
11.2. SHORT TERM LOANS CARVED OUT OF WORKING CAPITAL LIMITS:

ZLCC {GM) and above are empowered to sanction Secured Short Term loans up
to 180 days by carving out the same out of unavailed portion of cash credit limits
already sanctioned to borrowers by them. However, CAC is empowered to
·sanction such facility for accounts sanctioned by MCB. Such sanctions should be
reported to MCB for information.
11.2.1: EXTENSION OF TENOR OF SHORT TERM LOANS CARVED OUT OF WORKING·

CAPITAL LIMITS:
The tenor of existing short term loans, carved out of working capital limits shall
be extended any number of times by the respective sanctioning authority
subject to ·
L Availability of adequate drawing power
ii. The account being regular in all aspects and renewal of working capital
limits as per extant guidelines.
------000------
811 Page
Chapter-12
FINANCE TO VARIOUS SEGMENTS
12.1. MICRO SMALL AND MEDIUM ENTERPRISES:

Micro, Small and Medium Enterprises are the main growth contributors <?.f the
Indian econorrw due to their ability to create jobs, foster entrepreneurship and
provide depth to the industrial base of the economy.
12.1.1 MICRO AND SMALL ENTERPRISES:
A separate Board approved loan policy for MSE sector framed by the Bank is in.
place.
Definitions; details regarding classifications/ sub-classifications and targets I sub-
targets have been detailed out in Chapter-2 Para 2.5.3. to 2.5.3.7.
All MSME loans, irrespective .of loan limit will be classified as priority sector
advances under Micro, Small and Medium enterprises21.
In terms of the recommendations of the Prime Minister's Task Force on MSMEs,
banks are advised to achieve:
i. 20 per cent year-on-year growth in credit·to micro and small enterprises,
ii. 10 per cent annual growth in the number of micro enterprise accounts and
iii. 60% of total lending to MSE sector as on preceding March 31st to Micro
enterprises.
iv. 7.5% of ANBC (Adjusted Net Bank Credit) or CEOBE (Credit equivalent amount
of off-balance sheet exposure) whichever is higher for bank lending to micro
enterprises.
12.1.2 LARGE INDUSTRIES:

Industries other than MSME are classified under Large Industries.
12.2. FINANCE TO INDUSTRIES:

12.2.1 General guidelines:
a) Generally, the Bank will confine itself to Industry- wise exposure of credit as
mentioned under prudential norms (Chapter-3). The exposure limits to
various sectors I industries shall be reviewed at the time of review of Loan
Policy document and also from time to time depending on National and
Corporate priorities.
b) The Bank shall review each industry where the exposure of the bank is
beyond a cut off limit as prescribed in the Credit Risk Management Policy.
The same shall be placed to the Board.
c) While financing industrial sector, industries rated below LT 6 (as per CRISIL
RAM rating model) shall be made only with strict due diligence with proper
justifications which should be duly recorded in the proposal. Financing low
rated industries shall be considered only after being fully satisfied about the
viability an$1 the track record of the promoters of individual projects/units.
d) Bank is subscribing to industrial information reports of CRISIL RESEARCH
(earlier called as CRIS-INFAC), which are made available in IOBONLINE for
use by Corporate Credit Departments at Central Office, Regional Offices
and Branches. Performance of each industry can be gauged through
these reports. Lending will be encouraged to those industries, which are
. performing well.
e) Each industry, based on its performance, is rated by CRISIL. On the basis of
CRISIL industry score, Reviews of various Industries are done periodically and
the Board is appraised accordingly. The Bank shall circulate the list of
industries based on their performance periodically. Bdnk shall exercise
caution in lending to those industries where general industrial performance
is not satisfactory.
12.2.2 Finance to Film Industry:

a)There is no ceiling with regard to cost of production of film. Sanctioning
authorities can stipulate adequate collateral security based on merits of the
case and the reputation of the promoters.
b)The period of loan should be fixed based on the assessment of cash
generation of the project. However, the repayment will be fixed not
exceeding 18 months for all movies.
c) Film Exhibition is mainly confined to the acquisition I construction of a new
cinema theatre or cinema complex or for renovation I expansion I
modernization of an existing theatre complex. Bank finance to this segment
will continue to be on conventional lines in their usual course of business. In
specific cases, working capital requirements may be considered subject to
taking usual precautions.
d) The discretionary powers for sanctioning loans for film production and film
distribution will not be applicable for finanCing to film exhibition. The
Indian Overseas Bank . LOAN POLICY DOCUMENT 2019
discretionary powers to grant general secured or unsecured advances will

be exercised for these advances.
12.2.3 Financing of Television Channel (telecasting) will be classified under Film

industries. However, Bank finance to this segment will continue to be on
conventional lines in their usual course of business. The discretionary powers
for sanctioning loans for Film Industry will not be applicable for financing to
television channel. The discretionary powers to grant general secured or
l,.lnsecured advances wili be exercised for these advances.
12.2.4 Ship Breaking Industry:

a) The advances under this category are generally extended in Branches
attached to Kolkata, Mumb·ai <?nd Ahmedabad Regions. Regional
Managers in these centers are authorised to sanction need based limits
according to the discretionary powers vested with them.
b) Facilities for Ship Breaking industry-in generally extended by way of Letter of
Credit and Cash Credit Cash credit facility is to take care of the payment
of Customs Duty, GST and Beaching charges. Cash credit will be made
available against goods (Scrap) and book debts ..
c) Detailed lending policy for Ship_ Breaking Industry approved by the Board is
in place.
12.2.5 Advances to Real Estate sector:

a) Real Estate Sector offers an attractive avenue for deployment of funds,
especially in the present environment of active marketing of Housing
Finance by Commercial Banks and other Housing Finance Companies.
b) While the development of real estate is welcome, there is a need for the
Bank to curb the excessively risky lending by exercising selectivity and
strengthening the loan approval process.
Some of the Important guidelines are as follows:

i. While appraising loan proposals involving real estate, bank will ensure
that the borrowers have obtained prior permission from government
/local governments/other statutory authorities for the project, wherever
required. RERA approval must be ·in place wherever applicable. In
order that the loan approval process is not hampered on account of
this, while the proposals could be sanctioned in normal course, the
disbursements will be made only after the borrower has obtained
requisite clearances from the government authorities.
841Page
ii. The norms like previous experience, maximum repayment period etc.,
laid down for Advances to Real estate may not be made applicable
for the loans given to parties for construction of Community hall, .hotel,
hospitals, shopping complex, warehouse etc. and such loans can be
appraised as normal project loans and sanctioned by appropriate
authority, without applying norms applicable to real estate sector.
However, these loans will be treated as real estate loans for the
purposes of classification and ref?orting. The repayment period for such
loans will not exceed 10 years based on the cash flows.
iii. While financing Real Estate Projects and Developers grading of the
Project/Developer has to be obtained from Credit Rating Companies
approved by the Bank while considering fresh and renewal I
enhancement of credit facilities (FB+NFB} aggregating Rs. 5 crores and
above.
12.3. Financing to Housing & Commercial Real Estate Projects (other than
Individual housing loans)
12.3. 1 Eligibility:
a} The builders or their associates should have developed at least one project
of value equal to one third value of the present project for which the credit
facility is sought. This eligibility criterion may b~ relaxed by HLCC (ED} I CAC
for existing I new ~ustomers ·who have no prior experience in development
of real estate.
b) The credit limit will be based on project cost, reputation and capacity of
the builders to execute the project and other appraisal aspects without any
ceiling on turnover.
c) Entry level rating equivalent to 1085 shall be accepted for lending to real
estate sector.
·12.3.2 System of lending:

Advance may be extended either in the form of cash credit, MCC or term loans.
However, advances in the form of Cash Credit I MCC can be considered only by
HLCC (ED} I CAC I MCB within their powers.
·12.3.3 Purpose:
a} Term Loans for acquisition and development of land (provided it is part of
the complete project) can be extended to Public agencies only and not to
Private builders.
b) Under no circumstances, credit facilities shall be extended to private

builders
i. For acquisition of land.
ii. For meeting. the cost of acquisition of development rights from any
existing holder of such rights.
iii. For meeting the tenancy settlement cost.
c) Where the purpose of facility is for meeting the cost of the development like
issue of Letter of guarantees I Letter of credit (NFB facility) in lieu of external
I internal development charges payable to Government, then there is no
objection for issue of such guarantees I LCs on behalf of private builders
provided the land has been acquired by them from their own resources.
d) Credit facilities can be extended to private builders on commercial terms
by Way of loans linked to each specific project where the land is acquired
and developed by State Housing Boards and other Public agencies. It will
be ensured by close monitoring that no part of such funds is used for any
speculation in land.
e) Purchase of ready built commercial property is permitted subject to
minimum margin of 50%. Age of the building should not be more than 25
years. All other norms as per the construction of commercial property
prevails.
12.3.4 Margin:
Margin of 40% on cost of land (for public agencies only) .30% on cost of
construction or amenities in case of layout etc. are prescribed.
Margin may be reduced in deserving cases by sanctioning authorities as follows:
Particulars Prescribed Margin Margin that can be

stipulated by
Sanctioning Authorities
Cost of land 40% 20%
Cost of construction 30% 20%
12.3.5 Security:
· a) The security will be in the form of land & building in the name of the
borrower. In addition, collateral securities in the form of any other land and
building; NSCs, term deposits may be obtained.
b) The total securities including collateral securities shall not be below 150% of
the loan amount. Sanctioning authorities can consider the limits with
security coverage of below 150% on a case-to-case basis but not less than
125% of the loan amount with clear justffications thereof.
2 0 MAR 'L019
12.3.6 Repayment:
The repayment will be based on cash flow & size of the project. As far as
possible, repayment will not be beyond 36 months (including holiday
period). However, ZLCC (GM) and above can sanction with repayment
period beyond 36 months, if so warranted.
12.3.7 Other Important guidelines:

a) Regarding obtention of permission/approvals from Government I local
Governments /. other statutory authorities for the real estate projects,
guidelines are in place. Though, the above requirement should not hamper
the process of appraisal of the proposal, the disbursements of the credit
facilities will be mad_e only after the borrower has obtained requisite
clearances from Government authorities/ Agencies I local bodies.
b) Bureau of Indian Standards (BIS) has formulated a comprehensive building
Code namely National Building Code (NBC) of India 2005, providing
guidelines for regulating the building construction activities across the
country. The code contains all the important aspects relevant to safe and
orderly building development such as administrative regulations,
development control rules and general building requirements: fire safety
requirements; stipulations regarding materials, structural design and
construction (including safety); and building and plumbing services.
c) No finance will be granted for construction of buildings meant purely for
Government I Semi-Goverr:'ment offices, including Municipal & Panchayat
offices. Banks may however grant loans for activities, which will be
refinanced by institutions like NABARD.
d) Projects undertaken by Public sector entities which are not corporate
· bodies (i.e. Public sector undertakings which are not registered under
companies Act or which are not corporations established under the
relevant statute) will not be normally financed by Bank.
e) However, where the project is run on commercial lines (the repayment is
not through budgetary allocations of the Government) and the
Government is interested in promoting the project either for the benefit of
weaker sections of the society or otherwise and part of the project cost is ·
met by Government through subsidies or by contributions to the capital of
the institutions taking up the project, bank finance may be made available
to the e_xtent of untied up portion of the project.
f) In order to reduce disaster risk, the guidelines formulated by the National
Disaster Management Authority (NOMA), ·Government of India ensuring
disaster resilient construction of buildings and infrastructure shall be

adopted by the Bank. Detailed guidelines are in place.
g) RERA act [Real Estate (Regulation and Development) Act, 2016]: The Real
Estate Act makes it mandatory for all commercial and residential real estate
projects where the land is over 500 square metres, or eight apartments, to
register with the Real ·estate Regulatory Authority {RERA) for launching a
project, in order to provide greater transparency in project-marketing and
execution. State Governments shall make rules for carrying out the
provisions of the Act. The. said rules are notified by some of the State
Government. For commercial real estate advances RERA approval must be
in place wherever applicable.
12.3.8 Procedure for registration of documents and also verification by the Bank
that registration with appropriate authorities has been done:
a) The Bank's lawyer on the approved panel scrutinizes the document of title
to the property and certifies its title as clear and marketable. It will be
ensured that lawyer personally makes a search in the Registrar office and
verifies the entries and a certificate is duly incorporated in his opinion on
the title deeds Branches have also been advised to apply for the certified
copy of title deeds from the Sub-Registrar Office and compare the same
with the documents proposed to be deposited with the Bank, so that the
genuineness of the documents is verified.
b) Various precautions to be observed in verification of the title deeds and
creation of mortgage to avoid frauds and mitigate the attendant risks
involved ·are in place.
· 12.3.9 Finance to specific Housing/Development Projects and Commercial Real

Estate Projects:
a) While granting finance to specific housir:lg I development projects and
Commercial Real Estate projects, the Bank will stipulate the following the
terms and conditions.
i. The builder I developer I company would disclose in the Pamphlets 1
Brochures etc., the name{s) of the bank{s) to which the property is
mortgaged.
ii. The builder I developer I company would append the information
relating to mortgage in favour of the Bank while publishing advertisement
of a particular scheme in newspapers I magazines etc.
iii. The builder I· de~eloper I company would indicate in their pamphlets I

brochures, that they would provide No Objection Certificate (NOC) I
permission of the mortgagee bank for sale of flats I property, if required.
b) The Loan funds shall not be released unless the builder/ developer/
company fulfil the above requirements.
12.4. Llquirent Advances:

Liquirent Loans are granted to Lessor(s) against the rent r~ceivables (Securitisation
of Rent receivables of on the building property let out on lease by way of term
loans only. Liquirent Advances are classified under CRE and Non CRE based on
the type of lease agreement. Wherever the following two conditions are fulfilled
the same is considered as Non CRE.
a) The lease rental agreement between the lessor and lessee has a lock-in
period which is not shorter than the tenor of the loan.
b) Lease deed does not contain any clause which allows a downward revision
in the rentals during the period.
Advances under Liquirent Scheme shall not be consider~d if the land lord and the
tenant are associates/subsidiaries/relatives. Any deviation has to be placed to the
MCB for consideration and approval. ·
The detailed guidelines on the scheme such as eligibility, loan" amount, margin,
security, repayment period etc. are in place. MD&CEO is empowered to extend
the maximum repayment period up to 180 months.
12.5. CAPITAL MARKET EXPOSURE:

12.5.. 1 General Guidelines:
a) A<;:lvances against shares and debentures to individuals and share & stock
brokers shall be considered by the Bank in select regions, and that too, in
specified branches in such Regions. (Reference para 4.2:2)
b) Besides the above, granting advances against primary security of shares
and debentures including promoters' shares to industrial, corporate or other
borrowers shall not be normally entertained. However, such securities sh9ll
be accepted as collateral for secured loans granted as working capital or
for other productive purposes from borr9wers other than NBfCs.
c) Advances granted for any other purpose - to the extent secured by the
collaterql security of shares or convertible bonds or convertible debentures
or units of equity oriented mutual funds i.e. where the primary security other
than shares/convertible debentures/units of equity oriented mutual funds
does not fully cover the advance will be treated as exposure to capital
market.
d) Shares and debentures in the dematerialized form that are approved by

the Bank only shall be accepted as security for granting advance.
e) Bank does not extend finance against IPO.
f) No advance against partly paid shares will be granted.-
g) No advances against shares in non-dematerialized form.
h) Where the securities are held in dematerialized form, the requirement
relating to transfer of shares in bank's name will not apply. lnstead,dien will
be marked against such shares in DP.
i) Banks will avail of the facility provided in the depository system for pledging
of shares.
j) At present a uniform minimum margin of 50% shall be maintained on all ·
advances against shares and loans & issue of guarantees for share brokers.
k) Within the total margin of 50%, Cash Margin of not less than 25% will be
maintained on the guarant.ees issued on behalf of Stock
brokers/commodity brokers in favour of stock exchanges/commodity
exchanges for capital market operations. Remaining 25% may be in the
form of cash/term deposits or near cash securities/liquid securities like NSCs,
LIC Policies with adequate surrender value, and Relief Bonds that can be
pledged.
m) Statutory limit on shareholdlng In companies:
In terms of Section 19(2) of the Banking Regulation Act, 1949, no banking
company shall hold shares in any company, whether as pledgee~
mortgagee or absolute owner, of an amount exceeding 30 percent of the
paid-up share capital of that company or 30 percent of its own paid-up
share capital and reserves, whichever is less, except as provided in sub-
section ( 1) of Section 19 of the Act. Shares held in de mat form should also
be included for the purpose of determining the exposure limit. This is an
aggregate holding limit for each company. While granting any advance
against shares, underwriting any issue of shares, or acquiring any shares on
investment account or even in lieu of debt of any company, these statutory
provisions will be strictly observed.
12.5.2 Bank Finance for PSU Dlslnvestments of Government of India

