Professional Documents
Culture Documents
Compilation of Opinion Reports (on the Borrower as well as on the Guarantors). Obtaining Opinion Reports from other banks / FIs in respect of new customers and Associate Concerns of the Unit. Compilation of Group Profile. Inspection of the collateral and assessment of value thereof.
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In case of proposals not considered acceptable, the CPC / SECC will advise the Branch / Unit accordingly after obtaining approval from the competent authority.
FUNCTIONAL RESPONSIBILITIES
Wherever two functionaries are assigned the functions relating to a single stage (e.g., appraisal), they will carry out all the functions relating to this stage either individually or jointly.
The senior functionary will decide the requirement in this regard.
Each of them will carry the responsibility for discharging the functions with due diligence.
FUNCTIONAL RESPONSIBILITIES
Wherever a functionary or an Officer at a Controlling Office is assigned the task of additional assessment, such functionary / Officer will carry out all the functions required for assessment, either individually or jointly with the functionaries at the Branch as required.
The functionary / Officer at the Controlling Office will decide the requirement in this regard. The additional assessment functions will not ordinarily require for each case a pre-sanction visit and / or interaction with the Appraiser / Borrower. However, if they are considered necessary, they will also be performed as part of additional assessment.
FUNCTIONAL RESPONSIBILITIES
At the appraisal stage, the Appraiser will prepare a proposal (including background papers) in full form, i.e., complete in all respects as a draft.
The Assessor will then review the proposal and if he finds that additional information / comments or modified comments are to be furnished, he will arrange with the Appraiser for such addition / modification to be incorporated in the draft proposal. An integrated final proposal will thereafter be submitted.
In cases where material changes in a proposal / report are made by the Assessor, the Appraiser may, if he so desires, place on record a copy of the draft proposal / report for a later reference.
FUNCTIONAL RESPONSIBILITIES
When an official who is to carry out additional assessment finds that the proposal received is to be re-drafted, the official will prepare a fresh proposal and submit it to the next authority. The proposal received from the Assessor will be held only as part of the record.
In respect of proposals which require sanction separately of different facilities (e.g., FB & NFB) by authorities at different levels, the highest level authority in the sanction trail will sanction all the facilities recommended in the proposal or as advised from time to time in the Scheme of Delegation of Financial Powers. The 3 stages involved in PCP will generally be handled by 3 different functionaries.
CONCURRENT BORROWING
Before sanctioning any credit limit, the Branch should ensure that the applicant is not enjoying similar or other credit facilities with other banks.
Normally, multiple borrowing / multiple facilities to the same Borrower from two or more banks should not be allowed.
If the applicant is found to be having any credit facility from any other bank or FI, detailed information should be called from the concerned bank / FI.
The applicant should submit along with the loan application a declaration regarding the existing credit arrangements.
CONCURRENT BORROWING
He should also furnish an undertaking that stocks will not be hypothecated to any other bank without the prior approval of the Bank.
Such multiple borrowings by persons, without the Banks written consent, should be viewed as financial indiscipline.
The advances will be recalled forthwith in case it was subsequently found that the Borrower had made a false statement in this regard. As far as possible, parties should be advised to restrict their borrowings to one bank only.
CONCURRENT BORROWING
Applicants seeking credit facilities of Rs. 25 lacs and over, should furnish in the loan application information about all pending litigations, which have been initiated by another financier including banks against applicants, their partners, directors, etc., for recovery of dues.
Similarly, in the loan proposals, this information should also be furnished in the appraisal submitted for sanction of credit limits of Rs. 25 lacs and above under Other Details, along with information on RBI Defaulters List / ECGC Caution List.
Non-submission of Control Returns in time should be viewed seriously. Necessary steps should be initiated to obtain the pending returns and ensure regular submission of such returns in future.
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vii. Controllers should scrutinise this register during their visits to the Branches.
viii. Each Branch will submit to its Controllers a monthly status report on pending loan applications, indicating the reasons for the delay.
Statement of pending proposals at LHO
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xii. In order to ensure that there is no delay in the disbursement of sanctioned facilities and also to avoid any need to change the collateral security after obtaining sanction, a preliminary scrutiny of the documents relating to the property should be carried out at the Branch to ensure that the title is clear.
STAGE 1
APPRAISAL
APPRAISAL
OVERVIEW
Preliminary Appraisal Detailed Appraisal Present relationship with the Bank Credit Risk Rating Opinion Reports Existing charges on assets of the Unit Structure of facilities and Terms of sanction Review of the proposal Proposal for sanction Assistance to Assessment
Compliance regarding transfer of Borrower accounts from one bank to another, if applicable
Government regulations / legislation impacting on the industry Applicants status vis--vis other units in the industry Financial status in broad terms and whether it is acceptable
Further, if the proposal is for Project Finance, Branches should additionally examine the following:
Whether project cost is prima facie acceptable
Debt / equity gearing proposed and whether acceptable Promoters ability to access capital market for D/E support
Whether critical aspects of the project Demand, CoPn, Profitability, etc., are prima facie in order
A] PRELIMINARY APPRAISAL
After undertaking the above preliminary examination of the proposal, the Branch will arrive at a decision as to whether to support the request or not.
