Table of Content

Subject

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Page No 2

Chapter 1.

Advances & Management Thereof Importance of Advances and General Principles of Advances The two principal activities- Deposits & Lending Role of the bank in the economy Prudential Exposure Norms Market Demands Rising defaults Willful Defaulter Fair Practices for Lenders Liability Know Your Customer (KYC) Principles of Sound Lending Safety of the Funds: Liquidity Profitability Spread or Diversification Purpose End-use of the funds Need based funding Viability of the project The borrowers stake Policy of the Bank Viability vs Security Why security? Process of Lending Character Capital Capacity Ideal Advance Classification of Advances Unsecured & Secured Advances

1.01 1.02 1.03 1.04 1.05 1.06 1.09 1.10 2.00 2.01 2.02.1 2.03 2.04 2.05 2.06 2.06.1 2.07 2.08 2.10 3.01 3.02 4 4.02 4.03 4.04 4.05 5 5.01

2 2 3 3 3 3 4 4 5 5 5 6 7 7 7 8 8 8 9 9 10 10 10 10 10 11 11 11

Classification of Advances based on Funding Classification of Advances based on the Period of Repayment Classification based on Types of Credit Facilities & Limits Cash Credit Overdraft Clean & Secured Overdraft Secured overdraft Term Deposit Receipts Bonds Life Insurance Policy Concepts Sanctioned Limit & Drawing Limit Demand Loan Term Loan Short Term Loan Medium Term Loan Long Term Loan Classification based on the Security Characteristics of a Good Security Standardization Durability Divisibility Marketability Identification Stability of Value Types of Charges Mortgage Simple Mortgage Equitable Mortgage Charge on Movable Properties

5.02 5.03 5.04 5.04.1 5.04.2 5.04.2.1 5.04.2.2 5.04.2.3 5.04.2.4 5.04.2.5 5.04.2.6 5.05 5.06 5.06.1 5.06.2 5.06.3 5.07 5.07.1 5.07.11 5.07.12 5.07.13 5.07.14 5.07.15 5.07.16 5.08 5.08.1 5.08.1.4 5.08.1.5 5.09

12 12 12 12 13 14 14 14 15 15 16 16 17 17 17 17 17 18 18 18 18 19 19 19 20 20 21 22 22

Pledge Hypothecation Assignment Banker's Lien Set -Off

5.09.1 5.09.2 5.09.3 5.09.4 5.09.5

22 24 24 25 25

Chapter 2

General Principles Interest Rates and Methods of computing Compounding of Interest method Bank Rate Benchmark Prime Lending Rate (BPLR) Base Rate Equated Monthly Installment (EMI) Insurance Principles of Insurance Bills Discount Types of Bills Demand Bill Usance Bill Documentary Bills Documentary Bills against Acceptance Documentary Bills against Payment Clean Bill Whom to sanction Bill facility Precautions Dealing with Default Project Report

1.00 1.01 1.02 1.03 1.04 2.00 3.00 3.01 4.00 4.01 4.01.1 4.01.2 4.01.3 4.01.4 4.01.5 4.01.7 4.05 4.06 4.06 5.00

26 26 27 27 27 28 29 30 31 31 31 31 31 31 31 32 33 34 35 35

Chapter 3

Guarantee Types of Guarantees Parties to a Guarantee Advantages of Guarantee Tender Guarantee Performance Guarantee Advance Payment Guarantees Deferred Payment Guarantee Letters of Credit Financial Guarantee & Performance Guarantees Norms regarding Guarantees Secured Guarantee Unsecured Guarantee Precautions to be taken Risks involved Procedure

1.00 1.02 1.03 1.04 1.04.1 1.04.2 1.04.3 1.04.4 1.04.5 1.04.6 1.05 1.06.1 1.06.2 1.06 1.07 1.08

37 37 37 38 38 39 39 40 40 41 41 42 42 42 42 43

Model Form of Bank Guarantee Bond

44

Chapter 4

Priority Sector Agricultural Finance Agriculture (Direct Finance) Agriculture (Indirect Finance) Small Scale Industry (SSI) Micro enterprises within SSI Micro Credit State sponsored organization for SC/ST Various Loans under Priority Sector Housing Loans Weaker Sections Differential Rate of Interest Other Activities Penalties for Non-achievement of Priority Sector lending targets Processing of applications Disposal of Applications Rejection of Proposals Mode of disbursement of Loan Insurance against Fire & Other Risks Photographs of borrowers Discretionary Powers Complaints How to assess would be Borrower? Application Market Reports Operations in the account Interview of the applicant Pre-sanction visit How to Process Application for Credit How to appraise loan? Credit Appraisal Techniques Fixed Capital & Working Capital Term Loan Differed Payment Guarantee