Finance can be extended to the successful bidders for acquisition of shares of
those PSUs under the Government of India disinvestment programme, subject to
RBI guidelines.
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Indian Overseas Bank LOAN POLICY DOCUMENl2019
12.5.3 Bank Finance for meeting promoter's contribution:

a) The promoters' contribution towards the equity capital of a company should
come from their own resources and Bank shall not normally grant advances
to take up shares of other companies. However, loan shall be granted to
Corporates against the security of shares in dematerialised form held by
them to meet the promoters' contribution to the equity of new companies in
anticipation of raising resources.
b) Financial assistance will be extended to Indian .companies for acquisition
of equity in overseas joint ventures/wholly owned subsidiaries or in other
overseas companies, new or existing, as strategic investment. Such
acquisition(s) should be beneficial to the Company and the country.
c) Under the refinance scheme of Export-Import Bank of India, term loans shall
be sanctioned on merits to eligible Indian promoters for acquisition of
equity in overseas joint ventures/wholly owned subsidiaries provided the.
term loans have been approved by the EXIM Bank for refinance.
d) Activities related to such acquisitions like payment of non-compete fee etc.
shall also be financed.
e) Eligibility:
(i) Only Corporates are eligible for these advances.
(ii) The Corporate should have been in the business for more than 3 years,
earning profit every year in the last three consecutive years.
(iii) The rating assigned shall be LTl to LT4, SME 1&2. TR 1&2 and Pl only.
CAC is empowered to approve any deviations in (ii) & (iii).
12.5.4 Guarantees favouring Commodity Exchange:

Bank will also consider issuing guarantees on behalf of commodity brokers in
favour of the national level commodity exchanges, viz., National Commodity &
Derivatives Exchange (NCDEX), Multi Commodity Exchange of India Limited (MCX)
and National Multi Commodity Exchange of India Limited (NMCEIL).
12.5.5 Loans to Stock Brokers & Market Makers:

The Bank will consider granting advances against shares, granting loans to Stock
Brokers and Market Makers, and issuing guarantees on behalf of share and stock
. brokers in favour of stock exchanges in lieu of margin requirements as per stock
exchange regulations.
12.6 ADVANCES AGAINST UNITS OF MUTUAL FUNDS:

As per RBI guidelines, advances may be granted against the pledge of
securities/units of various Mutual Funds under their various schemes like Unit Trust of
·····-···
911 Page
India, other mutual fund schemes of certain Commercial Banks, Public Sector
Undertakings like Life Insurance Corporation, General Insurance Corporation, etc.
However, branches shall advance against the securities/units of Mutual Funds like
LIC/GIC, Mutual funds promoted by Public Sector Banks, Private Banks/Companies
etc., only after getting prior clearance from Central Office.
12.7 GUIDELINES FOR SANCTIONING BRIDGE LOANS:

a} Bank will sanction bridge loans to companies (other than Non-Banking
Financial Companies and Residuary Non-Banking Financial Companies) for
a period not exceeding one year against expected equity flows/issues. Such
loans will be included within the ceiling of 40 percent of the banks' net worth
as on March 31 of the previous year prescribed for total exposure, including
both fund-based and non-fund based exposure to capital market in all
forms.
b} Ban~ will also extend bridge loans against the expected procee9s of Non-
Convertible Debentures, External Commercial Borrowings, Global
Depository Receipts and/or funds in the nature of Foreign Direct
Investments, provided the borrowing company has already made firm
arrange:ments for raising the aforesaid resources/funds.
c) The existing borrower companies as well as other companies (other than
non- banking financial companies) whose shares are quoted in at least two
major Stock Exchanges are eligible for the loan.
d) The purpose of the bridge loan and the· need shall be clearly spelt out by
the company.
e} The public issue should have the approval of SEBI, etc., and a copy of the
approval letter should accompany the application for the bridge loan
against equity.
f} The extent of such bridge loan may not exceed 50 % of the expected equity .
flows I issues.
g) The assets of the company in the form of fixed I block assets should be
available as security to cover the bridge loan. In addition to it, the personal
· guarantee of Promoter Directors shall be obtained. The sanction will be with
the approval of the members of the consortium I financing bank as the case
may be.
h} No lien letter should be obtained from bank branches handling the
allotment money account.
i) Our Bank should have a role in the Public Issue either as Lead Manager or
Advisor I Bankers to the issue.
92 I Page
j) The individual I group exposure norms should be complied with. The

maximum period of bridge loan will be one year.
k} ·However, only MCB can sanction such Bridge loans.
12.8 ADVANCES TO SELF FINANCING COLLEGES & SCHOOLS:

a} While financing Educational Institutions, the provisions of law .in force in
various states governing the setting up ot"educational institutions, creating
charge over assets of such Institutions etc., shall be looked into. Sanctioning
authority shall ensure that the mortgaged property of educational
Institutions is free from any defect and are enforceable.
b} While financing to MBA and Engineering Colleges grading of the institution
has to be obtained from Credit Rating Companies approved by the Bank
while considering fresh/enhancement of credit facilities (FB+NFB}
aggregating Rs. 5 crores and above.
c) In respect of a~vances to self-financing schools and colleges, for all new
proposals of Rs. 10.00 Crores and above, expression of interest only is
required from New Business Committee before sanction of loans. All new
proposals ·below Rs. 10.00 Crores and enhancements to the existing
accounts require clearance from HLCC (GM} before sanction of loans.
d) Powers are delegated to select authorities for financing Self Financing
Colleges and Schools.
12.9 ADVANCES TO NON BANKING FINANCIAL COMPANIES:

a} · While financing NBFC, Bank shall ensure that the said NBFC has not
contributed to the capital of any partnership firm or is not a partner of such
firm. Suitable undertaking from the NBFC shall be obtained for this.
b) NBFCs, registered with RBI are eligible for Bank Finance and the guidelines
are as follows:
i. Need based working capital facilities as well as term loans will be extended
to all NBFCs registered with RBI and engaged in equipment leasing, hire-
purchase, loan and investment activities.
ii. However, finance to Residuary Non-Banking Companies (RNBCs) would be
restricted to the extent of their Net Owned Fund (NOF).
iii. Finance can be extended to NBFCs against second hand assets financed
by them.
iv. Advances to NBFCs, against second hand assets I second hand machinery
/second hand vehicles should be extended only to NBFCs registered with
RBI & which have a good track record. Guidelines I Terms and conditions in
this connection are in place for compliance.
v. Non Corporate entities engaged in Non-Banking Financial activities can be
granted MCC limits against immovable properly as per norms applicable to
MCC advances to others.
vi. Advances to NBFCs exempted from the requirement of registration by RBI
will be considered as per Bank's general guidelines for financing to other
sectors.
vii. The powers for sanctioning credit facilities to NBFCs are delegated to select
authorities. ·
viii. Bridge loans of any nature, or interim finance against capital I debenture
· issues and I or in the form of loans of a bridging nature will not be granted
pending raising of long-term funds from the market by way of capital,
deposits, etc. to any category of Non-Banking Financial Companies and
alsoResiduary Non- Banking Company.
ix. Funds flow statements in respect of Bank's exposure to investment
companies and large NBFCs including MFis shall be obtained and ensure
that funds are not used for activities which are not permitted by the RBI.
x. Bank shall strictly follow the guidelines contained in RBI Master Circular22 on
Bank Finance to Non-Banking Financial Companies (NBFCs).
12.1 0 TELECOM INDUSTRY:

a) Financing of Telecom Industry will be taken up on selective basis.
b) The telecom Industry is capital intensive and therefore it incurs losses in the
initial few years The breakeven depends on subscriber bese and various
other factors On account of the higher capacity build up in the initial yeprs
to provide adequate geographical coverage to its subscribers the capital
cost and the operating costs will be higher in the initial years Going forward,
as the subscriber base increases the Company starts generating enough
revenues to sustain its operating expenses. In this background, the
promoters will normally enter into inter connection agreements with other
players for sharing the resources.
c) Also, the Telecom Industry usually operates on negative working capital. The
negative working capital is on account of higher credit availability and.
advances received from Pre paid subscribers.
d) The borrower should obtain the requisite licenses I permits I rights from the
. appropriate authorities.
e) The Bank guarantee shall be normally for the purpose of extending Financial
I Performance Bank Guarantees in the normal course of business in favour
941Page
J
f
of Department of Telecom (DOT) or any other statutory body prescribed by

Government of India. ·
f) TEV study on the project will normally be obtained.
12.11 SUGAR INDUSTRY:

a) The Bank shall prefer to lend to Integrated sugar mills (mills which produce
not only sugar but also ethanol and industrial alcohol from molasses and
power from bagasse) as they are likely to be more successful than
standalone sugar companies in terms of revenue and profitability. By opting
for such a model, Sugar Mills can partly protect themselves from the cyclical
downturns in the core sugar business.
b) The key provisions of the order issued from time to time by Ministry of
Consumer Affairs, Food & Public Distribution, and Department ·of Food &
Public Distribution Government of India like the command area to be
allotted to each Sugar Industry shall be looked .into.
c) The capacity of the Sugar Mill shall not be below the operational level of
2500 TCD (Tonnes of sugarcane Crushed per Day) and that adequate
sugarcane is available in the command area of the proposed unit.
d) As the viability of sugar Industry depends on the vagaries of monsoon and
the Government's policy on procurement price and price of levy sugar, the
estimates on the amount of sugarcane available for crushing, the crushing
capacity of the mill, the actual amount of sugarcane crushed in a day and
the duration of the crushing season shall be ascertained.
e) The level of Sugar recovery shall, preferably, be at a minimum of 9%.
f) Availability of soft loan from Sugar Development Fund at a lower interest
rate shall be looked into, as the low interest cost component will have a
positive impact on the viability of the project as also the cash flows.
12.12 Co-Origination of loans by Banks and NBFCs for lending to priority sector:
. All scheduled commercial banks (excluding Regional Rural Banks and Small
Finance Banks) may engage with Non-Banking Financial Companies - Non
Deposit taking - Systemically Important (NBFC-ND-Sis) (hereinafter referred to as
NBFC) to co-odginate loans .for the creation of priority sector assets. The
arrangement should entail joint contribution of credit at the facility level, by both
lenders. It should also involve sharing of risks and rewards between the bank and
the NBFC tor ensuring appropriate alignment of respective business objectives, as
per the mutually decided agreement between the ban~ and the NBFC, inter-alia,
covering the essential features as indicated in the RBI circular23.
12.13 FINANCIAL INCLUSION: TEMPORARY OVERDRAFT FOR BASIC SAVINGS BANK

DEPOSIT (BSBD) ACCOUNT HOLDERS:
a) As directed by RBI, Bank had introduced Basic Savings Bank Deposit
accounts with very low minimum balance with the objective of making
banking accessible to a vast section of population.
b) In order to meet financial commitments of BSBD account holders, Branch
Managers are vested with discretionary powers to grant overdraft as per
guidelines in force.
12.14. Pradhan Mantrl Mudra Yojana (PMMY)- The scheme has been introduced
by Government of India, detailed circulars are in place. Common Loan
application form has been devised and approved by IBA which is to be adopted
by all branches for considering credit facilities under PMMY.
12.15. Micro Units and Development Agency Ltd. (MUDRA):

Detailed guidelines are in place for sanction of loans under this scheme devised
by Government of India. There is a separate GL Code for MUDRA loans.
12.16. Stand up India: .

SME A~vance Scheme introduced by Govt. of India to give impetus to promote
entrepreneurial culture among the marginalized sections of the society- Detailed
guidelines are in place. Common application form approved by IBA to be
adopted by all Branches.
12.17. Loans to Staff/Ex-staff against Deposits standing In their name:

Loans can be sanctioned at concessional interest rates and margins (0.5% above
the applicable interest rate and margin of 5% at present for deposits up to
aggregate amount of Rsl.OO Crore) to staff and ex- staff (ex-staff members shall
not include employees who had resigned or were removed from bank's service)
against Deposits standing in their name either singly or jointly with members of
their family (the first name shall be the name of the staff member) or the spouse
of a person who was formerly a member of staff or an association or a" fund, all
members of which are members of the bank's staff as per the guidelines in force.
Branch must obtain a declaration from the staff member(s) concerned that the
moneys deposited or which may from time to time be deposited into such
accounts shall be the moneys belonging to him/her. This declaration should be a
part of the deposit account opening form and the branch shall ensure that this
declaration is duly signed by the staff member.
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Chapter-13
CREDIT APPRAISAL
13.1 MARKET INFORMATION I CREDIT REPORTS/ PR~ SANCTION VISIT/FINANCIAL

STATEMENT /VALUATION REPORT:
a) Opinion·about the applicant I associates should be ascertained by making

market enquiries from people in similar line of business I buyers I suppliers
etc. Even in the case of existing accounts Bank shall obtain periodic market
information. CRCO in banks prescribed. format must be obtained at the time
of fresh sanction as well as renewal of the business loans. However, for
business loans of Rs. 2.00 Lacs and above it must be compulsorily obtaine~.
For project funding above Rs. 50.00 Crores, rigorous due diligence and .
appraisal measures as per Annexure 2 to be done.
b) In the case of small borrowers, it should be ensured that the individual resides
or undertakes activity within the command area of the branch.
c) Bank shall obtain confidential opinion from the existing Banker and collect
information on the credit facilities sanctioned, conduct of the account,
examine the statement of account of the existing Banker for ascertaining
satisfactory dealings and operation and shall ensure that all such reports are
obtained and held on record before disbursement of the advance.
d) Pre-sanction visit to the applicant's place shall be undertaken to ascertain
the existence of tne unit as well as assets offered as prime I collateral
security and collect useful information on the business I trade practices.
e) In the case of Trade Credit advances,
i. Balance sheet shall not be insisted for credit limits up to Rs 10.00 lacs.
This shall be applicable for Proprietorship and Partnership firms only;
ii. Credit limits maybe sanctioned based on unaudited balance sheet
for limits up to Rs. 25 lacs.
iii. Valuation Report from the Bank's Approved Valuer shall not be
insisted on collateral securities offered for securing limits up to Rs. 1
lakh.
iv. For valuation of properties, valuation policy of the bank to be
referred.
13.2 APPRAISAL:
13.2.1 DRAWING OF CREDIT INFORMATION REPORTS:
a) RBI has approved 4 Credit Information Companies viz. I11 The Credit
Information Bureau (India) Ltd (CIBILJ, (2) Experian Credit Information Co. of
India. P. Ltd., (31. Equifax Credit Information SeNices P. Ltd. and (4) CRIF
Highmark Credit Information SeNices P. Ltd. These are composite bureau
established to seNice a closed user group of member· credit grantors
(Commercial banks I notified financial institutions and State Financial
Corporations regulated by RBI), who submit data to them and their
members in turn will be entitled to receive credit reports from their respective
centralised database. Our Bank is a member in all the four credit information
companies. It is compulsory to draw Credit Information Reports (CIRJ from
Credit Information Company in respect of ·adva!'lces for Consumer as well
as Commercial segment Irrespective of the loan amount- for fresh sanction/
enhancement I renewal. CIRs of all the borrowers/guarantors/associates to
be obtained. CIR of Proprietor in Proprietorship firm, Partners in case of
partnership firms, directors in case of Company account to be obtained.
The credit Information report obtained from the CIC(s) should be analysed
and discussed In the note/board note.
Following schemes are exempted from obtention of CIRs-

i. Loan against Deposits ii. Pensioners Loan Scheme
iii. Loans to individuals against NSCs, iv. Loans to insurance policies