If the Branch finds the proposal acceptable, it will call for from the applicant(s), a fully comprehensive application in the prescribed proforma, along with a copy of the proposal / project report, covering specific credit requirement of the Company and other essential data / information, which should include the following:
A] PRELIMINARY APPRAISAL
A] PRELIMINARY APPRAISAL
In respect of existing concerns, in addition to the above, particulars regarding the history of the concern, its past performance, present financial position, etc., should also be called for. This data / information should be supplemented by the following supporting statements:
Audited P & L Account and Balance Sheet for the past 3 years Details of existing borrowing arrangements, if any Credit information reports from the existing bankers on the applicant company Financial statements and borrowing relationship of Associate / Group companies
B] DETAILED APPRAISAL
After a pre-sanction inspection of the project site or factory in the case of existing units, the Branch may take up the detailed appraisal exercise using the appropriate format.
The viability of a project should be examined to ascertain that the company would have the ability to service its loan and interest obligations out of cash accruals from the business. While appraising a project or a loan proposal, nothing should be taken for granted. All the data / information should be checked and, wherever possible, counter checked through interfirm and inter-industry comparisons.
B] DETAILED APPRAISAL
Summarise the conclusions of the financial analysis carried out on the basis of the Companys Audited Financials for the last 3 years.
The other aspects to be examined and commented upon under this are the following:
The method of depreciation followed by the Company SLM, WDV Method or any other method and whether the Company has changed the method of depreciation in the past and, if so, the reason therefor Whether the Company has revalued any of its FA any time in the past and the present status of the Revaluation Reserve, if any created for the purpose Record of major defaults, if any, in repayment in the past and history of past sickness, if any
B] DETAILED APPRAISAL
The position regarding the Companys tax assessment Whether the provisions made in the Balance Sheets are adequate to take care of the Companys tax liabilities
The nature and purpose of Contingent Liabilities, together with comments thereon Pending suits by or against the Company and their financial implications
Qualified / adverse remarks, if any, made by the Statutory Auditors on the Companys accounts
Dividend policy
B] DETAILED APPRAISAL
Build-up of FA (requirement of funds for investment in FA to be critically examined with regard to production factors, improvement in quality of products, economies of scale, etc.)
Arrangements proposed for raising Debt and Equity
Capital structure (Position of Authorised, Issued / Paid-up Capital, Redeemable Preference Shares, etc.)
Debt component, i.e., Debentures, Term Loans, DPGs, Unsecured Loans / deposits, etc. It should always be borne in mind that all Unsecured Loans / Deposits raised by the Company for financing a project should always be subordinate to the Term Loans of the Bank / FIs and should be permitted to be repaid only with the prior approval of all the banks / FIs concerned. Where Central or State Sales Tax loan or developmental loan is taken as source of financing the project, furnish details of the T & C governing the loan like the rate of interest (if applicable), the manner of repayment, etc. Feasibility of arrangements to access capital market
Feasibility of the projections / estimates of sales, CoPn and profits covering the period of repayment
BEP in terms of sales value and percentage of installed capacity under a normal production year Cash flows and Fund flows Proposed amortisation schedule, if applicable Whether profitability is adequate to repayments with reference to DSCR, ROI Industry profile and prospects Critical factors of the industry and whether the assessment of these and management plans in this regard are acceptable Technical feasibility with reference to report of technical consultants, if available meet stipulated
B] DETAILED APPRAISAL INTER-FIRM COMPARISON For the purpose of inter-firm comparison and other information, where necessary, source data from Stock Exchange Directory, financial journals / publications, professional entities like CRIS-INFAC, CMIE, etc. with emphasis on the following aspects:
Market share of the units under comparison Unique features Profitability factors Financing pattern of the business
Current price
52 week high and low of the share price P/E Ratio or P/E Multiple Yield (%) Half-yearly and Yearly
Also, examine and comment on the status of approvals from other Term Lenders, market view (if anything adverse), and project implementation schedule.
Frequency of irregularity, i.e., number of times and total number of days the account was irregular during the last 12 months
Repayment of term commitments
Compliance with requirements regarding submission of Stock Statements, FFR Reports, renewal data, etc.
Stock turnover, realisation of book debts
E] OPINION REPORTS
Proposed Guarantors
F] EXISTING CHARGES ON THE ASSETS OF THE UNIT If a Company, report on search of charges with RoC.
Deviations proposed from usual norms of the Bank and the reasons therefor
J] ASSISTANCE TO ASSESSMENT
Interact with the Assessor, provide additional inputs arising from the assessment, incorporate these and required modifications in the draft proposal and generate an integrated final proposal for sanction.
STAGE 2
ASSESSMENT
Risk factors of the proposal and steps proposed to mitigate the risk
Deviations proposed from the norms of the Bank and justifications therefor
To the extent the inputs / comments are inadequate or require modification, arrange for additional inputs / modifications to be incorporated in the proposal, with any required modification to the initial recommendations by the Appraiser Arrange with the Appraiser to draw up the proposal in the final form
STAGE 3
SANCTION
Peruse the proposal to see if the report prima facie presents the proposal in a comprehensive manner as required.
If any critical information is not provided in the proposal, remit it back to the Assessor for supply of the required data / clarifications. Examine critically the following aspects of the proposed exposure in the light of the corresponding instructions in force:
Banks Lending Policy and other relevant guidelines RBI Guidelines Borrowers status in the industry Industry prospects Experience of the Bank with other units in similar industry Overall strength of the Borrower
SANCTION
Accord sanction of the proposal on the terms proposed or by stipulating modified or additional conditions / safeguards, or
Defer decision on the proposal and return it for additional data / clarifications, or Reject the proposal, if it is not acceptable, setting out the reasons therefor
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