1.01 1.02 2.00 2.02 2.04 2.05 2.06 2.06.2 2.06.3 2.06.4 2.06.5 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15

46 46 47 48 49 50 50 50 51 51 51 52 52 52 52 53 53 53 53 53 54 55 55 55 55

Chapter 5

1.01 1.02 1.02.1

Chapter 6 Chapter 7

2.00 2.01 2.02 2.03

61 64 64 64 65 65

Lease Finance Fixed Assets Loans Working Capital Funding Technical Viability Economic Viability Financial Feasibility Managerial Competence Balance Sheet Analysis Debt Equity Ratio Funded Debt : Net Worth Ratio Debt Service Coverage Ratio (DSCR) Break Even Point/ Cost Volume Profit Analysis Sensitivity Analysis Internal Rate of Return Funded Debt : Net Worth Ratio Debt Service Coverage Ratio (DSCR) Project Report for Bank Loan - Format

2.04 3.00

65 66 67 67 68 68 68 70 71 71 72 74 75 71 71 78

3.00 3.07 3.08 3.09 3.09 3.10 3.11 3.08 3.09 4.00

Chapter 8

Documentation Promissory Note Indian Contract Act (ICA) 1872 Essential Elements of a Valid Contract Classification of Contract on Basis of Legality Classification on Basis of Formation Classification basis of Performance Definition of Offer Classification of Offer Acceptance of Offer Definition of Consideration Competence to Contract Free Consent Conditions which vitiate Free Consent Revocation of an Offer Legal relation between Principal & Agent 2.00 3.00 3.04 4.00 5.00 6.00 7.00 7.1.1 8.00 9.00 10.00 11.00 12.00 13.00 14.00

79 79 81 81 83 83 84 84 85 85 86 87 87 87 88 88 91

Chapter 9

Disbursement of an Advance

Chapter 10

Asset Classification Definition of Performing Assets Definition of Non Performing Assets Out of Order & Overdue status Income Recognition Policy Reversal of income Appropriation of Recovery in NPAs Interest Application Asset Classification Substandard Asset Doubtful Asset Loss Asset Guidelines for Classification Availability of Security Accounts with Temporary Deficiency Up- gradation of NPAs Accounts regularized near about balance sheet date Assets classification to be borrower wise Loans with moratorium for payment of interest Agricultural Advances Provisioning Norms Loss Assets Doubtful Assets 1.1 1.2 2 2.1 3 4 5 6 6.1 6.2 6.3 6.4 7 7.1 7.2 7.3 7.4 7.5 7.6 8.0 8.1 8.2

94 94 94 95 95 96 97 97 97 97 98 98 98 98 98 99 99 99 100 100 101 101 101 101

Period for which the advance has remained in 8.2.1 doubtful Substandard Assets Standard Assets 8.3 9

102 103 104

Chapter 11

Various lending schemes for guidelines Advances against Term Deposit Receipts Maturity Date Closure of Loan Account Loans against Deposits of another Branch Margin 1.0 2.00 3.00 4 5

104 106 106 107 107

Interest Rate Frauds Observance of Income Recognition and Provisioning norms Limit on Credit Exposure Documentation Advances against Shares Overdraft Cash Credit limit Interest Rate Pledge of shares Loans against Life Insurance Policies Non Priority Vehicle Loans (Two Wheeler) Purpose Eligibility Norms Terms & Conditions Documents required while applying for Loan Repayment Period Security Documentation Non Priority Vehicle Loans (Four Wheeler) Eligibility Norms Terms & Conditions Documents required while applying for Loan Repayment Period Security Documentation Gold Loan Scheme Eligibility Norms Terms & Conditions Documents required while applying for Loan Repayment Period Security How to Process Application Priority Sector Transport Operator Purpose Eligibility Norms

6 7 8 9 11 2.00 2.1 2.00 3.00 3.00 5.00 5.1 5.2 5.3 5.4

107 108 108 109 109 109 110 110 111 113 115 115 115 115 116 116 116 116 117 117 118 119 120 120 120 120 120 121 121 122 122 122 122 122 122

8.00 8.1 8.9

5 5.1 5.2

5.6 5.7 6 6.1 6.2

Terms & Conditions Repayment Period Security How to Appraise Application HOME LOANS Purpose Eligibility Norms Terms & Conditions Documents required while applying for Loan Priority Sector Educational Loan Eligibility Norms Terms & Conditions Repayment Period Security Documents required while applying for Loan

3 6.4 6.5 6.7 7 7.1 7.2 7.2 7.7 8 8.2 8.3 8.6 8.7 8.9

123 123 123 123 124 124 125 125 126 127 128 128 129 129 130 132 138 141

Chapter 12 Chapter 13 Chapter 14

Recovery of Debts Credit Information Agencies Summary of Documentation