IVP & KVP approved by IRDA
v. Jewel Loans vi. Agriculture Jewel Loans
vii. Loan against Govt. Bonds etc. viii. Staff Consumer Loan
ix. DPN Loan/ Cash Credit Facility to X. Term Loan (Wedding) to
staff staff
xi. Staff Vehicle Loan xii. Festival Advance to staff
xiii. All schemes of Staff Housing Loan xiv. Education loan to wards ot
(including Subhgruha housing loan staff members
for staff if it is linked with SHLJ
XV. Winter Loan to staff xvi. Drought/Flood Loan to staff
Any other exclusive scheme for staff under welfare schemes which is not
available to general public.
b) As of now Branches and other Offices are given access to draw the reports
from CIBIL & CRIF HIGH MARK. Reports shall be drawn from other Companies
as per operational guidelines issued from time to time.
c) The· credit information report obtained from the CIC(s) should be analysed
and discussed in the note/board note.
13.2.2 GUIDELINES REGARDING BORROWERS FEATURING IN THE WILFUL DEFAULTERS

I CAUTION LIST OF RBI I SPECIFIC APPROVAL LIST OF ECGC:
Bank ·shall adhere to the guidelines stipulated in RBI master circular on Willful
Defaulters24,
CIBIL willful defaulter also to be verified before sanctioning/renewing any credit
facility.
Advances to Exporters whose names appear under SAL (Specific Approval list) of
ECGC:
In respect of advances to exporters whose names appear under "Specific
Approval List" by ECGC, prior clearance from ZLCC should be obtained for
proposals falling up to the powers of RLCCs. After such prior clearance, RLCCs can
sanction/renew credit facilities to such exporter's up to their powers.
13.2.3 REPORT FROM CRILC DATA BASE:

a) For all credit limits of Rs 5 Crore and above (Fund Based+ Non-Fund Based),
a Report from CRILC data base shall be drawn and it will show the status
(NPA or SMA etc.) of the account with all the lenders.
b) Login Ids and Passwords are shared with credit verticals at CO, all Zonal
Offices and select Regional Offices and in case of any clarification with
regard to CRILC, Credit Support Services Department at Central Office will
· clarify to Branches/ROs/ZOs.
c) For all credit limits of Rs. 5.00 Crores and above, CRILC report should b~
compulsorily discussed in the Board Note. ,
d) Other than that, current accounts with other banks also to be checked and
to be discussed in board note. For closure of accounts with other than
financing banks, necessary steps to be taken with the account holding bank
for its closure.
13.2.4 VERIFICATION IN MCA WEBSITE:

With regard to companies registered under the Indian Companies act 1956, the
authenticity of the audited financial statements, the name of the auditors I firm
•• ..... --· • ··-·--·-- • ~- • ... •• -

. .
....... :·:-." ··-····· 1;.-. ·--·~--··· ......... ·········-··-··-.·-
.
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2 GMAR 1019
and the index of charges created shall be verified in the Ministry of Corporate
Affairs {MCA) website. Directors/ Authorised signatory details and the details of
companies in which they are interested also can be verified through the MCA21
Website.
13.2.5 Verification from Central Fraud Registry and Information Service Companies
i.e. Probe 42, etc. to be done before sanctioning/renewing any credit facility.
13.2.6 UDIN (Unique Document Identification Number): lt.is mandatory to obtain

UDIN by all practicing Chartered Accountants for all certificates issued by them ·
where the Financial Information/ related content is certified as True and Fair/ True
and Correct. Therefore, verification/ cross checking of the authenticity of the
documents issued by practicing CA to be done from the portal at
https://udin.icai.org/ This should be discussed in the board/ appraisal note.
Further, ICAI has now made UDIN mandatory in the following phases:
a) All GST & Tax Audit Reports w.e.f. 1st April, 2019.
b) All other attest functions w.e.f. 1st July, 2019.
13.3 WORKING CAPITAL:

a) Banks have been given freedom in evolving their own method of lending
and the Bank has evolved its own lending policy. A separate policy for
lending to Mi.cro and Small Enterprises {MSE) is in pface.
b) In respect of other category of borrowers with working capital limits up toRs
2 crores (Except for MSE borrowers with limits up to Rs 7.50 Crores) will be
assessed as per Nayak Committee recommendations i.e. turnover method.
Borrowers ~njoying working capital limits of above Rs 2 crores and up to Rs.
10 Crores (above Rs 7.50 Crores and up toRs 10 Crores for MSE borrowers)
will be assessed as per the existing traditional method of arriving at
Maximum Permissible Bank Finance {MPBF) calling for the CMA data and for
borrowers enjoying working capital.limits of above Rs10 Crores, option will
be given to the borrower to be assessed as per the Cash Budget method or
as per MPBF method. For industries like sugar and tea wherein the pattern of
financing the peak cash deficit{s) is followed all along, the existing system
of assessment under the cash budget method will be followed.·
c) Branches/ROs/ZOs to adopt simplified procedures for sanction of Working
Capital Limits to MSEs i.e. 25% of the projected and accepted annual
turnover could be extended as Working C':lpital limit to MSE units requiring
aggregate fund based working capital limits up to Rs 7.5 Crores. In such
cases where 25% of the accepted Turn Over is extended as working capital
100 I Page
the borrower has to bring in 6.25% of the accepted turnover as margin for
the proposed working capital limit. Current Ratio of 1.25 to be maintained.
Working Capital Assessment for Digital Portion: For those units enjoying
working capital limits up toRs 7.50 Crores, Branch/ROs/ZOs would consider
extending working capital up. to 30% of the digital portion of the turnover
projected. The borrower has ·to bring in 7.50% of the accepted digital
turnover as margin.
d) Cash Flow: Cash Flow method is another method of assessing the working
capital requirements of the borrower and it provides informatio~ that
enable us to evaluate the changes in net assets of an entity, its financial
structure {including its liquidity and· solvency) and its ability to affect the
amounts and timing of cash flows in order to adapt to changing
circumstances and opportunities. Cash flow information is useful in assessing
the ability of the entity to generate cash and cash equivalent~ and enable
us to assess and compare the present value of future cash flows of different
entities. Historical cash flow information is often used as an indicator of the
amount, timing and certainty of future cash flows. It is also useful in checking
the accuracy of pqst assessments of future cash flows and in examining the
relationship between profitability and net cash flow a~d the impact of
changing prices. Under this method, bank finance is just equal to cash
deficit which arises when cash receipts fall short of cash payments.
13.3.1 CURRENT RATIO:

While it is desirable for a current ratio of 1.33:1 { 1.25:1 for MSE) . as a
benchmark, lower current ratio can be considered acceptable on a case-
to-case basis depending upon the components and quality of current
assets and current liabilities. Funds flow analysis shall be done in these cases.
13.3.2 BOOK DEBTS:

In respect of advances against book debts, the age of book debts shall not
be more than 120 days. In justifiable cases, advance against book debts of
age above 120 days and not exceeding 180 days shall be sanctioned on
case to case basis for which powers are delegated to select authorities.
Once in a quarter, a certificate from the statutory auditor of the Company,
who has audited and certified the books of account of the company or
auditor approved by Lead Bank in case consortium or by our RO, should be
obtained with age-wise details of the book debts.
1 S MJ\R 7.019
13.4. TERM LOAN/PROJECT FINANACING:

a) Term loans are extended for acquisition of fixed assets like land, building,
plant and machinery, vehicles, furniture and fixtures.
b) While appraising the Term loan requirements, Bank will endeavour to
appraise both term loan and Working capital requirements at the time of
initial stage of appraising the proposal.
c) The appraisal of term loan is a one-time exercise, but more detailed, rigorous
and complicated as the repayment ranges over a longer period.
d) The following four critical factors will be looked into in depth.
1. Managerial Competence, 2. Technical Feasibility,
3. Commercial Viability and 4. Financial Feasibility
e) For the project loans of these industries, Bank shall consider longer tenor
amortization up to 25 years (within the useful life/concession period of the
project) and sanction the loan offering the Initial Debt Facility for a medium
term, say 5 to 7 years with periodic refinancing (Refinancing Debt Facility)
of balance debt, the tenor of which could be fixed at the time of each
refinancing, within the overall amortization period.
f) Banks are providing now-a-days more term loans with longer duration. As
consortium has become optional, banks may even take care of the project
fundi!lg without any ceiling subject to compliance with the prudential
norms. Hence the bank would involve in funding the term loan requirements.
g) Term Loan I Deferred Payment Guarantee (DPG) will normally be
considered with a maturity not exceeding 10 years including moratorium I
holiday period and, under specific circumstances, extended for longer
periods up to 15 years in respect of housing loans and i0frastructure projects,
the repayments may however be extended beyond 180 months. In such
cases endeavour should be made for tie-up of take out finance.
h) It is not practicable to fix uniform gestation/holiday period as it varies from
project to project:
i) Gestation/Holiday period for various project loans will vary from 3 months to
36 months. However, on any account the gestation period should not go
above 36 months. GM Corporate Credit. is empowered for sanctioning
exceptions.
j) In case of Consortium lending, the holiday period as decided by the leader
Bank /institution may be considered for acceptance.
k) In case of Multiple Banking, the holiday period, as permitted by the
Bank/Institution, with major share, may be accepted.
I) In term loan appraisal, besides other factors, Debt Service Coverage Ratio
(DSCR) and Debt Equity Ratio will be given more importance.
13.4.1 DEBTSERVICECOVERAGE RATIO (DSCR):

This ratio is to be computed only after thoroughly scrutinizing various
projected financial statements.
DSCR =
Net Profit after Tax+ Depreciation+ Interest on Term Loan
and other long term debts
Installments of Term Loan & other long term debts+ Interest on
Term Loan and other long term debts
.While the desirable ratio would be above 2:1, average DSCR of 1.5: 1 with
minimum DSCR of 1.2: 1 can be accepted on merits. For MSME units located
in backward areas an average DSCR of 1.5 ~ith a minimum of 1.2 in any
year can be accepted.
13.4.2 OTHER BENCH MARK RATIOS:

a) It is very difficult to evolve industry-wise bench marks for debt-equity ratios
and profitability ratios or any other specific ratios. However, in general, debt
equity ratio of less than 2:1 and Total Outside Liabilities to Tangible Net Worth
(TOL/TNW) ratio of less than 4:1 will be considered as reasonable
requirements for any credit proposal. For NBFCs having investment grade
rating, TOL/ TNW less than 10:1 will be considered reasonable. These bench
marks will generally be observed for new connections.
b) Relaxation in the bench mark ratios may, however, be considered by
respective sanctioning authorities on merits of the case.
13.4.3 TECHNO"ECONOMIC VIA81LITY(TEV) STUDY:

TEV study facilitates the sanctioning authority in arriving at an informed judgment
as to the viability /acceptability of the Project before lending. Bank has extant
guidelines in place on identification of the projects for which TEV Study is required.
The TEV policy is detailed in Bank's Valuation Policy. The consultants would be
engaged for TEV study for new (Green Field) projects of Rs. 25.00 Crores and
above. In respect of expan~ion of existing (forward/backward integration)
projects, TEV Study is to be done if such cost of expansion undertaken is equal to
(1 00%) or more than the cost of original project. In case of consortium/multiple
baking advances, where the total cost is Rs. 50.00 Crores and above, Bank shall
2 8 MAR 7.019
insist on TEV Study. However, if any member Bank of the consortium/multiple

banking had already conducted TEV Study, Bank shall accept the same instead
for fresh one. When the TEV Study is made by customer directly through our panel
consultant, branch should get it confirmed by the same consultant.
Notwithstanding the above, the sanctioning authority if convinced and desires
may waive "TEV Study" on case to case basis.
13.5 PROJECT FINANCE PORTFOLIO OF BANKS

a) While extending credit facilities under project financing, it should be ensured
that the promoters' fund I equity is brought in to the project as agreed upon
at the time of appraising the proposal.
b) While determining the level of promoters' equity, Bank may accept any one
of the following methodologies.
i. Promoters bring their entire contribution up front before the Bank starts
disbursing its commitment.
ii. Promoters bring certain percentage of their equity (40%-50%) upfront
and balance is brought in stages.
iii. Promoters agree ab-initio that they will bring in equity funds
proportionately as and when the Bank releases the loan in stages.
c) In view of the greater equity funding risk associated with the last method, at
the time of appraising the project, the source of promoter's contribution
should be called for and the funding sequence as to how and when the
same will be infused into the project should be ascertained.
d) It should be ensured that stipulated level of DER is maintained at all times for
· the project for which finance is sanctioned.
e) In this connection the following procedure will be adopted.
i. That the method of bringing in equity on pro-rata, can be accepted on
case-to-case basis in respect of top borrowers whose capability to raise
the equity at the appropriate time is indisputable.
ii. A certificate from the Auditor who will audit I be appointed (by the
borrowe~) to audit the books of accounts of the concern/firm/ company
should be called for, to ensure that the stipulated DER is maintained at
any point of time, whenever pro-rata infusion of promoter's equity in the
project is acceptable to us at the time of appraisal of the project.
13.6 APPRAISAL OF INFRASTRUCTURE PROJECTS:

a) While appraising infrastructure projects, in addition to assessing industry
scenario, experience, past performance of the promoters, it will be ensured
that the projects financed by the Bank have income generation capacity
sufficient to repay the loan together with interest. It will also be ensured that
project financed is run on commercial lines involving commercial
considerations such as identifiable activity, cash flow considerations etc.
b) It will also be ensured that there is no liquidity mis-match because of
financing to such projects. Identification of various project risks, evaluation
of risk mitigation through appraisal of project contracts and evaluation of
credit worthiness of the contracting entities and their ability to fulfill
contractual obligations will be an· integral part of appraisal exercise.
c) While. appraising infrastructure projects, longer repayment and longer
holiday period will be considered. Special repayment mechanisms like
Escrow and Trust and Retention a/c and reserves may be insisted. Take out
financing will be considered depending .on liquidity position.
Implementation and follow up of Industrial projects involving term loans and
Deferred Payment Guarantees (DPGs) with limits of Rs 2 crores and above
from the Bank are to be monitored through a progress report.
d) The desirable Debt Equity Ratio (TOL/TNW) will generally be in the ratio of
3.5-4: 1and relaxation can be given on case-to-case basis. Likewise, while
the desirable and ideal DSCR ratio would be above 2:1 , an average DSCR
of 2.0 with a minimum of 1.50 in any year can be accepted. Deviations if
any have to be justified in the appraisal note.
13.7 FINANCING PROMOTER'S EQUITY:

The promoter's contribution towards the equity capital of a company
should come from their own resources and the Bank will not normally grant
advances to take up shares of other companies. In view of the importance
attached to the infrastructure sector, under 'certain circumstances,
financing the acquisition of the promoter's shares in an existing company,
which is engaged in implementing or operating an infrastructure project in
India will be considered subject to the following conditions:
i. The Bank finance would be only for acquisition of shares of existing
companies providing infrastructure facilities as defined by RBI from time
to time. Further, acquisition of such shares should be in respect of
companies where the existing foreign promoters (and/ or domestic joint
promoters) voluntarily propose to ·disinvest their majority shares in
compliance with SEBI guidelines, where applicable.
ii. The companies to which loans are extended should, inter alia, have a
satisfactory net worth, as per sanction terms.
2 B MAR 1019
iii. The company financed and the promoters/ directors of such companies
should not be a defaulter to banks/ Fls.
iv. In order to ensure that the borrower has a substantial stake in the
infrastructure company, Bank finance will be restricted to 50% of the
finance required for acquiring the promoter's stake in the company being
acquired.
v. Finance extended will be against the security of the assets of the
borrowing company or the assets of the company acquired and not
against the shares of that company or the company being acquired. The
shares of the borrower company I company being acquired may be
accepted as additional security and not as primary security. The security
charged to the Bank should be marketable.
vi. Bank will ensure maintenance of stipulated margins at all times.
vii. The tenor of the loans will not be longer than seven years However, the
Board can make an exception in specific cases, where necessary, for
financial viability of the project.
viii. This financing would be subject to compliance with the statutory
requirements under Section 19(2) of the Banking Regulation Act, 1949.
ix. Such financing for acquisition of equity shares by promoters will be
treated as capital market exposure and be restricted within the regulatory
ceiling fixed to capital market exposure.
x. The proposal for bank finance should have the approval of the Board.
13.8. APPRAISAL OF PROPOSALS RELATING TO INFORMATION TECHNOLOGY:

a) While assessing working capital limits for borrowers engaged in
Information Technology, limits up toRs 2 crores (For working capital limits
up to Rs 7.5 crore for Micro & Small Enterprises, it is to be assessed as per
method given in point 13.3-c of this LPD) may be assessed on the basis of
20% of projected turnover or at the option of the borrower, the limits can
be considered as per monthly cash budget. For working capital facilities
above Rs 2 crores in respect of Non-MSE borrowers and for credit limits of
above Rs 7.5 crore to MSE borrowers, the assessment is to be made
uniformly as per cash budget method and credit would be made
available on the basis of deficits.
b) As regards IT projects and other projects, where financing of intangible
assets is involved, Bank will insist on production of actual cash flow
statements for the past performance if any, for tlie units already in
existence.
13.8.1 Screening Committee:

Proposals for financing development of software shall be cleared by
Screening Committee in Central Office. The screening committee shall
comprise of GM/DGM (lTD), GM/DGM(TBD), GM/DGM(RMD) and
GM/DGM(MSME). While lTD and TBD will give inputs regarding the technical
aspects of the proposal, MSME shall give the inputs related to the financial
aspect and RMD shall study the overall risk of the proposal. The quorum of
the committee shall be 3 and presence of GM(ITD) or GM(TBD) is
compulsory. After clearance such proposals will be sanctioned by the
respective sanctioning authorities. The proposals once cleared by
Screening Committee, need not be referred again at the time of renewal,
if the enhancement does not exceed 50% of the limits and if there is no
change in the activity of the borrower~
Financing other activities of IT Units and proposals of ITES shall be appraised

by the respective sanctioning authority within their per borrower limits for
which clearance of Screening Committee is not required.
13.9. TOBACCO INDUSTRY:

In respect of advances to tobacco industry, in view of peculiar nature of
trading thereof, the Bank will continue with the present system of
procurement method based on indication letters/ export orders received
by the clients.
13.10 SUGAR INDUSTRY:

a) Sugar is working capital intensive· industry. Sugar is mainly produced
between November and May, but is sold throughout the year. Cash credit
limits for working capital purpose shall be fixed on the basis of anticipated
valuation, realistic peak level stocks likely to be reached by a factory during
the relevant crushing season and valued on the basis of levy price fixed by
Government of India for levy sugar and at average price realized in the
preceding three months (moving average) or the current market price
whichever is lower, for free sale sugar (including buffer stocks).
b) Guidelines on margin for com.modities under the provisions of Selective
Credit Control shall be complied with
2 8 MAR 1019
Minimum
Commodity Margin
(a) Buffer stocks of sugar ·Q%
(b) Unreleased stocks of sugar with Sugar

. Mills representing - a) levy sugar 10%
b) free sale sug_ar 25%
c) For prescribing lowe~ margin for cash credit against free sale sugar, powers
have been delegated to various layers of authorities.
d) The company's requirements of soft loan from Sugar development fund for
on lending to cane growers in the command area, Basal Dose loan to cane
growers (by way of' advance payment) and HoNest and Transportation
(H&T) loan to contractors (generally towards freight charges) shall also be
taken into account while assessing the we requirement.
e) Wherever consortium arrangement is proposed, the requirement of the
company by way of Basal Dose loan and HaNest and Transportation (H&TJ
loan shall be shared among the consortium members ..
Financing soft loan for onward lending to cane growers/hoNest and
transport loan to contractors shall be made to well established companies
since such loans are. generally unsecured and are given against the
company's undertaking.
13.11 CONSTRUCTION .INDUSTRY:

.
In case of construction industries, the extant RBI guidelines based on
Accounting Standard (AS.7) issued by Institute of Chartered Accountants
of India (ICAIJ will be followed to arrive at the permissible bank finance for
borrowers with fund based working capital limits beyond Rs 2 crores.
13.12 DISCOUNTING OF BILLS UNDER LC:

Limits for Bill purchase/discounting facility will be fixed keeping in mind the
sales turnover of the last three years for the existing units and the expected·
turn over (which is realistic of achievement) for the next three years for thE?
new units. Discounting of Bills under LC after acceptance by LC opening
bank can be extended over and above per borrower limit by sanctioning
authorities to the extent of two times of the discretionary powers.
13.13 COLLATERALS:
General:
a) Repayment capacity of the borrower shall be the prime consideration while
evaluating credit proposals. Collateral security and guarantee offered shalf
be considered as secondary source of repayment.
b) Assets acquired out of Bank finance shall normally be taken as primary
security for the entire exposure.
c) Bank will not reject any proposals just because no tangible security is
available if the proposal satisfy all parameters and deserve sanction.
d) Based on risk perception, the Bank will endeavor to obtain sufficient and
suitable tangible collateral securities wherever possible.
e) Second charge on fixed assets, if available, will be insisted upon for working
capital advances. Where the Bank has financed both for fixed assets and
current assets, the residual value of fixed assets will be charged as
continuing collateral security for the working capital a_dvances and vice
versa.
f) Collateral Management: Branch to update various securities/ CERSAI/
ROC/LG-LC margin/ Valuation/ Insurance details in the account master as
per guidelines33,
13.13.1 Collateral security for Agricultural Advances:
Collateral security for Agricultural Advances shall be governed by RBI guidelines

issued from time to time. However, the present stipulation of Collateral security for
Agricultural Advances is as follows.
I. All Agriculture advances up to Rs. 1.60 lacs will be granted without collateral
security and margin.
II. For short term production credit, collateral security may not be insisted up
to aggregate loan limit of Rs 3.00 lakhs for the existing- agriculture borrowers
with satisfactory track record of 2 years in our Bank.
Ill. Collateral security may not be insisted up to aggregate limit of Rs 5.00 lakhs
under Agri-transport loans for the existing agriculture borrowers of our Bank.
IV. In case of Farm credit & Agriculture Infrastructure loans where the loan limit
is above Rs 3 Lakh in Short Term Production Credit (as per II), above RsS Lakhs
in Agri-transport loans (as per Ill) and above Rsl Lakh in all other cases of
Agriculture Loans, the post credit/post development value of prime &
collateral securities should be a minimum of 200% of the limits sanctioned
2 8 MAR 1019
except poultry and aquaculture where no insurance cover of birds/pisces

(prime security) is available.
V. For Poultry and aquaculture, the collateral security cover should be
minimum 100% of the loan amount excluding the Risk Mortality Fund.
VI. For tie up for recovery loans, no collateral security should be insisted up to a
limit of Rs 3 Lakhs in short term production credit as well as for term loans
separately (both for new and existing customers). Hence the total limit
including short term production credit and term loan should not exceed Rs
6 Lakhs per borrower under the tie up arrangement.
VII. For all advances under Agriculture, authorities above scale IV can sanction
credit facilities with less than the above stipulated value of prime and
collateral security to the best of theirjudgment and risk perception with due.
justification.
VIII. For Food & Agro processing units under Ancillary services, the collateral
coverage will be as applicable to MSME advances. Similarly, the CGTMSE
coverage, rating and other industrial guidelines will be same as that of
lndustriai/MSME accounts as the food & Agro Processing units basically carry
out industrial activities only, though .classified under Agriculture as per
revised RBI guidelines. Interest Rate will be in accordance with the, Interest
Rate Circular updated every month under the head "Food & Agro
Processing Units Classified under Agriculture"
IX. However, Collateral security should be obtained for Special Agriculture
Credit Schemes, Government Sponsored Schemes or other Ancillary
services as per tile provisions of respective schemes only.
No Agriculture proposal should be rejected for want of tangible collateral
security alone. If otherwise the Bank is satisfied with regard to the viability of
the project and track record of the Farmers/promoters, such proposals may
be referred to the concerned sanctioning authorities on whom the
discretion for relaxation in security coverage is vested with.
13.13.2 Collateral security for Micro, Small and Medium Enterprises (MSME):
a) All MSE advances up to Rs. 10 lakhs will be granted without collateral security
and third party guarantee as per RBI guidelines. These advances will be
brought under CGTMSE guarantee cover, wherever possible.
b) All MSE credit up to Rs 2 crores will also be granted without any collateral
security qnd third party guarantee where CGTMSE guarantee is available.
Collateral can be taken only if CGTMSE cover is not available for the unit.
Bank will cover all eligible advances under CGTMSE. When an MSE borrower
;<~
..... "
llOIPage
prefers collateral security to CGTMSE Cover for loans above Rs 10 Lac and
up to Rs 200 lakhs, Bank will accede to the borrower's request. Such
preference of the borrower and Bank's acceptance of the collateral
security will be recorded.
c) For all Medium Enterprises (ME) advances and Micro and Small Enterprises
(MSE) advances of above Rs 200 lakhs, suitable collateral security and/or
third party guarantee may be taken based on risk perception and judgment
of sanctioning authority.
d) No MSME proposals, however, should be rejected for want of tangible
collateral security alone, if otherwise the Bank is satisfied with regard to
viability of the project and track record of the promoters.
e) In case of rejection of MSME proposals for any reason, the rejection should
be conveyed to the applicant, only with the consent of the next higher
authority.
CGTMSE Cover: The CGTMSE Guarantee Cover is applicable to MSE units (Micro &
. Small Enterprises as per MSMED Act, 2006) with loan amount up to Rs. 2.00 Crores
(both Fund/ Non-Fund based). Guarantee cover is enhanced from Rs. 1.00 Crore
to Rs. 2.00 Crores., w.e.f. 01.01.2017 and is applicable to proposals sanctioned/
enhanced on or after··o1.01.2017 under Manufacturing and Services activities
(Excluding Educational/ Training Institutions and SHGs).
Annual Guarantee Fee (AGF} would now be charged on the outstanding loan
amount instead of guaranteed amount for credit facilities sanctioned/ renewed
to MSEs on or after 01.04.201825.
The extent of guarantee coverage is increased from 50% to 75% for credit facilities
of Rs. 50.00 Lacs and above with an increase in the AGF on the outstanding
amount on or after 01 .04.201826.
MSE Retail Trade (Micro and Small Enterprises) has been included as an eligible
activity under Credit Guarantee Scheme of CGTMSE to fresh credit facilities
sanctioned by MUs on or after 01.04.201.8. Exposure limit for credit facility of retail
trade segment will be from Rs. 10.00 Lakhs to Rs. 100.00 Lakhs per MSE borrower.
Extent of guarantee coverage to such credit facility would be 50% irrespective of
the category of the borrower27.
CGTMSE has now introduced a new "Hybrid Security" product, .allowing
guarantee cover for the portion of credit facility not covered by collateral security.
In the partial collateral security model, the MUs will be allowed to obtain collateral
security for a· part of the credit facility, whereas the remaining part of the credit
facility, up to a maximum of Rs. 200.00 Lacs, can be covered under Credit
Guarantee Scheme of CGTMSE. CGTMSE will however, have pari-passu charge on
the primary security as well as on the collateral security provided by the borrower
for the credit facility2s.
Initiation of legal proceeding as a pre-condition for invoking of guarantees is

waived in respect of those credit facilities covered under CGS where the
aggregate outstanding amount considered eligible for claim settlement by
CGTMSE does not exceed Rs. 50000.00 per claim29.
The timeline for lodgment of claim has been increased from 2 years to 3 years from
NPA date or expiry of lock in period whichever is later, keeping all the other criteria
same. It will be applicable for cases which have turned NPA on or after the date
of issue of the circular by CGTMSE30.
Udyog AadhaarNumber (UAN) is now mandatory for guarantee coverageJl.
Guidelines to be followed for refund of annual fee as per CGTMSE notificationJ2.
Eligible retail trade advances up toRs. 10.00 Lacs sanctioned under MUDRA should
be covered under Credit Guarantee Fund for Micro Units (CGFMU).
To facilitate collateral free and third party guarantee free loans under Stand Up
India Scheme, the National Credit Guarantee Trustee Company(NCGTC) has
come up with Credit Guarantee Scheme called 'Credit Guarantee Scheme for
Stand Up lndia(CGSSI) '. All loans above Rs. 10.00 Lakhs & up to Rs. 100.00 L9khs
sanctioned under Stand Up India scheme sanctioned without any collateral
security and I or third party guarantees should be covered under CGSSI.
Detailed operational guidelines for CGFMU and CGSSI are in place.
13.13.3 Collateral security for schematic lending & Special Credit Schemes:
Collateral security should be obtained forSpecial Credit Scheme as per provisions
of the respective schemes. Status quo will continue for special schemes where
collateral security has been waived as per scheme.
13.13.4 COLLATERAL SECURITY FOR LARGE INDUSTRIES/TRADE CREDIT ADVANCES:

a} Branch Managers up to the level of Scale IV while exercising their
discretionary powers should stipulate collateral securities to a minimum
extent of 50% of the advances sanctioned for large industries (Other than
residual current assets and machinery) and for trading sector the value of
collateral securities should be a minimum of 60% of the limits sanctioned.
b) For all advances (i.e. U, Trade etc.) authorities above scale IV can sanction
credit facilities with less than 50%/60% (as the case may be) of collateral
security (other than residual current assets and machinery). Such sanctions
should be supported by sound reasoning:
c) While the securities that are easily marketable and less volatile can be
taken as collateral security, agricultural land property shall not be taken as
collateral security while extending industrial & trading advances.
d) Forced sale value of the immovable property should be taken as the value
of the property for appraisal purposes.
13.14 GUARANTEES:
a} In addition to the securities - both prime and collateral - the Bank will
continue to insist for personal guarantees of partners/directors. In the case
of advances to Private Ltd Companies- personal guarantee of all promoter
directors will be insisted upon.
b) In the case of advances to Public Limited Companies, personal guarantee
of all the directors except Institutional Director/Government Director /Bank
Nominee and or Professionals/Employees serving as directors will generally
be insisted upon.
c) In case the guarantee of promoter directors of the Private· Ltd. Company
and guarantee of directors of Public Ltd Co. mentioned above are not
forthcoming, powers are delegated to select authorities for waiver on a
case to case basis.
d) In the case of sick units, which are under rehabilitation where the
performance is not satisfactory, the Bank would endeavour to get the shares
of the company held by the promoter directors pledged to the Bank,
subject to the provisions of Section 19(2} of the Banking Regulation Act,
1949.
2 8 MAR 2019
13.15 ALLOCATION OF SUB-LIMITS TO OTHER BRANCHES:

With the convenience of operating the accounts anywhere under CBS
package, allocating sub limits at other branches shdll be discouraged.
Wherever sub-limits ore allocated to other brdnches, the parent bmnches
shall ddvise the purpose for allocating the limit besides the permissible debits
and shall monitor the operations through Continuous Surveillance Statement
received from the branch maintaining the sublimit. Further, the parent branch
shall enter the net limit in the system (after excluding the sublimit) instead of
reducing the drawing power.
13.16 ACCEPTING NON-LIFE POLICIES ISSUED BY PRIVATE SECTOR INSURANCE

COMPANIES LICENSED BY IRDA:
Policies issued by Private Sector Insurance Companies licensed by IRDA like
Universal Sompo General Insurance Co. Ltd .. Reliance General Insurance Co.
Ltd., IFFCO Tokyo General Insurance. Co. Ltd., ICICI Lombard General
Insurance Co. Ltd., Chola Mandalam General Insurance Co. Ltd. and HDFC
Chubb General Insurance Co. Ltd. etc., can be accepted covering securities
hypothecated/pledged/ mortgaged to the Bank by borrowers I guarantors
for securing the advances granted.
------000--·--·
Chapter-14
TERMS OF FINANCE
14.1 PRICING:
In terms of the guidance note on Credit Risk Management issued by Reserve Bank
of India, all borrowal accounts are to be internally rated for an effective credit risk
management and the advances are accordingly priced which is dealt in the
Credit Risk Management Policy.·
14.1.1. Rating of Accounts

Guidelines34 for Internal Rating of Borrowal Accounts to be followed as advised
from time to time.
Concept of Dynamic rating to be followed as per extant guidelines35,
14.1.2. External Rating for Borrowal accounts:

a) As per the Basel Ill Guidelines issued by RBI, the risk weights for few segments
are based on External Rating. The External Rating will be applicable only to
Corporates, Public Sector Entities, HFCS, NBFC- AFC & IFC Accounts. To be
eligible for risk weighting purposes, the rating should be in force and
confirmed from the monthly bulletin of the concerned rating agency. The
rating ogency should have reviewed the rating at least once during the
previous 15 months. As per present guidelines from RBI, unrated exposures
having aggregate credit limit of more than Rs 200 Crores form the Banking
system will attract 150% risk weights, bank shall restrict taking such exposures.
b) Bank shall request the existing borrowal accounts having aggregate

exposure of more than Rs 100.00 Cr to get themselves "externally rated".
14.1.3. Finer Interest rates:

Discretion to consider finer interest rates in respect of borrowal accounts for
business considerations are delegated .to ZLCC and above for advances
linked to BPLR I Base Rate I MCLR. However, interest rates linked to Base Rate
I MCLR shall be subject to minimum of Base Rate I MCLR (excluding cases
permitted by RBI).
Following are the Parameters for considering concessions in Interest Rate/

Commission/ Charges and LC/LG Margin:
For existing customers:

i. Return on capital
ii. Collateral Coverage
iii. Return on Assets. (From Cost Benefit Analysis)
2 8 MAR 2019
iv. Payment track record of the borrower.

v. Turnover in the account.
vi. Average Limit utilization.
vii. Adhoc/Excess taken over last 12 months.
viii. Number of LC devolved/LG invoked over last 12 months.
ix. Length of relationship including group relationship.
x. Salary/Business Account/CASA
xi. Other Para Banking
xii. Consistency in Financial Statements/Accounting Quality.
xiii. Financial Covenants
xiv. Compliance of Terms and Conditions.
The first two parameters bear 20% weightage each and the rest parameters bears
5%weightage each.
For New Borrowers:
a) Return on Capital (Weightage 30%)

b) Return on Assets (Weightage 5%)
c) Collateral Coverage (Weightage 30%)
d) Manufacturing Unit (Weightage 15%)
e) Benchmark Ratio- Current Ratio (Weightage 10%)
f) Benchmark Ratio- TOL/TNW (Weightage 10%)
Detailed Operational Guldellnes36 on above parameters are in place.
14.1.4. Additional Interest rate:

The Bank will be charging additional interest in the following cases from the
borrowers:
a) The Bank will be charging additional interest as per the interest rate policy37 of
the bank:
b) Additional interest of 2% shall be charged in case of accounts where SRRP has
been done on account of non-submission of information in time for regular
review I renewal of limits.
c) Wherever adhoc facilities are allowed additional interest of 1% over and
above the rate charged for the respective credit facility shall be collected.
14.1.5 New Scoring Model for MSME:

New Scoring .Model for MSME is designed to assess and filter the entry level MSME
applicants. (Credit Limits from Rs. 2 Lacs and above up to Rs. 200 Lacs) The
1161Page
applicant is eligible for bank finance, provided the marks scored by him/her are
60% and above. Before processing the new MSME proposals, (loan amount of Rs.
2 Lacs and above up toRs. 200 Lacs), they must be. rated under the New Scoring .
Model, to arrive at a decision whether to consider the proposal or not. In addition
to the above, Branches/Regions to continue to do rating under CRRM/RAM rating
as applicable for the proposals qualified under the New Scoring Model.
14.2 MARGIN:
a). Bank recognizes margin as the borrower's share in the assets or security and
therefore the Bank will endeavour to prescribe a suitable margin in most
cases of lending by taking into account various ~actors
b) The margin norms stipulated in the table below does not cover the following
advances. These advances are covered in the respective schemes/policy
elaborately.
o Loan against Deposits.
o Priority Credit.
o MSE advances.
o Special Credit Schemes.
c) Loan against NSC can be sanctioned by respective sanctioning authority
by keeping 20% margin on Face Value/ Accrued Interest.
d) The margin stipulated below is minimum margin only and subject to RBI
guidelines.
e) . Sanctioning authorities can prescribe _higher marg!n depending upon the
market conditions, nature of industry, internal & external rating and security
coverage etc.
Minimum margin to be
Sl. Type of advances
stipulated
Generally for all advances (Term loan 25% (Desired level)
1
and Cash Credit)
2 CAPITAL MARKET EXPOSURE .
a. Advances against shares EIJ% (RBI guidelines)
b. Advances against G-Sec/Treasury Bills ?.fffo
50%0ut of which
Cash margin not less than -
Loans to Stock brokers & Market
c. Makers 25%Cash/near cash securities
like NSC, LIC- 25%
{RBI.guidelines)
Loans to Stock brokers & Market
d. Makers - against G-Sec/Treasury Bills 20% _.,
1 8 MAR 7.019
REAL ESTATE
3 Housing & CRE Projects(other than
individual housing loans)
a. Cost of land (for public agencies only) 40%
b. Cost of co'nstruction or amenities in 30%
case of layout etc.
50% of the value of the
4 Misc. Cash Credit (MCC)
property as loan
5, Book Debts (age up to 120 days) 25%
6 lnstafund 10%
)
7 Non Fund Based Limits
a LCDP Cash/Deposit -10%.

LCDA
b LG Performance Cash/Deposit - 10%
c LG Financial Cash/Deposit - 25%
14.2.1 Discretion for prescribing lower margin:

Bank may, at its discretion prescribe lower margin on a case to case basis based
on merits. The discretion for prescribing lower margin is vested with various layers
of authorities' subject to compliance of certain parameters as described in
CSSD, C.O. circular ADV/279/2018-19 dated 26.09.2018.
14.3 OTHER CHARGES/FEES:

14.3.1 Processing Charges:
Bank shall continue to collect processing fees according to the schedule
provided from time to time.
14.3.2 Upfront fee for Term Loans:

For Term Loans (for standalone Term Loan as well as Term Loan sanctioned with
other facilities) upfront fee shall be collected at the time of initial sanction as per,
schedule fixed from time to time.
14.3.3 Charges for Modification of sanction & Revalidation of sanction:

Bank shall collect processing fee on modification of certain terms of sanction
already accepted by the borrower and also charges on revalidation of sanction
expired I about to expire as per the schedule fixed from time to time.
14.3.4 Commitment Charges:
a) Commitment charges shall be levied for all the working capital Fund Based,
Non Fund Based limits and Term loan of Rs 50 lakhs and above from our Bank.
b) Such levy shall be on the unutilized portion of the working capital FB and NFB
limits subject to tolerance level of 20% of each limit.
c) With regard to Term Loans, wherever the drawal is not made as per the draw
down schedule by the borrowers, commitment charges shall be levied on
the undrawn amount, if the undrawn amount is more than 20% of the amount
committed for drawal at each stage.
d) Charges are recovered as per utilization level of the limit.
14.3.5 Pre-payment Charges:

a) Pre-payment charges on the pre-paid amount shall be levied in the case of
term loans and other loans (with exemptions of certain loans) irrespective of
amount of loan and irrespective of residual period of loan where the
prepayment period of the loan exceeds one year.
b) No prepayment penalty will be applicable on all floating rate term loans
sanctioned to Individual borrowers However, for commercial loans availed
in individual names the prepayment charges sholl be applicable if the
repayment is not out of own source.
c) In respect of term loans of other borrowers, prepayment penalty will not be
applicable even if the repayment is out of own resources.
d) Prepayment charges are also not applicable for working capital limits.
14.3.6 Mortgage Charges:

Mortgage charges shall be collected as per guidelines.
14.3.7 Consortium Fee:

Bank shall charge a management fee in respect of c:onsortium advances, where
the Bank is the leader for the various services rendered as leader. The fee will be
borne by the borrower and is in addition to the pro-rata processing charges of
member banks.
1 8 MAR 1019
14.3.8 NOC Charges:

NOC charges to be collected for issue of no-objection certificate [for take-over
of loans] other than Housing Loans and Term Loans with floating.rate of interest in
the name of individuals.
14.3.8 Waiver of charges/fees:

Ban~ may at its discretion consider waiver or allow concession in Processing
charges, Upfront fee and commitment charges, pre-payment charges, LG/LC
commission, Mortgage charges and penal interest, on a case to case basis based
on merits. The discretion is vested with various layers of authority.
In case devolvement of LCs has taken place consecutively for 2 times, all
concessions allowed shall be withdrawn and applicable charges as per the rating
and Circulars In force shall be charged for the LC limit, under report to the
sanctioning authority.
14.4 COLLATERAL SECURITY

14.4. 1 Norms on Collateral security coverage:
a) Agricultural Advances:
The Collateral Security norms for Agricultural Advances will be governed by
RBI guidelines issued from time to time.
b) Large Industries/ Trade Credit advances:
Branch Managers up to the level of Scale IV while exercising their delegated
powers should stipulate collateral securities to a minimum extent of 50% of
the advances sanctioned for large industries (Other than residual current
assets and machinery) and for trading sector the value of collateral securities
should be a minimum of 60% of the limits sanctioned. ·
For all advances (i.e. Large Industries, Trade etc.), authorities above scale IV
can sanction credit facilities with less than 50%/ 60% (as the case may be) of
collateral security (Other than residual current assets and machinery). Such
sanctions should be supported by sound reasoning.
For Manufacturing under MSME and Services under Trading we may consider
FMV for collateral security.
c) Special Credit Scheme/Other schematic advances:

Collateral security should be obtained for Special Credit Scheme as per
provisions of the respective schemes. Status quo will continue for special
schemes where collateral security has been waived as per scheme.
2 \l MAR 1019
14.4.2 Change in collateral security:

Sanctioning authority concerned may permit change in collateral security
subject to the value of the collateral being as per norms and delegated powers
of the sanctioning authority.
14.4.3 Acceptance of properties owned by third parties as Collateral Security:

Branches do not have powers to sanction loans against the collateral security of
mortgage of properties owned by third parties who are not partners /directors or
very close relatives of the borrower. In such cases, Branch should obtain prior
specific clearance from Regional Head for accepting the mortgage by third
parties unrelated to the borrower.
While accepting such properties as collateral securities, Branch.es are advised to

be extra cautious and follow the laid down procedures for verifying the
genuineness of the documents submitted by the borrowers independently
through the Bank's approved panel advocate.
A certificate should be obtained from the advocate certifying that the title to the
property being original and not duplicate or fake and that the title is clear,
marketable and free from encumbrances.
Furthermore, as a fraud prevention method, Banks may take the following

measures:
1. They may insist on opening of Bank accounts with full KYC details and
photographs by third party owners of the properties.
2. They should communicate with the owners of the property through
registered letter to confirm proof of residence. and their willingness to offer
the security as collateraL (Format will be advised by Law Department).
The guarantee of the property owners should be obtained in all cases. Wherever
the guarantee is restricted to fair market value of the property, sanction should
be obtained as per discretionary powers in force.
------000------
1 S MAR 1019
Chapter-15
CREDIT MONITORING
Bank has a well-defined system to identify accounts in Standard Assets showing

overdues more than one month which are classified as "Special Mention
Accounts". The accounts will be monitored on a monthly basis to ensure that
viable accounts are put to "Resolution" as per RBI guidelines at the earliest signs
of distress and also to ensure that accounts are properly Classified.
15.1 MONITORING SYSTEMS:

The Bank.will also continue with the existing monitoring and follow up systems as
follows:
a) E R I Statements.
b) Regular submission of Continuous Surveillance Statement (CSS).
c) Regular submission of stock statements.
d) Ensure 100% renewal/ review of borrowal accounts with credit limit of Rs 1
Lakh and above.
e) Verification of securities pledged/ mortgaged to the Bank.
f) Conducting regular inspection of borrowing units.
g) Follow the system of internal inspection of branches.
h) Taking immediate action on concurrent audit reports and RBI inspection
reports etc.
i) Conducting Stock Audit /Credit Audit.
j) Monitoring under Special Mention Account norms.
k) Monitoring of SMA-2 accounts and uploading of CRILC SMA return to RBI.
15.2 REVIEW OF LOAN SANCTIONS MADE BY EACH AUTHORITY:

Credit sanctions made by each sanctioning authority shall be placed before the
· next higher authority for review as per guidelines in force. All credit sanctions
made by ZLCC (GM) are to be reported in the following month to Credit
Monitoring Department, Central Office in CAF 1A along with office notes as per
guidelines in force. A consolidated detail of sanctions made by ZLCC (GM) shall .
be sent to CSSD during 1st week of the following month.
15.3 REVAMPING OF LOAN REVIEW MECHANISM AND CREDIT AUDIT:.

a) Loan Review Mechanism an "off-site" audit process and Credit Audit and
...on-site" audit process was introduced in our Bank in tune with the
"Guidance Note on Risk Management" by Reserve Bank of India.
b) These two systems were revamped and merged together as CALRM.
c) Further, the above CALRM Audit was renamed as CREDIT COMPLIANCE

AUDif3B.
15.4 UNIT I GODOWN INSPECTION:

a) One of the main aspects of monitoring and control is regular
inspection of godowns of the borrowers by the Branches/ Regional
Offices/Zonal Offices to ensure that the Bank's advances are sufficiently
secured by prime/collateral securities and also to ensure that the unit is
functioning well and there is aCtive movement of stocks.
b) The inspection of godown/unit should be carried out meticulously as per
terms of sanction for both fund based and non-fund based facilities.
Normally for all advances unit inspection will be conducted on monthly
basis. ·
c) In deserving cases, sanctioning authorities can take a view on the
periodicity of the inspection, depending upon the nature of the aCtivity,
and can relax periodicity of the unit inspection after duly documenting the
reasons.
d) In the case of consortium, where our Bank is leader, the periodicity of unit
visit can be fixed as per the above guidelines. In cases where our Bank is
not the leader, the Bank wiil fall in line with the leader of the consortium.
e) Revised operational guidelines39 for Godown inspection to be followed.
15.5 CALCULATION OF DRAWING POWER BASED ON THE STOCK STATEMENT/

DEBTORS STATEMENT:
a) While arriving at drawing power based on stock statement, unpaid stocks
should be excluded.
b) Working Capital Limits are sanctioned in three ways as mentioned herein
below:
i. Cash Credit against hypothecation of Stocks alone.
ii. Cash Credit against hypothecation of Book Debts.
iii. Cash Credit against hypothecation ofStocks & Book Debts.
c) The guidelines for calculation of Drawing Power based on the stock
statement are in place.
d) The Drawing Power shall be arrived at based on the stock statements and
on statements of Book Debts submitted by the borrowers as detailed below.
2 8 MAR 1019
{A) Calculation of DP for the Cash credit against hypothecation of Stocks alone:
n) 1. Value of Stocks Less Unpaid Stocks Rs

a} Trade Creditors (excluding liability under LC) Rs
{Advance payment to suppliers may be netted off
against trade creditors)
b) Liability under LC (A&E} Rs
c) Goods Purchased under Guarantee Rs
Value of Paid Stocks [1 - (a+b+cJl Rs
Less Margin stipulated in the terms of sanction Rs
Drawing Power Rs
{B) Calculation of DP for Cash Credit against hypothecation of Book Debts:
Drawing Power (DP) =Value of eligible Book Debts- (minus) Margin stipulated as
per the terms of sanction
{C) Calculation of DP for Cash Credit against hypothecation of Stocks & Book
Debts {combined}:
o} 1; Value of Stocks Less Unpaid Stocks Rs

a} Trade Creditors (excluding liability under LC) Rs
(Advance payment to suppliers may be netted off
against trade creditors)
b) Liability under LC (A&E) Rs
c) Goods Purchased under Guarantee Rs
Value of Paid Stocks [1 - (a+b+c)] Rs
Less MarQin stipulated in the terms of sanction Rs
[A] Drawing Power for Stock Rs
2. Value of eligible Book Debts Rs.
Less Margin stipulated in the terms of sanction. Rs
(B) Drawing Power for Book Debts Rs
Drawing Power for combined CC i.e. DP for Stock plus Rs
DP for Book Debts (A + Bl ..
Indian Overseas Bank LOAN POLICY.OOCUMENT 2019
e) Value of stocks/Book Debts particularly their age, should be taken into

account as per the guidelines stipulated in the Book of Instructions/ terms of
sanction.
f) In the case of consortium advances, the bank shall follow the. method of
computation of the DP followed by ·the leader of the consortium.
g) In the case of Multiple Banking, the Bank shall follow the method of
computation of DP followed by major shareholder of working capital limits.
In the absence of such information from the Bank having major share in
working capital, Bank's prevailing method of calculation of DP shall be
followed.
15.6 SUBMISSION OF QIS / CMA:

Submission of QIS forms I, II & Ill is discontinued. In all cases where working capital
limits are Rs 2 crores and above CMA data will be called for, along with audited
balance sheets.
15.7 SUBMISSION OF AUDITOR'S CERTIFICATE:

a) Whenever the borrower is advised to produce auditor's certificate by the
Bank, during the course of dealing with the borrower in respect of finance
made to them, such auditor's certificates should be obtained from the
Auditor who has originally audited and certified the books of accounts of
the concern/firm/ company.
Deviations can be allowed as under
Sanctioning authority Authority to permit deviation
UR_to RLCC ZLCC
ZLCC & HLCC (GM) HLCC (ED)
HLCC (ED), CAC & MCB CAC
b) There are legislations like The Employees Provident Funds and

Miscellaneous Provisions Act 1952 (EPFO Act) which declares priority to the
dues under those enactments over others, sometimes including those of
secured creditors The realization of such dues by respective authorities by
proceeding against the assets of the borrower companies cannot be ruled
out. This might, in turn, adversely affect the financial position of the
borrower firm or result in reduction or loss of security given to the bank, in
case the authorities choose to move against such securities.
125 I Page
2 8 MAR 1019
Hence, to ensure that the borrowing firms are making payments of their statutory
dues in time, strictly in compliance of the provisions of the relevant statutes, the
following guidelines of. RBI shall be followed.
"A certificate shall be obtained from the borrower's auditors on an annual basts
stating that all statutory dues, Including EPF dues have been paid by the
borrower". ·
No waiver for obtention of auditor's certificate is allowed at any level.

15.8 STOCK AUDIT:
Stock Audit is conducted for borrowal accounts as per the guidelines laid
down in the Policy Document for Internal Inspection/ Audit. The reasons and
circumstances under which stock audit can be waived are also enumerated
in the said policy which is approved by the Board.
15.9 REVIEW/RENEWAL OF BORROWAL ACCOUNTS:

a) Review/Renewal of borrowal accounts sanctioned will be ensured within 3
months from due date.
b) The Line of Credit for 3 years assures exporters that they will get enhanced
credit limits, if the export performance is satisfactory. The limits are to be
reviewed by stepping up or stepping down the quantum of facilities based
on performance by calling for minimum but vital requirements like,
achievement of projected export turnover, projected profitability, operations
in the account etc. Such reviews will be done by the sanctioning authority of
the limits within one year from the date of sanction/last review.
c) The Bank shall review the progress of review /renewal of borrowal accounts
on quarterly basis. All the credit limits are renewed/reviewed at least once in
a year.
d) Secured term loans/Demand Loans granted for approved purposes, against
various securities such as gold ornaments, NSC/LIC policies/ Resurgent India
Bonds/ IMDs etc. are allowed to run off and once sanctioned by the
authority, they are not subject to renewal/review.
However, if cash credit facility is sanctioned against the above security,
renewal of the limit has to be done once in a year.
e) Term loan accounts are to be reviewed periodically by the authority under
whose powers the drawing power amount falls at the time of review.
However, the review should be made at least once in a year. All Retail Term
Loans up to Rs. 25.00 Lacs are exempted from Annual Review.
..
1261 Page
f) All mortgaged property shall be physically inspected before review/renewal

of limits and encumbrance certificate to be obtained once in three years.
g) All existing and new housing loans with sanctioned limits of Rs. 25.00 Lacs and
above, including NPA accounts to be reviewed ohce in 3 years.
h) Staff Loans are exempted from Review/Renewal.
15.10 REVIEW OF STANDALONE TERM LOAN LIMITS:
a) The review of standalone term loans sanctioned by various authorities

(including MCB) shall be placed only to the concerned authority under
whose powers the drawing power falls, as on the date of review.
b) The review on standalone term loans for term loan limits of above Rs 5 lakhs
and Rs 5 lakhs & below shall be made in the respective prescribed formats;
15.11 EXTENSION OF EXPIRED LIMIT/SHORT REVIEW & RENEWAL PROPOSAL (SRRP):

a) Whenever there is delay in submitting renewal proposal due to genuine
reasons, system of short review is in place for a period of six months from
the date of expiry of the previous sanction. Such short reviews shall be put
up to the sanctioning authorities concerned and will be resorted to only
once between two regular sanctions.
b) If a sanctioning authority extends the· limit for a period of 6 months only on
a full-fledged proposal due to certain adverse features, then such review
will be treated as a renewal and not as a review.
c) If the Branch submits a complete renewal proposal before expiry of the
existing limits or before the expiry of the extended period of the limits,
branch will be in order in continuing the existing facilities till a decision is
taken by the sanctioning authority. The action of the branch concerned in
having continued the expired limits shall be deemed to have been
approved till a decision is taken by the sanctioning authority. Sanctioning
authorities shall ensure renewal of the facilities expeditiously.
15.12 REVALIDATION OF SANCTION:
Credit Sanctions (including term loans) are valid for six months from the date
of sanction. Unless availed within this period, they require revalidation by
sanctioning authority. Sanctions by MCB can be considered for revalidation

by CAC and for others by the respective authority that has sanctioned the
loan.
Revalidation of limit per se will not change the due date for next renewal.
However, if the revalidation is done with proper re-appraisal of the credit
proposal that was originally sanctioned, the due date for next renewal may
be arrived at based on such revalidation.
· 15.13 MID TERM REVIEW OF LARGE BORROWAL ACCOUNTS:

The Continuous Surveillance Statement (CSS) is to be collected every month
from Branches in respect of borrowal accounts with fund based working
capital limits of Rs 1 crore and above. This helps to monitor the account at
' '
Central Office/Zonal Office/Regional Office. The statement is thoroughly
scrutinized and adverse features noticed are communicated to Branches for
rectification.
15.14 COMPULSORY AUDIT OF BORROWAL ACCOUNTS:

a) As RBI has left to the discretion of banks to fix a suitable cut off limit with
reference to the borrowing entity's overall exposure on the banking system
in respect of compulsory audit of borrowal accounts, it has been decided
that all borrowers with credit limits of above Rs 25 lakhs from the banking
system should get themselves audited compulsorily by Chartered
Accountants.
b) For individual agricultural borrowers whose borrowings from the Bank are Rs
50 lakhs and above, the Bank should insist for submission of their Financial
St~tements. In other words, submission of financial Statements by individual -
agricultural borrower for availing agricultural advance(s) for less than Rs 50
lakhs are waived.
-
15.15 VALUATION OF SECURITIES:
a) The · recovery of the advances is directly related to the quality of the
securities in the event of enforcement. The valu.e of the security has also a
bearing in capital provisioning. Hence the bank has a policy in place for
valuation of immovable properties and plant and machineries offered as
security for the advances granted by the Bank.
Indian Overseas Bank · LOAN POLICY DOCUMENT 2019
b) The frequency of the valuation and category of advances to be valued,

etc. are spelt out in the Policy Document on Valuation of Properties.
15.16GUIDELINES FOR OPERATIONS IN NPA ACCOUNT SHOWING SIGNS OF

REVIVAL:
Due to some genuine and unforeseen circumstances which are beyond their
control, borrowers may suffer losses. This will lead to their accounts becoming
NPA In those cases. where borrowers are willing to revive the business activities,
Bank will allow operations in the NPA account, not only to
· help them to revive their business but also to reduce their dues in NPA accounts.
The guidelines to be followed are as follows:
i. The holding on operations will be a temporary affair.
ii. In order to speed up the decision making process with regard to allowing
holding on operations in NPA accounts, Branch Managers are permitted to
allow operations in NPA accounts (irrespective sanctioning authorities of
these loan accounts) under report to Regional Office and Sanctioning
Authority.
iii. Branch to discuss with the borrower in detail and ascertain the status of
their firms.
iv. Unit should be a going concern.
v. While allowing holding on operations in NPA accounts, the exposure in such
accounts will not be allowed to go above the level of ·outstanding as on
the date of allowing such holding on operations.
vi. Branch to explore the possibility of deducting a cut back of 10% from each
credit coming into the account for recovering the overdue installments I
interest in the NPA account. This will be entirely depending on the
circumstances of each case. Recovery of interest already charged and not
serviced will be considered in phases. Besides, installment payment will also
be scheduled gradually within say, next month or so. Though, in NPA
accounts, interest is not applied, branch will take into account the notional
interest to be charged and discuss with the borrower about recovery
thereof in phased manner.
vii. Within a period of three months of allowing operations, a view is to be taken
in its entirety about future course of action and the manner in which further
1 s M~R 1019
recoveries have to be effected, by way of rehabilitation/restructuring or by

filing suit I action under SARFAESI Act 2002.
viii. Such decision to allow operation should be reported to Regional Office
·and Sanctioning Authority.
15.17 QUICK MORTALITY:

The Bank will classify accounts that become NPA within a year of its sanction as
quick mortality.
15.18 REVITALI~ING DISTRESSED ASSTES- JOINT LENDERS' FORUM AND

CORRECTIVE ACTION PLAN:
RBI have announced revised frame work on resolution of stressed assets4o, in view .
of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC).
The extant instructions on resolution of stressed assets such as Framework of
Revitalizing Distressed Assets, Corporate Debt Restructuring Scheme (CDR),
Flexible Structuring of Existing Long Term Project Loans, Strategic Debt
Restructuring Scheme, (SDR), Change in Ownership outside SDR and Scheme for
Sustainable Structuring of Stressed Assets (S4A) stands withdrawn. Accordingly,
the Joint Lenders' Forum (JLF) as an institutional. mechanism for resolution of
stressed accounts also stands discontinued.
However, the revised frame work is not applicable for the following-
~ The revival and rehabilitation of MSMEs as defined under 'The Micro, Small
and Medium Enterprises Development Act, 2006 shall continue to be
guided by the instructions contained in RBI circulars 41 as amended from
time to time. ·
~ Restructuring of loans. in the event of natural calamity shall continue to be
as per the directions contained in the RBI Master Directions42, as amended
from time to time.
Our Bank is having board approved separate policy on Resolution of Stressed
Assets- Revised Framework43.
Bank has signed Inter-Creditor Agreement for resolution of stressed assets with
Indian Banks' Association which is at present applicable for borrowal accounts
having aggregate exposure of more than Rs. 50.00 Crores and is a legal
document and enforceable in any court of law. With reference to any borrower,
130jPage
.Indian Overseas Bank LOAN POLICY DOCUMENT 2019
those relevant lenders whose share in the aggregate exposure to the said
borrower is at least 66% (by value), or two thirds of relevant lenders as of the
reference date have to take the decision. Resolution plan that is approved by the
Majority Lenders shall be final and binding on all the Relevant Lenders and bound
by the approved Resolution Plan. The Lead Bank shall have the right (but not the
obligation) to arrange for buy-out of the facilities of the Dissenting Lenders at a
value that is not less than 85% of the lower of Liquidation Value or Resolution
Value. Once the resolution process is commenced in terms of this Agreement for
any particular Borrower, it can be terminated if approved by the Majority Lenders
or the Resolution Plan is not approved by the Majority lenders within 180 days from
the Reference Date. The objective of the Inter-Creditor Agreement is to set out
the overall framework, in respect of accounts classified as SMA or NP A by all or
some of the relevant lenders for revival and rehabilitation of the borrowers and
effectuating the implementation of a debt resolution plan in respect of the
facilities provided by the relevant lenders with a view to optimize and preserve
the recovery.
------000---·--
1311Page
Chapter-16
REHABILITATION AND RESTRUCTURING OF BORROWAL ACCOUNTS

16.1. PROVISION AVAILABLE FOR FINANCING WEAK UNITS:
Rehabilitation efforts will be taken up at the incipient stage itself to arrest slippage
of account into substandard /doubtful/ loss category under NPA classification
and to aid up gradation of assets. While financing weak/sick units, RBI guidelines
will be kept in view. However, in respect of restructuring proposals formulated
under CDR/BIFR packages, flexibility will be allowed to accept the same even if
such proposals involve reliefs and concessions which are beyond those
envisaged by RBI.
16.2. RESTRUCTURING:
a) Need based additionalloqns will be considered by Bank while
restructuring borrowal accounts.
b) The restructuring of accounts and treatment of restructured accounts as
per RBI guidelines are followed.
c) The guidelines of RBI to restructure the corporate debt of Rs. 10 crore and
above under Consortium /Multiple Banking Arrangement under Corporate
Debt Restructuring System continue to be implemented by the Bank.
d) Discretionary powers are in place for expeditious restructuring of viable
accounts.
16.3. REHABILITATION OF SICK /WEAK INDUSTRIAL UNITS:

a) Extension of fresh credit facilities in accounts after compromise settlement
/OTS/write off under rehabilitation package will be considered on case-to-
case basis based on some /any of the following parameters:
i. When the company belongs to any group in which all the other
accounts with us are standard assets and earning profit and if the
corporate guarantee of the performing company of the group is
available.
ii. If the company is owned by State /Central Government and preferably
with the Government Guarantee for the existing and or proposed
additional limits.
iii. When the company is taken over by a new management who is
competent to run the unit profitably.
132 I Page
Indian Overseas Bank LOAN POLICY·DOCUMENT 2019
iv. When the company could enter into a new line of activity /diversify
activity which could enable the company to come out of sickness.
v. After compromise settlement, if there is sizeable positive tangible net-
worth which could improve further due to sacrifice made by the Banks
/Fis/statutory authorities.
vi. The borrower was not a willful defaulter and should not have made
external diversion of funds.
vii. Company/promoter undertakes to make good the sacrifice /write off
suffered by the Bank on account of OTS in full or part. .
b) The sdnctioning authority in such cases shall be one layer higher than the
sanctioning authority under whose discretionary power the limit falls or that
has approved the earlier OTS (whichever is higher).
c) The Bank has separate policy for rehabilitation of MSME accounts.
16.4. GRANTING OF ADVANCES TO AN ACCOUNT THAT WAS NPA OR SETTLED

UNDER OTS WITH SACRIFICE:
The guidelines enumerated in Para 16.3 shall be applicable for NPAs and OTS
settled accounts of other categories also.
16.5. GRANTING OF ADVANCES TO AN ASSOCIATE IN A GROUP WHERE ONE OF

THE ASSOCIATES IS NPA OR GRANTED OTS WITH SACRIFICE:
Fresh I enhancement of credit limits to a standard performing account in a group
can be considered even though any of their associate(s) is/are a non performing
asset, or was granted OTS with sacrifice, or a suit filed account. Suitable powers
are delegated to the authorities to consider such fresh limits or enhancement and
for 'renewal.
16.6. Relief Measures to borrowers in areas affect~d by Natural Calamity:
The relief measures to borrowers in areas affected by Natural Calamity are to be
extended as per the RBI master Circular from time to time. The latest guidelines
are as per RBI Master Direction FIDD No.FSD.BC.2/05.10.001 /2016-17 dated July 1,
2016. However, in general the following. guidelines on relief measures to
agriculture borrowers in areas affected by natural calamity are to be adhered to.
(i) Declaration of Natural Calamity:
The type of natural calamity, declaration of natural calamity, the extent of
crop loss, and assessment of the crop loss will be in accordance with the
1331Page
2 8 MAR 1019
Indian Overseas Bank LOAN POLICY DOCUMENl2019
directives of RBI from time to time for extending relief measures to the eligible
borrowers.
(ii) Relief Measures:
a) Restructuring/Rescheduling of Existing Loans:
As the repaying capacity of the people affected by natural calamities
gets severely impaired due to the damage to the economic pursuits and
loss of economic assets, relief in repayment of loans becomes necessary
in areas affected by natural calamity and hence, restructuring of the
existing loans will be done in accordance with the extant guidelines of RBI.
Other priority sector loans may also be restructured/rescheduled as per
the RBI guideline if a view is taken by SLBC/DCC depending upon the
severity of the natural calamity.
b) Sanctioning of Fresh Loans
Fresh crop loans may be granted to the affected Farmers which will be
based on the scale of finance for the particular crop and the cultivation
area, as per the extant guidelines.
The bank assistance in relation to agriculture and allied activities (poultry,
fishery, animal husbandry, etc.) would also be extended for long term
loans for a variety of purposes such as repair of existing economic assets
and/or acquisition of new assets.
Consumption loans and other priority sector loans may also be sanctioned
in line with RBI guidelines.
c) Other relief measures:
1~ Guarantee: Credit should not be denied for want of personal
guarantees.
2. Security: For restructured /rescheduled agriculture loans on account
of natural calamities no collateral security should be insisted. However,
the existing collateral security, if any should be continued as security for
such converted loans. The restructured /rescheduled loans should not
be included while considering the collateral security coverage for
fresh/additional credit.
3. Margin: Margin requirements may be waived or the grants/ subsidy
given by the concerned State Government may be considered as
margin.
4. Rate of Interest: Concession in interest rate may be extended if the
SLBC/ DCC take a view on the interest rate concession to have
uniformity in approach among banks in providing relief which can be
••• "'•'"'•"~ ~-.-··M·-·~· o !:.:·.~~~ ·- < ~·~·· _._, • .-•.-,~.--·-~<""·~-··•~'•
,:..•...}..__
1341Page
1 s M~R 1019
maximum up to 1 year MCLR of the Bank. In respect of current dues in

default, no penal interest will be charged. For converted/rescheduled
loans waiving of penal interest, already charged may be considered.
5. Other measures: All charges debited or due from the farmer's loan
account other than the normal interest may be waived on merits
considering the hardship caused to Farmers
{iii) Discretion:
The discretion for extending relief measure except fresh credit to the
borrowers in the areas affected by natural calamities vests with the next layer
of sanctioning authority. Fresh credit may be considered on merits by the
respective sanctioning authority including branches as per the discretionary
power of overall per borrower limit.
Reference Circulars:
1. RBI Circular No. RBI/FIDD/2016-17 /33-Master Direction
FIDD.CO.Pian.l /04.09.01/2016-17 dated July 7, 2016 and last updated on
01.08.2018 & 04.12.2018.
2. RBI Circular no FIDD/2016-17/37 Master Direction F IDD.MSME &
NFS.3/06.02.31 /2016-1 T July 21, 2016 on MSME Finance.
3. Ministry of. Small Scale lndustries3 vide its notification No.S.O. 1722(E) dated
October 5, 2006.
4. Lqtest RBI Circular 'Ref: RBI/201 &-16/70/DBR.No. Dir.BC.12/13.03.00/2015-16
July 1, 2015 on Exposure Norms.
5. RBI/2016-17/167 DBR.No.BP.BC.43/21.01.003/2016-17 December 01,2016 on
Large Exposure Framework.
6. RBI Circular No. RBI/2016-17 /50-DBR.BP.BC.No.8/21.01.003/2016-17 dated
August 25, 2016 on Guidelines on Enhancing Credit Supply for Large
Borrowers through Market Mechanism.
7. RBI circular 2014-15/62 DBOD.No.Dir.BC.14/13.03.00/2014-15 dated July 1,
2014 on Master Circular of Instructions Relating to Deposits held in FCNR(B)
Accounts.
8. RBI Master Circular- No. RBI/2015-16 /95/DBR.No.Dir.BC.1 0/13.03.00/2015 16
dated July 1, 2015 on Loans and Advances - Statutory and Other
Restrictions.
9. RBI circular DBOD.No.BP.BC.94/08.12.001 /2008-09 dated December 8, 2008
on 'Lending under · Consortium Arrangement I Multiple Banking
Arrangements.
10.RBI circular DBOD.BP.BC.No.62/21.04.103/2012-13 dated November 21,
2012 on Non-Performing Assets and Restructuring of Advances.
11. RBI circular No.RBI/2015-16/281 /DBR.Dir.BC.No.?0/13.03.00/2015-16 dated
January 07, 2016 on Non-Fund Based Facility to Non-constituent Borrowers
of Bank.
12. CSSD circular ADV/316/20·18-19 dated 28.12.2018 on SOP for Consortium
Lending.
13. CSSD circular ADV /338/20 18~ 19 dated 18.02.2019 on Appointing of ASM for
Large Credit Exposure.
14. RBI circular DBOD.No.BP .BC. 94/08.12.001 /2008-09 dated December 8, 2008
on 'Lending under Consortium Arrangement I Multiple Banking
Arrangements'
15. RBI circular DBOD.BP .BC.No.62/21.04.1 03/2012-13 dated· November 21,
2012 on Non-Performing Assets and Restructuring of Advances.
16. RBI Circular FIDD.CO.Pian.BC.23/04.09.01 /2015-16 dated April 7, 2016 on
Priority Sector Lending Certificates.
.... ··•·•··· """' ..... ·-· ·~··- .... "'•"""·--~--~-·--·-·-········-····· ·-· ······--· .. ..
............. -.
1361Page
17.CSSD circular ADV/ 308/ 2018-19 dated 14.12.2018 on Guidelines on Loan

System for Delivery of Bank Credit.
18. Treasury Department circulars FX/08/2015-16 dated 02.11.2015,
FX/109/2015-16 dated 07.11.2015, FX/122/2016-17 dated 09.05.2016 and
FX/47/2018-19 dated 14.01.2019 on Gold Monetization Scheme.
19. Chapter 18, Volume 2 of Book of Instructions- 2018.
20. RBI circular 2017-18/139 A.P. (DIR Series) Circular No. 20 dated 13.03.2018 on
discontinuation of LOU/LOC.
21.MSME Department circular adv/ 204/2017-18 dated 05.03.2018 on MSME.
22.RBI Master Circular No. RBI/2015 -16/36 /DBR.BP.BC.No.5/21.04.172/2015-16
dated July 1, 2015 on Master Circular - Bank Finance to Non-Banking
Financial Companies (NBFCs).
23.RBI circular 2018-19/49 FIDD.CO.Pian.BC.08/04.09.01/ 2018-19 dated
21.09.2018 on Co-origination of loans by Banks and NBFCs for lending to
priority sector.
24. RBI Circular No.RBI/2015-16/ 100- DBR.No.CID.BC.22/20.16.003/2015-16
dated July 1, 2015 on Willful Defaulters.
25. CGTMSE (Notification No. 6455/44) Circular No. 139/2017-18 dated
28.02.201 8.
26.CGTMSE (Notification No. 6456/44) Circular No. 140/2017-18 dated
28.02.2018.
28.02.2018.
28.02.20 18;
29. CGTMSE (Notification No. 6553/44) Circular No. 144/2017-18 dated
14.03.2018.
30. CGTMSE (Notification No. 6554/ 44) Circular No. 145/2017-18 dated
15.03.2018.
3l.CGTMSE (Notification No. 6572/44) Circular No. 146/2017-18 dated
21.03.2018.
22.03.2018.
33. CSSD circulars Adv /206/2017-18 dated 07.03.2018 and ADV /259/2018-19
dated 12.07.2018 on Collateral Management.
34.RMD circular MISC/370/2018-19 dated 22.06.2018 and MISC/530/ 2018-19
dated 13.03.2019 have to be followed on Internal Rating of Accounts -
RAM.
35. RMD circular no. MISC/423/2018-19 dated 20.09.2018 on Dynamic Rating.
36. CSSD circular no. ADV /279I 2018-19 dated 26.09.2018 on Parameters for
considering concessions in Interest Rate/ Commission/ Charges and LC/LG
Margin.
37. CSSD circular no. Adv/229/2018-19 dated 13.04.2018 on Interest Rate Policy
on Advances.
38.Loan Review Mechanism Department CO circular Master/ 018/ 2018-19
dated 05.05.2018.
39. CrMD Circular Adv /269/2018-19 dated 05.09.2018 on Godown Inspection. .
40.RBI circular No. DBR No. BP.BC. 101/21.04.048/2017-18, dated 12.02.20.18
on revised frame work on resolution of stressed assets.
41. RBI circular No. FIDD. MSME & NFS.BC.No. 21/06.02.31 I 2015-16, dated
17.03.2016 and DBR.No.BP.BC.18/21.04.048/2018-19 dated 01.01.2019.
42. RBI circular no. FIDD.CO. FSD.BC.No. 8/ 05.10.001 I 2017-18 on restructuring
of loans in event of natural calamity.
43. SAMD circular Master/024/2018-19 dated 05.11.2018 on Resolution of
Stressed Assets.
·-----000-···-·
1381 Page
ANNEXURE· 1
CHECK LIST FOR ADVANCES
(INCLUDING TAKE OVER FROM OTHER BANKS}
For the convenience of branches, a Standard Operating Procedure (SOP) has

been prepared to ensure the quality of loan processing: It covers the various
stages from sourcing to disbursement.
Source Generation
•:• Generate own leads, Leads given by Controlling Office, Customers, others
sources etc.,
•:• Ideally those accounts/Units which are in commercial operations for the last
two years (one year in case of Infra projects). No major Greenfield I brown
field projects, which are in implementation stage, should be targeted. The
unit should have been earning profits for at least two preceding years (For
Infra, it is l year from Cod). This is applicable only for take over loans.
Market Reputation
•:• Due diligence of the market reports, standing of borrower entity by

enquiring related persons.
•:• Customers with adequate experience/background are to be enquired.
Customer Contact (Phone)
•:• Initiate a contact over phone to have meeting with Promoters, Directors,
Partners, Proprietors, etc.,
Customer Meeting
•:• Meet the customer on the date of appointment.
•:• Explain the sanction process.
•:• Give a check list of documents to be submitted by the customer at each
stage of processing the proposal. .-
•:• Make a presentation on Bank's products, seNices offered by the Bank to suit
customers' needs.
STEP 1: Documents to be obtained by the Branch from Customer
Application Form
•:• Obtain Application form/request letter from Customer, if not taken already.
Indian Overseas Bank 1Standard Operating Procedure

KYC Documents I Due diligence
•!• Obtain KYC documents like certified· copies of PAN, Passport, Voter ID,
Aadhar etc. of all Partners, Promoters, Directors, and Guarantors.
•!• Certified copy of Residential proof (i.e. Passport, Voter ID, Telephone bill,
Electricity bill etc.,) of all Partners, Directors, and Guarantors.
•!• Full Address of the Firm/Company's office, Factory, Plant, Project sites.
•!• Full Partnership Firms; obtain certified true copy of partnership deed and
Registration certificate of the Firm.
•!• For companies, certified copy of MOA/ AOA/Certificate of incorporation.
•!• Contact details of Promoters, Top management, Other Key persons of the
firm/ company, with details of Phon~ no, Fax, Mobile Nos.
•!• Latest list of Directors with their role/Capacity, certified by the Company
secretary.
Present Banking arrangements
•!• Obtain present banking arrangements with account details, Details of limits
enjoyed if any, Sanction letters if any, Present bank details, Contact no. of
present bank Manager, Statement of account for last 12 months of the unit,
of all facilities, from existing bankers to determine conduct of the account.
Securities, Sale deed copies
•!• Take details of securities offered.

•!• For immovable properties, take Sale deed copies, Last EC for last 13 years.
•!• A confirmation/assurance from the unit that the securities made/will be
made available to other banks will be made available to our bank also and
that they will abide by our bank's take over norms.
(Only for take over accounts)
Other aspects:
•!• Obtain external rating letter, if any, from CRISIL/CARE/CRA/Fitch/SMERA.

•!• Obtain latest sanction letters of other banks to know the terms/conditions,
Details of Prime & Collateral security given. (For consortium/MBA/take over
accounts).
The applicant should be advised that the application will be processed further,
and If found prim facie In line with the bank's loan policy/guidelines /norms, a·
decision will be communicated to Applicant verbally.
Indian Overseas Bank I Standard Operating Procedure

Activities to be done· by branch:
Scrutiny of the application
•!• Scrutiny of the application with all details, enter in Loan Application register
and Disposal register, Allot Reference number and enter the same on
Application.
Verification of KYC documents & Due diligence
•:• Verify the KYC documents of all entities (PAN, Passport, Aadhar of
Promoters/Guarantors, documents for the borrower entity and other
documents submitted) with originals.
•:• Cross Check their genuineness (for e.g. PAN from NSE site, Passport from GOI
site, CIN/DIN of company from MOC site etc.,)
•:• Verify Address, location and existence of the company/firm/unit, Promoters,
Guarantors as per the documents submitted.
•:• Cross verify the Partnership deed registration with related approval agency.
•:• For companies, cross check with MCA portal on Company name, CIN, ROC
datq, capital details, Balance sheets,
•!• Verify GST, IT, IEC Code Nos., Pollution Certificate, and other approvals/
Clearances with respective agencies and see that these are in force.
Verification with Present Bankers
•:• Cross check the account details, statements, other details given by the
customer with the banker,
•!• In case of Consortium/MBA, verify the Asset status and latest position.
Credit Information Reports (CIRs)
•!• Obtain CIRs of the Company, all the Partners, Promoters, Directors,
Guarantors, and the Group companies and verify for adverse features if any.
Verification of Statements
•!• Cross check/Verify the Bank statements of accounts with respective Bank for
genuineness.
Cross Check with rating agencies
•!• For genuineness and to know the conduct, adverse findings if any, on the
account.
Indian Overseas Bank 1 Standard Operating Procedure

Verification of Defaulters List
•!• Verify CIBIL, CIBIL willful defaulter List, CRILC, ECGC Caution list, Caution lists of
Govt Agencies, Banned list of promoters of SEBI, ROC site (for financials and
details of existing charges), RBI defaulters list, Central Fraud Registry etc.
Market reports
•!• Enquire with suppliers and customers of Borrower
•!• Prepare the CRCO reports
Verification in MCA site (For ltd Companies)
•:• Cross check data, CIN, Company name from MCA site.
•:• Verify the charges registered already.
•!• For companies, obtain ROC search report for charges registered.
On the basis of above documents, conduct a Preliminary assessment of the

proposal; take a view, whether the proposal is as per Bank's Loan Policy
guidelines/norms/other guidelines and circular instructions issued from time to
time. If found acceptable, move to STEP .:.. 2, otherw'ise advise suitably the
customer and concerned authorities orally on our inability to consider the
application, within 7 working days of meeting with customer.
STEP 2: BRANCH TO OBTAIN FOLLOWING DOCUMENTS FROM CUSTOMER
Profile of the Unit
•:• Brief write up on management, key persons, industry, Present banking

arrangements, etc.
Flnanclals
•!• Full set of Audited financials for the last 3 years, Provisional balance sheet for
current year, Orders on hand to justify the Projected Sales, CMA data (for WC)
duly signed by the promoters I directors, partners, proprietor, etc., For TL,
Projected Statements for OSCR analysis.
Details of Associates/Group Companies
•:• Obtain details of associates, Group companies, their Financial and Banking
arrangements with Bank statement of accounts, copies of sanction letters of
Associates/Group Companies.
•!• Contact details of bank Branches, Manager's Name I Phone Number.
Indian Overseas Bank 1Standard Operating Procedure

Assets & Liability statements
•:• Obtain Assets& Liability statement of the Individuals, Proprietor, Partners and
guarantors as per bank's instructions.
IT returns
•!• IT returns for the last 2 years.
GST returns
•!• GST return for the last year.

Statutory approvals
•!• MSME registration, license if any under Shops & Establishment Act,
license/approval from regulatory authority, Po"ution control Certificate, GST
registration, and other relevant approvals if any,
•!• Verify that all the above certificates are valid in force.
•!• Confirmation from the customer that statutory dues are regularly paid.
Processing fees
•!• Obtain processing fees as advances as per Bank guidelines.

Capital Structure declaration
•!• Details shareholding pattern., certified by the company secretary.

Declaration from borrower
•!• A declaration from the prospective borrower about the existing banking/
borrowing arrangements, if any.
•!• Declaration on pending court cases as per RBI circular dated 23.10.1999.
•!• Whether unit is Owned or Leased and whether lease is in force.
•!• Whether any of the associate/ group company is sick or suit filed, if so details.
Rental Premises
•!• Copy of Lease arrangement(s) in force, with validity date, NOL from Property
for free access 'to bank to enter.
Indian Overseas Bank 1Standard Operating Procedure:
2 8 MAR Z019
Relevant documents, If Term loan is required.
•!• Project report, sources of promoters' contribution with supporting documents,

evidencing of investments made so far, project implementation schedule
project profitability statements for DSCR, Details of Suppliers, etc.
Activities to be done by branch:
Verification of Financials
•!• Obtain independent confirmation of audited financials from the company's

auditors.
•!•· Verify from MCA site on the genuineness of balance sheet submitted to us.
•!• Verify payment of statutory dues pending if any and see auditors report.
Verification of approvals
•!• For companies, obtain ROC search report for charges registered.
•:• Verify GST, Sales Tax Registration, IT, IEC code nos, Pollution Certificate, and
other approvals/ Clearances with respective agencies and see that these are
in force.
Verification of Credit Information Reports
•:• Obtain CIR from existing bankers as per IBA format on the borrowing entity &
its associates, if applicable.
Inspection
•:• Do inspection of the unit, manufacturing activities/ showroom, godowns,

collaterals, etc.,
·:· Make discreet enquiries with local persons to ascertain the ownership of the
property (ies). ·
•!• Prepare road map and Local map.
•!• Take photographs of the unit with Owners/ Promoters
•!• Prepare a unit Inspection report:
Pricing
•!• Negotiate the pricing, other concession, etc. with the customer.
Discreet enquiries (only for take over loans)
•!• Discreet enquiries should be made for cross checking the reasons given by
the borrower for moving the account.
Indian Overseas Bank 1 Standard Operati~

Credit rating
•:• Do the Internal Credit Risk rating/CRISIL RAM rating.

•:• Also take CRISIL industry ratings report from CRISIL RAM.
On the basis of documents received so far, CRA, interest rate, securities offered,
Bank Loan Policy, CRMD norms, etc., if the proposal is found to be acceptable
and a board agreement has been reached on pricing & other terms· & conditions
with the borrower, move to step- 3; otherwise advise the customer of .our inability.
to consider the proposal.
Step: 3 Documents to be obtained from Customer
Documents of title
•!• Obtain original title deeds/ certificate copies (in case of takeover of limits),
prior deeds, Land tax receipt, Building tax receipt, procession certificate,
Location sketch and other relevant papers for the properties.
Details of Tls/other loans with other banks/Fis
•!• If the term loan has been tied up with any Fl or other lender(s), obtain the
necessary proof.
Other documents
•!• Obtain letter of allocation of power supply, certificate of utilities available; any
other documents required to process the proposal, other clearances from
Govt Departments, etc.
Activities to be done by branch:
Valuation of Securities
•!• Obtain valuation report of the properties from Bank's Approved valuer as per
bank norms.
Legal Opinion
•:• Arrange Legal opinion of the imf'(lovable properties as per bank's extant
norms., Verify Lawyer's Certificate for genuineness of title deeds and search
report from Sub Registrar Office (as per clause 24 and 25 of Legal opinion
format), EC for the last 13 years.
-·--·----·--·-····----..·-·-------.--------..-.-..----·-·----·-.--
.. ---·---~
Indian Overseas Bank 1 Standard Operating Procedure .. . _

Inspection of the properties
•!• Prepare report in F 337, Road map and Location map of the property, Take
Photographs along with Owner.
Verification of TL/ other loan details
•!• Verify the details given, statements, Assets status from the respective bankers.
TEV study
•!• Arrange of TEV study & cost verification, in case of term loan as per the extant
instructions I requirements.
Suppliers
•!• Take a list of suppliers, and the-items to be procured

•!• Copies of the quotation and contact details of suppliers.
•!• For suppliers ·on machinery, obtain opinion report from their bankers; obtain
original copies of invoices, quotations, arrangements of after sales services
etc.
•!• Have reports from D & B/ any other accredited agency of repute· on the
suppliers.
TL requirement
•!• Assessment based on the DSCR, . Margin norms, security coverage and
Economic/ Marketing/ other viability studies.
On the basis of above docume~ts, prepare appraisal note within 10-12 days and
put up to sanctioning authority. If the Proposal is sanctioned in step - 3, then
proceed to step - 4
Step: 4: Post sanction formalities and disbursement to be done by branch:
Sanction LeHer
Advise the sanction to the unit incorporating all the terms & conditions and
obs~rvations of the sanctioning authority, if any. The sanction letter would be
handed over, in duplicate, to the customer and customer will return one signed
copy. Discuss with the customer regarding documentation formalities/
requirements, fulfilments of terms & conditions stipulated in the sanction letter and
likely time for completion of the formalities.
Indian Overseas Bank I Standard Operating Procedure-

Documentation
•:• Obtain the Accepted Sanction Letter from Borrower & Guarantors
•:• Obtain the satisfactory credit reports from existing Bankers, if not done
already.
•!• Complete the execution I obtention of documents as per sanction, Manual
of documentation, Bank guidelines.
•!• Completion of security creation/mortgage, hypothecation, lien, etc. as per
sanction.
•:• Registered memorandum of title deeds as applicable.
•:• Collection of processing charges, Mortgage charges if any,
•:• Compliance of sanction terms.
•:• Vetting from Panel Lawyer on documents executed.
•:• 1.1 Line Manager's Certificate.
Disbursement
•!• Obtain Pre-release clearance from RO/CO

•!• Do Pre- Sanction Inspection of the unit/ project implementation.
•!• Confirm on collection of processing charges, Mortgage charges and other
charges.
•!• Note to Manager for release of limits after Pre-release clearance and on
compliance of terms of sanction.
Charge Creation .
•!• Branch will be responsible for creation of all charges viz. ROC, CERSAI,
Registered memorandum with sub Registrar Office, etc. for all securitized
loans within stipulated time. The copies of the receipts/ proof of charge
creation are to be kept with documents. These activities to go
simultaneously.
•:• Insurance formalities on Prime/ collateral securities.
•!• Obtain and Scrutinise the ROC charge ID, Date of creation, Amount of
charge,
•t+ Obtain and file CERSAI Registration ID.
Illustrative check-list of documents to be obtained from the customer:
Documents to be obtained from customer

• Application Form
• KYC documents i.e., Identity/ Address proof documents, PAN, Passport,
Voter ID, Aadhar of Proprietor, Partners, Directors, Guarantors.
• Ownership documents like Certified copy of Partnership deed, Registration
Certificate, MOA, AOA, and Certificate of Incorporation.
Indian Overseas Bank 1 Standard Operating Procedure

• List and contact details of Promoters, Top Management, Key Persons, with
their role, capacity.
• Details of present Banking arrangements, Bank and account details, limits
enjoyed, sanction letter copies, Bank contact details with Manager
contact nos.
• Existing rating letters from CRISIL/CARE/ICRA/SMERA. If any.
• Brief write up of the unit, Management, Key Persons, Present banking
arrangements, Location sketch.
• ABS for the last three years, Provisional BS for Current year, Order on hand,
• CMA data for WC advance
• For TLs, Project report, Project profitability statements for DSCR, Details of
• Suppliers, copies of quotations, Contact nos. of suppliers, details/ sources of
promoters' contribution, evidence of investments made so far, project
implementation schedule.
• Details of Associates I Group companies, Brief profile, their ABS, banking
arrangements, Limits enjoyed by them, Bankers details, Contact nos, Their
Asset status.
• Asset Liability statements of promoters, Partners, Directors, Guarantors
• IT Returns of the members concerned and the unit/GST returns/Sales Tax
assessment orders Copies of all statutory approvals held, clearances from
Govt. Departments, GST registrations, MSME Registration, Pollution
Clearances, Licences and Permissions held.
• Details of Share holding pattern, certified by company secretary
• · Various Declarations from the borrower.
• Details of the security offered, copies of title deeds, ECs, Tax receipts
• Lease agreements, NOC from Landlord
• Letter of allocation of power supply, Certificates of Utilities available and
other clearances.
• A confirmation that the statutory dues are regularly paid
• If some portion of expenditure has already been incurred; obtain the
necessary proof.
• Any other documents as required by the bank.
• The above list Is only Illustrative. Branch may request additional documents,
If felt necessary, as per the Bank norms, nature of activity1 business model
of the unlt.
n Overseas Bank 1 Standard Operating Procedure

ANNEXURE -2
Rigorous Due Diligence and Appraisal Measures for project funding above Rs.
50.00 Crores.
a) Regulatory clearances/approvals for the projects.

b) Group Balance sheet to be obtained and analysed.
c) Cash flow to be ascertained.
d) RBI defaulter list to be verified.
e) CIBIL willful defaulter to be verified.
f) Credit information from CIC to be obtained. Rating agency reports to be
analysed.
g) The account i.s to be verified from CRILC database.
h) Equity Research/ Industry Analyst report to be analysed.
i) Litigation listing for the borrower by 3rd party sources to be done.
The account is to be verified from Central Fraud Registry and Information Service
Companies i.e: probe 42.
' .. '
2 8 MAR 7.019

LPD 2019 PDF

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INDIAN OVERSEAS BANK REF NO; ADV I 35512019-20

CENTRAL OFFICE DATE: 10.04.2019

CIRCULAR TO ALL BRANCHES /OTHER OFFICES

Loan Policy Document 2019 & Operational Guidelines on Lending

II. Operational Instructions:

a. RBI guidelines: Recent guidelines issued by RBI on Co-Origination of Loans

b. IBA guidelines: Based on the EASE reforms on Clean Corporate Lending

g. New Business CommiHee (NBC): Expression of Interest accorded by the NBC

i. Margin/Interest Rate/Review /Renewal:

Loan Policy Document-2019 and Operational Guidelines on Lending

Annexure: Loan Policy Document 2019 & Operational Guidelines on Lending

Loan Policy Document-2019 and Operational Guidelines on Lending

LOAN POLICY DOCUMENT

Credit Support Services Department

LOAN POLICY DOCUMENT 2019

Cha~ter Para PARTICULARS Page No.

a) Comply with Government guidelines /RBI regulations on Capital adequacy,

1.4. GENERAL GUIDELINES ON LENDING:

2.1. PRIORITY SECTOR CREDIT:

2.2. CATEGORIES OF PRIORITY SECTOR:

2.3. TARGETS AND SUB TARGETS:

ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposures, whichever Is

2.4. WEAKER SECTIONS:

2.5. THRUST AREAS:

The Government I RBI's guidelines in respect of lending to priority sector &

2.5.1.2. Small and Marginal Farmers:

and Allied Activities, provided banks maintain disaggregated data of such

2.5.3 MSMI: FINANCE:

2.5.3.2. Manufacturing Enterprises

The Micro, Small and Medium Enterprises engaged in the manufacture or

2.5.3.3. Service Enterprises

2.5.3.4. Khadi and Village Industries Sector (KVI)

2.5.3.5. Other Finance to MSMEs ·

i. Loans to entities involved in assisting the decentralized sector in the supply

2.5.4 EXPORT CREDIT:

(* Adjusted Net Bank Credit)

2.5.5. EDUCATION; HOUSING; SOCIAL INFRASTRUCTURE; RENEWABLE ENERGY AND

Loans to individuals for educational purposes including vocational courses up to

a) Loans to individuals up to Rs. 35 lakhs in metropolitan centres (with

2.5.5.3. SOCIAL INFRASTRUCTU~E:

2.5.5.4. RENEWABLE ENERGY:

2.5.6. SPECIAL CREDIT SCHEMES:

b) Repair/renovation of existing houses,

2.5.7. OTHER THRUST AREAS:

RISK MANAGEMENT & PRUDENTIAL NORMS

3.2 PRUDENTIAL NORMS

3.3 DEFINITION OF GROUP:

Indian Overseas Bank LOAN POLICY DOCUMENT 20~ 9

g) Even after complying with the above directions, if a sanctioning authority is

3.4 EXPLANATION FOR CREDIT EXPOSURE:

3.5 EXPOSURE LIMITS:

a) Exposure limit for single/group b.orrower will be calculated based on Capital

3.6 CEILING FOR SINGLE/ GROUP BORROWER LIMIT:

3.6.1 (b) SINGLE BORROWER LIMIT: (FOR INFRASTRUCTURE PROJECTS)

Category of borrower Maximum Limit Maximum limit with

3.6.1 (c) SINGLE BORROWER LIMIT FOR OIL COMPANIES:

3.6.2 GROUP BORROWER LIMIT:

Group borrower limit Maximum Limit Maximum limit with

3.6.3 EXEMPTIONS FOR CEILING ON SINGLE/GROUP EXPOSURE LIMITS:

a) Existing/additional credit facilities (including funding of interest and

3.6.4 .EXCESS OVER PRUDENTIAL NORMS:

3.7. GUIDELINES ON ENHANCING CREDIT SUPPLY FOR LARGE BORROWERS THROUGH

3.8. PRUDENTIAL MEASURES: