A

SUMMER TRAINING PROJECT

ON
CREDIT APPRAISAL

Submitted to MASTER SCHOOL OF MANAGEMENT, MEERUT

In the partial fulfilment of the requirement for the PGDM

Of
Post graduate diploma in business management
(2016-18)

Under the guidance of Submitted by

Mr ASHUTOSH ARORA Prashant Kumar
(Senior manager) PGDM (2016-18)
ROLL NO-PS1618029

1|Page
 ACKNOWLEDGEMENT
It has been a subject of great honour for me to have involved with the
pioneer fabrication Pvt limited, RCC developers Pvt limited and reck life
organisation Punjab national bank, for the period of two month as a summer
trainee.

I acknowledge my deep indebtness and gratitude to my Mr VINAY BHANDARI

(AGM) AND ASHUTOSH ARORA (SENIOR MANAGER), Punjab national bank, civil
line saket (Meerut). His involvement and timely guidance throughout the
project, review and feedback has made this report possible/meaningful.

I am also grateful to all other colleagues who helped me time and again during
my training period and for providing me with guidance and encouragement
throughout the project.

I would like to thank Mr Ajay Sharma, faculty guide for the project, who
encouraged and guided me from time to time during my internship.

In the end I would like to thank all Faculty of master school of management
and all staff of PNB for providing me great learning environment.

2|Page
 EXCUTIVE SUMMARY

The introduction and application of the concept of customer services entered

in a welcoming way in India only after independence. The banking system in
India has come a long way during the last two centuries. Its growth was faster
and the coverage wider since 1969. In 1969 a major position of banking sector
was ensured to the public sector. This process continued and embraced few
private banks in 1980.
The transfer of ownership of banks from the private to public was aimed at
entrusting the banks with greater responsibilities for the economic
development of India by taking banking services to the masses and taking
special care of the weaker section of the society and the priority sector of the
economy. Through the number of banks offices magnitude and the variety of
the operations have grown considerably during the period of near about three
decades, but it appears that the banking sector has entered into serious among
customers.
For overcoming this problem, banking industry should seek introspection and
adopt refined management techniques. It has been endeavour of this study to
analyse the present state of various banks keeping in view the primary data
has been collected regarding the present state of loan schemes in various
banks by using a questionnaire.

3|Page
 PREFACE

Modern organization is highly complex and dynamic system. They operate

under very turbulent social economic and political environment they are
required to reconcile several incompatible goals. Conflicting roles and
divergent interest they are also fraught with the use risk and uncertainties,
hence tactful management of such organisation to plan to execute guide,
coordination and control the performance of the people to achieve
predetermined goals. Management has to keep the organisation vibrant
moving and in equilibrium. It has to achieve goal which themselves are
changing it is therefore a problem highly complex and ticklish.

4|Page
 DECLERATION
I, Prashant Kumar , hereby declare that the dissertation on credit appraisal
at Punjab, saket Meerut assigned to me for the requirement of partial
fulfilment of master school of management (MSM), Meerut, as summer
training project for POST-GRADUATION DIPLOMA IN MANAGEMENT, 2016-
2018. It is original work done by me and all information providing in this
project is authentic to the best of my knowledge.

5|Page
 TABLE OF CONTENT
TOPIC PAGE NO
Acknowledgement 2
Executive summary 3
Preface 4
Declaration 5
Table of content 6
Bank profile 8-21
Objective of the study 22
Need of the study 23
Scope of the study 24
Limitation of the study 25
Research methodology 26
Indian banking schemes 27
Overview of loan 28-33
Sanction of bank loan 34-49
Credit appraisal 50-51
Time norms for sanction loan 52
Types of charges 53-55
Credit risk management 56-62
Case analysis 63-69
Housing finance 70-71
Education loan 72-74
Car loan 75-76
6|Page
Conclusion 77-78
Suggestion 79
Citation and reference 80

7|Page
 BANK PROFILE
PUNJAB NATIONAL BANK is an Indian multinational banking and financial
services company. It is a state-owned corporation based in New Delhi, India.
Founded in 1894, the bank has over 6,968 branches and over 9,935 ATMs
across 764 cities. It serves over 80 million customers.
Type Public sector bank

Traded as BSE:532461
NSE:PNB
CNX nifty constituent
Industry Banking, financial service

Founded 19 may 1894; 123 year ago

Founder Lala lajpat rai

Headquarter New Delhi

Key people Sunil Mehta (MD & CEO)

Product Credit card

Consumer banking
Corporate banking
Finance and insurance
Investment banking
Mortgage loan
Private banking and equity
Wealth management
Revenue 47,424.35 crore
(US$7.4 billion ) (2016)
Operating 12,216 crore (us$1.9 billion)
(2016)
Net income -3,974.39 crore (us$-620 million)(2016)

Total assets 667,390.45 crore (us$ billion )(2016)

Capital ratio 11.28% (2016)

8|Page
Total no of zonal office 78

Total no of branches More than 6,968 branches

Total no of ATMs More than 9,935 ATM,S

Number of employee 70,801 march (2016)

Punjab national bank, Indias first swadeshi bank, commenced its operation on
April 12, 1895 from Lahore, with an authorised capital of Rs 2 lac and working
capital of Rs. 20,000. The far- sighted visionaries and patriots like lala lajpat rai,
Mr EC Jessawala, babu kali prasono roy, lala Harikrishan lal and sardar dyal
Singh Majithia displayed courage in giving expression to the spirit of
nationalism by establishing the first bank purely managed by the Indians with
Indian capital.

9|Page
 BUSINESS PERFORMANCE

During the long history of over 122 years of the bank, 7 banks have merged
with PNB and it has become stronger and stronger with a network of 6888
domestic branches and 9997 ATMs as on 31st December 2016. The bank in Q3
FY17 Crossed many milestones enumerated below:
Global business Rs. 10,00,000 crore

Global Deposits Rs. 6,00,000 crore

Domestic Deposits Rs. 5,50,000 crore

CASA Deposits Rs. 2,60,000 crore

Saving Deposits Rs. 2,20,000 crore

Domestic CASA ratio 47%

The bank has recorded consistently higher CASA share to domestic deposits
which stood at 47% as on 31st Dec16 with a growth of 32.8% on YoY basis. The
saving deposits of the bank at Rs 2, 21,997 crore as on 31st dec16 grew by
37.5% on YoY basis.

On the assets side, net advances of the bank at Rs 3, 85,727 crore showed a
decline of 1.8% on yearly basis as on 31st dec16. Within the asset side, the
bank placed a special focus on small ticket advances i.e., retail, MSME and
agriculture credit. As a result of this, the share of small ticket advances to
domestic non-food credit increased from 55.0% in dec15 to 56.6% dec16.

In term of bottom line parameters, the banks operating profit increased from
Rs 2918 crore in Q3 FY16 to Rs 3155 crore in Q3 FY17 and net profit stood at
Rs. 207 crore showing an increase 306.2% in dec16 over dec15. This is was

10 | P a g e
due to robust growth in non-interest income (50.5%on YoY basis in Q3 FY17
over FY16). The banks trading profit increased from Rs 298 crore in Q3 FY16
to Rs.516 crore in Q3 FY17 and recovery in written off accounts increased
from Rs. 519 crore in Q3FY16 to Rs.937 crore in Q3 FY17.

In term of key financial ratios, the cost of deposits moved southward from
5.81% in Q3 FY16 to 5.31% in Q3 FY17. The bank has been able to maintain its
capital adequacy ratio above the regulatory requirement. The banks CRAR
stood at 11.62% which constituted tier I ratio of 8.84% and tier II ratio of 2.78%

The banks gross NPA and net NPA stood at Rs. 55,628 crore and Rs. 34,994
crore, respectively as on 31 dec16. In term of ratios, the gross NPA and net
NPA ratio stood at 13.70% and 9.09% respectively.

The bank continues to ley emphasis on improving the asset quality. Owing to
this approach, cash recovery, up gradation and the written off amount was
over Rs.6400 crore in Dec16. The provision coverage ratio increased from
51.06% in March16 to 54.96% in Dec16.

11 | P a g e
 KEY FINANCIAL RATIOS OF PNB
Mar 2017 mar 2016

Face value 2.00 2.00

Dividend per share --- ---

Operating profit per share 28.38 29.21

Net operating profit 222.16 241.52

Per share(Rs)
Net profit margin 2.80 -8.38

Return on long term fund 172.95 74.36

Return on net 3.47 -11.20

Worth (%)
Net profit/ total fund 0.19 -0.63

Loan turnover 0.11 0.12

Total income/ 8.14 8.58

Capital employed (%)
Total asset turnover ratio 0.07 0.07

Asset turnover ratio 0.07 0.08

Credit deposit ratio 70.81 75.19

Financial charges coverage ratio 1.46 1.36

Current ratio 0.03 0.03

Quick ratio 28.98 28.09

Dividend pay-out ratio ------ ------

Net profit
Dividend pay-out ratio ------- -------

12 | P a g e
Earnings per share 6.23 -20.24

Book value 179.03 180.61

ENHANCE VISIBILITY
To create a sustainable competitive advantage, the bank is focusing on
strengthening brand equity by connecting with the Gen-Next segment.
Towards this, the bank has taken the following steps:
The bank has made official debut on the social networking sites i.e.,
twitter and LinkedIn, with an aim of strengthening BRAND PNB on
social media and to engage with customers in a cost efficient manner.
Mr Virat kohli, a renowned and energetic young cricketer has been
chosen as brand ambassador of the bank because of his mass appeal to
the youth of the country.

13 | P a g e
 DIGITAL BANKING
The banks digital strategy is well delineated ad strive to meet the aspiration of
the customers for banking at a click of the mouse and banking on the palm top.
The bank has recorded fast pace of digitalization with over 2.82 lakh UPI users,
78 lakh internet banking users and 59 lakh mobile banking users as on
31.12.2016. The bank launched bucket full of innovative digital product and
service to make banking experience more pleasurable, more convenient and
more rewarding. PNB KITTY was launched in the month of dec16. This online
wallet serves as a virtual account that holds money online and can be used to
perform various activities like send or receive money through PNB KITTY,
online utility bill pavements, mobile /DTH recharge etc. without sharing
sensitive credentials of the bank account. The bank also has unified payment
interface(UPI) facilitating the customers to access their bank account opened
with different bank in a single app & transfer funds across the banks. The
advent of UPI is to support and speed up seamless remittances across the
banks as simple as sending an sms.

In the series of credit cards, the bank has recently launched contact less credit
card wave in pay. In addition to various digital products, the bank has a
network of 9997 ATMs on 31.12.2016 installed at various geographical location
in the country which not only offer most of banking facilities like cash
withdrawals , balance enquiry , statement of account, fund transfer etc. but
also provided many value added service like inter-bank funds transfer through
card to-card fund transfer, immediate payment system (imps), payment of
utility bills, request for stop payment of cheques, IBS registration, complaint
registration of non- receipt of cash through ATMs Aadhaar number registration
through ATMs, credit card bill payment, debit card loyalty registration,
payment of direct taxes etc.

14 | P a g e
 PEOPLE DEVELOPMENT
People development through up-skilling HR to align HR policy & strategy with
business strategy and goal is the main focus of bank to help improve customer
service, commitment, competencies and culture.
Further an on-boarding & mentoring program titled PNB NAVODAYA has
been introduced for newly recruited employees as well as for those recently
promoted and first time branch heads. Also, PNB Unit (e- learning app and web
based portal) has been launched for all PNB Parivar members to provide high
quality e-learning 24x7.

CSR
Corporate social responsibility (CSR) is an integral part of corporate business
strategy of the bank. The bank is promoting welfare if people living in rural and
semi urban areas as a part of its CSR activity.
The bank has a PNB VIKAS-Village adoption scheme under which the bank has
adopted 168 villages (78 in lead districts and 90 in non-lead district) in different
states. Further, PNB ladli is one such scheme where the bank is popularizing
education among the girls in rural and semi urban areas. The bank under this
scheme has distributed Rs. 84.72 lac to 3791 girls up to 31st DEC16 since the
inception of the scheme.
The bank is also running SWACHCHH VIDYALAYA campaign in which assistance
is being provided for construction of toilets in governments schools of
adopted/identified villages under PNB VIKAS.
Further, the bank also running PNB KISAN BALAK SHIKHSHA PROTSHAN
YOJANA in which education is being popularized among children of poor
agriculture borrowers of the bank.
PNB UJALA is another scheme for providing 4 solar street lights in adopted
villages. Solar lantern is given to each girl student who is already adopted
under PNB ladli scheme.

15 | P a g e
Toward women empowerment, MAHILA KAUSHAL VIKAS YOJANA is a scheme
for creating women entrepreneurship by PNB farmer welfare trust (PNBFWT)
and PNB centenary rural development trust (PNBCRDT)

AWARDS AND RECOGNITIONS

DURING FY17 the bank has won many prestigious awards from influential
domestic and overseas awarding institutions. The banks six projects won
skoch order of merit Award i.e., security operations centre, oracle real
application cluster, TAB banking, green pin and PNB Univ. the bank was also
declared runner up in education loan provided of the Year 2016 by outlook
money.
In particular, PNB regained its number one slot amongst nationalized bank with
overall rank at 175th amongst top 1000 world bank by the banker. Amongst
nationalized banks, PNB topped the chart of Indias most trusted brand trust
report 2016 launched by trust research advisory.

Best it team of the year award

At the IDBRT banking technology award for the year 2005-06

SKOTCH challenger award

For change management for the year 2005-06

Best it user in banking & financial service industry 2004

BY NASSCOM in partnership with economic times

Golden peacock award

For excellence in corporate governance 2005

16 | P a g e
Best apprenticeship/ on the job training program gold award at the 7th
annual Tata institute of social science (tiss) leap vault CLO (chief learning
officers) awards.

PNB HFL honoured on `successful completion of 25 years of service- 24th July

2014
PNB HFL awarded for excellence in talent management4th July 2014

PNB housing adjudged as winners for `brand excellence in banking finance and
insurance sector

Vigilance award for 2016-2017

PNB housing award for` excellence in financial service by dainik bhaskar at the
India pride awards 2016-2017

PNB housing once again bags the `housing finance company of the year award
at the 9th annual estate award 2016.

17 | P a g e
 CORPRATE VISSION AND MISSION

MISSION
Creating value for all its customer, investors and employees for being the first
choice for all stakeholder

VISSION
To position PNB as the `most preferred bank` for customers, the` best place to
work in ` for employees and a `benchmark of excellence` for the industry

18 | P a g e
 MERGER AND ACQUISITIONS
NUMBER ACQUISITION COMPANY LOCATION
DATE
1 1951 Bharat bank Ltd. New Delhi, India
2 1961 Universal Bank of Dalmianag
India Bhiar,India
3 1962 Indo-commercial India
Bank
4 1986 Hindustan India
commercial Bank
5 1993 New Bank of India New Delhi, India
6 2003 Nedungadi Bank Kozhikode, Kerala,
India

19 | P a g e
 PEST ANALYSIS

regulatry bodies economical trend(indian

& global)
govt policies
seasonality & weather
internationaL issue
legislation intrest & exchange rates

POLITICAL ECONOMICAL

TECHNOLOGICAL SOCIAL

competent technology lifestyle trends

development customer attitudes &
information technology opinion
global communication media views
innovative potential brand image
advertising & publicity

20 | P a g e
 SWOT ANALYSIS OF PNB

STRENGTHS weakness
wide network poor customer relation
large no of customers high mobility of staff
fast adaptabily to technology gender discremination (during loan)
brand recognition
excellent training
PNB SWOT
ANALYSIS
OPPORTUNITY
fast growing indian bank
THREAT
high grwoth in banking
large no of of market player
liberal markrt
competitive edge
micro financing
changing culture
make india digitilite

21 | P a g e
 OBJECTIVE OF THE STUDY
Identification of the problem
To study and learn the various system and procedures used by the bank
in lending to housing and MSME loan.

To identify the problem faced by the bank in attracting more customers

to use its various kinds of loan products.

To identify the problem faced by the bank at various stages of

undertaking the home loan and MSME loan.

To understand and identify difficulties in the home loan and MSME asset
management practice of the bank.

The basic objective behind joining PNB credit department was to learn
about how retail and MSME loan sanctioned.

To understand the credit rating system and the methodology applied.

The way balance sheet and other financial tools are used in deciding
whether or not to approve the loan.

The other important aspects apart from the financial techniques which
are of equal important.

To study the valuation of collateral security method followed by the

bank while lending the home loan and MSME LOAN.

22 | P a g e
 NEED OF THE STUDY
It has been felt very useful in future
To study the role of the staff and the decision making process in lending
to the MSME and home loan borrower.

To learn and comprehend thoroughly the system and procedure used in

financing the segment.

To analyse the issue relating to various financial aspects of lending.

To calculate the risk involved and how the risk and uncertainty to be
assessed and managed by the bank while lending home loan and MSME

To study the valuation of collateral security method followed by the

bank while lending home loan and MSME loan.

23 | P a g e
 SCOPE OF THE STUDY
The present study is confined to home loan and MSME loan product
offered by the domestic operation of Punjab national bank.

The study is also confined to the internal function and operational

aspects of the home loan and MSME loan process.

The data and the information could be collected here has been taken
from the recorded book maintain by the branch and from the oral
communication with branch AGM and other staff.

24 | P a g e
 LIMITATION OF THE STUDY
Some of the limitation of the project that were encountered during the study
are:
In case of interacting with the representative of a particular bank it
happen many a time that the representative cannot disclose all the data
because of certain reason like banks privacy policy etc. thus getting clear
picture about the service provided is not possible.
Due to paucity of time, only important factors have been analysed and
discussed.
This data collected from only one branch so it is so difficult to predict
about Indian banking home loan and MSME loan.
Generally the data on the website of the bank are not fully disclosed i.e.
other than the charges mentioned on the website there are many
hidden charges which increase the cost like service charge etc.
This data mostly collected from document maintain by the branch.

25 | P a g e
 RESEARCH METHODOLOGY
The methodology being used involves two basic sources of information
primary source and secondary source.

PRIMARY SOURCE OF INFORMATION

Meeting and discussion with the assistant general manager and the
other staff of the bank.
Meeting with the client.
Meeting and listening other staff.

SECONDARY SOURCE OF INFORMATION

Loan policy and internal circular of the bank.
Research papers, power point presentation and PDF files prepared by
the bank and its related officials.
Referring to information provided by CIBIL, Income tax files.

26 | P a g e
 INDIAN BANKING STRUCTURE

RBI

Scheduled bank Unscheduled bank

Commercial banks Co-operative banks

Public sectors
banks Private sector Foreign sector Regional rural banks
banks banks banks

b
SBI and associate
Co-operative banks
bank

Other nationalized
banks
State co-operative banks

Other public sector

banks

Central co-operative banks

Primary cooperative banks

27 | P a g e
 BRIEF OVERVIEW OF LOAN
Credit can be of two types fund base & non fund base
FUND BASE INCLUDE
Working capital
Term loan
NON-FUND BASE INCLUDE
Letter of credit
Bank guarantee

TERM LOAN
Term loan also referred as term finance; represent a source of debt finance
which is utilized for establishing or expanding a manufacturing unit by the
acquisition of fixed assets. These are generally repayable in more than one
year but less than 10 years. Such loans are raised for expansion, diversification
and modernization of the enterprises. The primary sources of such loan are
financial institutional and secured by term loan agreement between the
borrower and the bank.
Term loan are normally granted for period varying from 3-7 year and in
exceptional cases beyond 7 year. The exact period for which particular loan is
sanctioned depends on the circumstances of the case.
The basic different between short term facilities and term loan is that short
term facilities are granted to meet the gap in the working capital and are
intended to be paid out of the sale of the fixed assets given as security for the
loan. This makes it necessary to adopt different approach in examining the
Application of the borrowers for term credit.
FEATURES OF TERM LOAN
Following are the different features of term loans:

28 | P a g e
 1. Currency: Financial institutional give rupee term loan as well as foreign
currency term loan.
2. Security : All loan provided by financial institutional along with interest,
liquidate damages, commitment charges, expenses etc. are secured by
way of:
a) First equitable mortgage of all immovable properties of the borrower,
both present and future: and
b) Hypothecation of all movable properties of the borrower, both present
and future, subject to prior charges in favour of commercial bank for
obtaining working capital advance in the normal course of business.
3. Interest payment and principal repayment: These are define
obligation which are payable irrespective of the financial situation of the
firm.
4. Restrictive covenants: FLs impose restrictive condition on the
borrower depending upon the name the project and financial situation
of the borrower.

Procedure associated with a term loan sanction involves the following step:

submission of loan application: The borrower submits an

application form which seeks comprehensive information about the
project such as:
(a). Promoters background
(b). Particular of industrial concern
(c). Cost of project
(d). Means of financing
(e). Marketing and selling arrangement
(f). Economic consideration
Initial processing of loan application: The loan application is
reviewed to ascertain whether it is complete for processing, if it is
incomplete then it is sent back to the borrower for resubmission with all
relevant information.
Appraisal of the proposed project: The detailed appraisal of the
project covers the marketing, technical, managerial, and economic
aspects.

29 | P a g e
 Issue of letter of sanction: If the project is accepted, a financial
letter of sanction is approved of the borrower.
Acceptance of term and condition by the borrowing unit: On
receiving the letter of sanction the borrowing unit convenes its board
meeting at which the term and condition associated with the letter of
sanction are accepted and appropriate resolution is passed to the effect.
Execution of loan agreement: After receiving the letter of
acceptance from the borrower. The FI send the draft of the agreement
to the borrower to be executed by the authorised person.
Disbursement of loan: Periodically, the borrower is required to
submit the information on the physical progress of the projects, financial
status of the project, arrangement made for financing the project,
contribution made by the promoters, projected fund flow statement,
compliance with various statutory requirement and fulfilment of
disbursement condition.
Monitoring: monitoring of the project is done at the implementation.

APPRAISAL OF TERM LOAN

Appraisal of term loan for, an industrial unit is a process comprising several
steps; there are four board aspects of appraisal, namely.

Technical feasibility- To determine the suitability of the technology

selected & the adequacy of the technical investigation & design.
Economic feasibility- To ascertain the extent of profitability of the
project & its sufficiency in relation to repayment obligation pertaining to
term assistance.
Financial feasibility- To determine the accuracy of cost estimates,
suitability of the envisaged pattern of financing & general soundness of
the capital structure.
Managerial competency- To ascertain that competent men are
behind the project to ensure its successful implementation & efficient
management after commencement of commercial production.
NON-FUND BASED:-

30 | P a g e
LETTER OF CREDIT
A letter of credit (LC) is an arrangement whereby a bank (the issuing bank)
acting at the request & on the instruction of the customer or on its own behalf.
I. Is to make a payment to or to the order of a third party (the beneficiary),
or is to accept & pay bills of exchange (drafts drawn by the beneficiary),
or
II. Authorized another bank to effect such payment, or to accept & pay
such bills of exchange (drafts):or
III. Authorizes another bank to negotiate against stipulated document (s),
provided that the term & condition of the credit are complied with.

BASIC PRINCIPLE
The basic principle behind an LC is to facilitate orderly movement of trade; it is
therefore necessary that the evidence of movement of good is present. Hence
documentary. LCs is those which contain documents of title of good as part of
the LC document. Clean bills which do not have documents of title of good are
not normally established by bank.
PARTIES TO THE LC
1. Applicant the buyer who applies for opening LC
2. Beneficiary the seller who supplies goods
3. Issuing bank- the bank which opens the LC
4. Advising bank- the banks which advise the LC after confirming
authenticity.
5. Negotiating bank the bank which negotiates the documents
6. Confirming bank the bank which adds its confirmation to the LC
7. Reimbursing bank- the bank which reimburses the LC amount to
negotiate bank.
8. Second beneficiary- the additional beneficiary in case of transferable
LCs.

31 | P a g e
 PNBs LOAN POLICY
OBJECTIVE
The credit management & risk policy of the bank at the macro level is an
embodiment of the banks approach to understand, measure and manage the
credit risk and aims at ensuring sustained growth of healthy loan portfolio
while dispensing the credit and managing risk. This would entail reducing
exposures in high risk areas, emphasizing more on the promising industries/
productive sectors/segments of the economy, optimizing the return by striking
balance between the risk and the return on assets and striving towards
maintaining/ improving market share.

BASIC TENETS OF THE POLICY

All loan facilities consider only after obtaining loan application from the
borrower and compilation of confidential report on them and the
guarantor. The borrower should have the desired background, expertise
to run their business successfully.
Project for which the finance is granted should be technically feasible
and economically / commercially viable i.e. it should be able to generate
enough surplus so as to service the debts within a reasonable period of
time
Cost of the project and means of financing the same should be properly
assessed up. Both, under-financing and over financing can have an
adverse impact on the successful implementation of project.
Borrower should be financially sound, enjoy good market reputation and
must have their stake in the business i.e. they should possess adequate
liquid resource to contribute to the margin requirement.
Loan should be sanctioned by the competent sanctioning authority as
per the delegated loaning power and should be disbursed only after
execution of all the required document.
Projects financed must be closely monitored during implementation
stage to avoid time and cost overruns and thereafter fill adjustment of
the banks loan
The policy sets out minimum or benchmark lending rate, BPLR=11%

32 | P a g e
 The policy lays down norms for takeover of advance from other
banks/financial institution.
As a matter of policy the bank does not take over any non-performing
asset (NPA) from other bank.

33 | P a g e
PROCEDURE FOR SANCTION OF BANK LOAN IN
BRIEF
1. LOAN APPLICATION: the entrepreneur has to submit prescribed loan
application along with requisite documents which depends upon the
type and quantum of loan. The prescribed loan application from for
credit facilities over Rs. 2 Cr. Is PNB 1017. The application is
accompanied with credit monitoring arrangement form (CMA) or / and
other relevant document. The check list of document is enclosed
annexure A.

2. PRE SANCTION APPRAISAL: after the receipt of application, the

appraising official/branch manager should verify the authenticity of
document submitted by the party/ borrowal. The appraising officer
includes manager credit or/and manager incharge, loan section of the
concerned branch, should conduct property (ies) offered as collateral
security and also place of work/residence as part of appraisal and annex
his /her visit report with the proposal.

As per point 6(i) of circular no. 99/2011 of L&A reveal as incumbents

are advised to make use of the appropriate formats of loan application.
It should be noted that loan application should from a part of the loan
proposal being sent to the sanctioning authority.
(ii) Incumbent, while giving the certificate in the loan proposal form,
should ensure that the particulars furnished by the borrower in the loan
application form have been duly verified and discrepancies, if any ,
observed have been indicated in a separate sheet (s) attached to the
loan proposal

The circular No. 83/2009 dtd. 06.07.2009 of L&A standardised credit

appraisal format and as per annexure-I of circular No. 99/2011 dtd.
01.10.2011 of L&A Read as while submitting the appraisal note, no
column of the board format should be left blank/deleted and all pages /
annexures should be duly authenticated. It is pertinent to mention that
most of data in credit appraisal format is derived from document
submitted by the party.

34 | P a g e
 As per Cir. 33/2011 dtd. 31.03.2011 of L&A regarding confidential
reports on borrowers and co-obligants, it is reiterated as information
furnished in the loan application by the application forms the basis for
completing the confidential report. The loan application form is
accompanied by bio-data form of directors/guarantors including the
statement of asset and liabilities. It should be verified by bank officials
through documentary evidence and prudence should be resorted to
compile the CR of the borrower/guarantor.

As per circular No. 129/10 vide its Para 2 pointers 1 & 2 of L&A, it is
reiterated that w.r.t. use of middlemen/outside consultants, branches
should do independent marketing and undertake due diligence before
taking any decision on the loan proposals. It is advised that all
branches/Circle offices should suitably guard against the malpractices
adopted in the matters of proposals brought/ introduced by the
middleman outside consultants including the matter of
valuation/verification of properties/other securities.

As per L&A Circular No. 129/10 vide its Para 2 pointers 4, it is reiterated
that obtaining certificates from values/advocates/chartered
accountants, in no way dilute the responsibilities if the incumbents to
undertake due diligence of loan proposal and assessment of valuation of
the immovable properties, which should be undertaken in term of
banks guideline. Likewise in case of end use verification/utilization of
loan, promoters, contribution, valuation of IPs, projections of
profitability and viability, verification of title deed etc., branches should
not rely solely on the certificate given by the outside experts/agencies.

3. Pre sanction visit: the antecedents of borrowers/guarantors should be

verified as part of pre-sanction appraisal which, inter-alia, includes spot
verification of borrowers unit/factory/business premise/IP offered as
security in the loan account/residence as part of appraisal and annex the
copy of visit report with the proposal. The report should contain date of
visit, name of the official who visited the site, important nearby
landmarks, name of the neighbour and observation made about
approximate market value.

35 | P a g e
 4. Due diligence: As per L&A Circular No. 138/09 at Para 2 reveals that
drawing of consumer information report (CIRs) from CIBIL is mandatory
for borrowers guarantors & co-obligation (both consumer &commercial
category accounts), requiring fresh credit facilities before sanction of
facilities as well as at the time of renewal/review/enhancement.

5. Due diligence: As per L&A Circular No. 151 dated 28.09.2007 reveals
that while considering the proposal for financing a limited company,
search be got conducted from the O/o registrar of companies to
ascertain about the charges , if any, already created by the company. In
case of existing accounts of companies, such search be got conducted at
the time of renewal/enhancement so as to ensure that no charges has
been created in the intervening period by the other bank/lending
institution to the detriment of banks interest.

1. Due diligence: KYC documents submitted along with the loan application
should be duly checked and verified with the original documents and
visits to the reported addresses is a part of pre-sanction appraisal.
As per L&A Circular 99/2011, annexure-ii point 6 (ii) read as
incumbents, while giving the certificate in the loan proposal form,
should ensure that the particular furnished by the borrower in the loan
application form have been duly verified.
As per inspection and audit division annexure-1, chapter-iii, annexure-A,
Copy verified from the original will be kept on record with AOF
2. Due diligence: the branches should verify the authenticity of the
financial statement i.e. ITRs, balance sheets etc. which involve drawing
the same from the website of ROC, income tax deptt., sales tax deptt.
etc.
As per L&A circular L&A 42/09 reiterated 99/2011 reveals that the status
of the chartered accountants/firms should be ascertained from the
website of the ICAI and subsequently confirmation from the concerned
chartered accountant/firms about the genuineness of the signatures
affixed on the financial documents submitted with bank.

3. Credit risk rating (CRR): The (CRR) models provide a standard system for
assigning a CRR to all the party/borrowal on the overall credit risk

36 | P a g e
 involved. Inputs to the models are the financial, management, business
and conduct of account, industry information. The evaluation of a
borrower is done by assessment on various objective/subjective
parameters. CRR is mandatory requirement for taking decision for the
sanction/rejection of loan.
As per book of instruction in Ch.1, Para 14.2 read as other important
aspects to be considered for determining the credit rating of the
borrower are as under:
a) The basis of determining parameters shall be the latest audited
balance sheet of the borrower.

4. Confidential report (CR): no credit proposal should be

sanctioned/submitted to the higher authorities for fresh sanctions
unless confidential report (CR) has been collected and placed on record.
As per book of instruction Ch. 9, pg. 9.1, it is of paramount importance
that confidential reports on borrowers should be compiled by branches,
and pay offices with the utmost possible accuracy.
As per L&A Circular No.74/09 read as the incumbent incharge may
depute a member of the staff to assist him as credit reporter, but it
must be clearly understood that the responsibility for the compilation
and the authenticity of details given in the reports is that of the
incumbent incharge

5. Credit appraisal standard appraisal format: after the due diligence, the
loan is appraised through a standardised credit appraisal format as per
L&A Circular No. 83/2009 reveal that it is to be prepared by appraising
officers including manager incharge of loan section. No column of the
board format should be left blank/deleted and all pages /annexures
should be duly authenticated as per L&A Cir. 99/2011, annexure-1, pt.
4(vi). The genuine credit requirement of the borrower should be
properly appraised based on latest audited/unaudited (as the case may
be) financial data.

6. Permissible bank finance (PBF): for the assessment of cash credit limit
(CC), with a view to impart uniformity to the system of appraisal of
working capital(WC) requirement of the borrowers, bank should obtain
information on credit monitoring arrangement (CMA) data base forms

37 | P a g e
 except where assessment of WC is done as per simplified turnover
method. All the borrowers opting for maximum permissible bank finance
(MPBF) system have to submit information on CMA forms irrespective of
the limit. Whereas in case of simplified turnover method CMA should
not be obtained. Sanctioning authority may satisfy himself on the
projected turnover.
As per L&A Circular 83/09 at point 7A regarding appraisal note has
mentioned that financial position of the company as on close of F.Y. for
last 03 years and estimated for last year and projected for the next year,
key financials upto last qtr. And brief discussion on financial indicators
including paid up capital sales, other income, profitability, diversion of
funds, etc.

The book of instruction in Ch. 4, Para 4.2.3 has mentioned as under:-

to assess the reasonable of borrowers projections, the following
factors should be kept in view:
i) The branches can use with advantages the past data given by the
borrowers well as the data available with it. The comparison has
to be made between the past performance and the future
projections. If the future projections are markedly different from
the past trend in relation to projected rate of growth, the reasons
for the same have to be ascertained before accepting the various
projections.
As per Ch. 4, Para 4.2.3 of book of instruction read as ii) the
projections given by the borrower are normally based on certain
assumptions such as market demand, cost of raw materials, price,
availability of inputs and other environmental factors. The bank
has to assess how far these assumptions are realistic and likely to
materialise.
As per point 6 of appraisal note contains that details of group
/allied/associate firms and the facilities sanctioned to them along with
conduct of these account with our bank/other banks and comments on
adverse indicators should be obtained.

7. Term loan appraisal: the appraisal of term loan broadly involves

following analytical assessment:-

38 | P a g e
 i) Purpose, cost of project and how it is to be tied up,
ii) Future trends of production and sales,
iii) Estimates of cost, expenses, earning and profitability, and
iv) Cash flow statement during the period of the loan
v) Due diligence of supplier of proposed goods
vi) The services of banks technical officers, if required.

8. Viability: as per book of instructions in Ch.1 on general instructions

reveals that the bank officials are supposed to ascertain whether the
project for which credit facilities to be sanctioned is bankable and a
viable project. The bank officials are supposed to verify whether the
promoters of the business have adequate knowledge in r/o proposed
business activity, standing & market reputation. It is also to be ensured
all statutory requirements for running the proposed activity.

9. IP security valuation and NEC: before sanction of loan, valuation of

properties offered as collateral security be got done from the bank
approved valuer strictly as per bank guideline. Non encumbrance
certificate (NEC) from banks approved advocate should be obtained to
ascertain whether all properties accepted as collateral are free &not
mortgaged or sold earlier. Besides above, the bank officials should also
ensure that valuation of properties is correct and unencumbered.
As per L&A Circular No. 12/2007 at annexure A point (C) w.r.t. the suties
of the valuer read as while giving valuation report on the banks
prescribed format, has to ensure completion of due diligence exercise
and shall, inter-alia, keep the following points:
-that he himself has visited the site and made necessary enquiries from
some local property dealers of the concerned locality which leads him to
confirm that the property in question belongs to the person offering the
IP to the bank for accepting as security as on the date of valuation.
-That the IP in question bears the same description/details as mentioned
in the documents/title deeds which have been proposed to be valued.
-that the IP in question is self-occupied or tenanted.
-That IP in question is not in dispute whatsoever.
-attach plans and elevations of all structure standing on the land and a
layout plan along with a photograph of the built up property.

39 | P a g e
As per bank guideline contained in term of IRMD L&A Circular No.121 dated
04-11-2010 read as that while recommending/sanctioning loans branch
officials should invariably make independent spot verification of the I.P. to
check its genuineness, retain a copy of photograph of I.P. carry out valuation of
the property by interacting with the local people and confirm that property by
interacting with the local people and confirm that property has not changed
hands before being offered to the bank or there are deals under way on the
property which may subsequently lead to litigation resulting in dilution in
banks securities and follow the rules/instruction meticulously to safeguard the
interest of the bank. It is pertinent to add that the services of professionals
such as valuers and advocates will not justify any dilution in the
responsibilities of bank officials in verifying the securities.
As per L&A Circular No. 56 dated 8.7.2000 contained that it was advised to
be extra cautious while accepting sale deeds and other documents of
properties as collateral securities and as a fraud prevention method and
following measures are suggested:
i. Branch may insist on opening of bank accounts (with photograph,
introduction, confirmation of address through registered letter, etc.) by
owners of property who offer the same as collateral security against
loan given to the third parties.
ii. Branch should communicate with the owner of the property through
registered letter to confirm proof of residence and their willingness to
offer the security as collateral. However, in exceptional cases, if the
person offering the mortgage is not an account holder of the bank and it
is decided not to insist upon for opening of the account, antecedents of
the mortgagor be verified and photograph duly attested by the said
person be obtained and kept along with letter of request showing the
intention to create mortgage by deposit of title deeds. Confirmation of
address through registered letter as advised hereinabove be done
invariably.
As per circular no. 9/2009 of law division vide its annexure-1 has reveal that
the obtaining of the title deed investigation and search report is not a mere
formality. It is a measure to ensure identification of true owner of the
property, ascertain genuineness of security and that mortgage is entitled to
create legal and valid mortgage which is marketable. Further, proper
identification of the prospective mortgage be done to avoid impersonation.

40 | P a g e
Further at point F read as it has been decided that a certified copy of the title
deeds be obtained from the concerned office of the sub registrar / registrar
of assurance , so as verify the genuineness of the original title deeds submitted
to the bank. The counsel should should certify in the research report that
contents of the certified copy, registration particular and the photograph, if
found affixed, of the intending mortgagor, tally with that of the original title
deeds. The branch official should also cross-check the contents, registration
particulars and the photograph.
Further at point 6(b) has mentioned whether the legal opinion take care of the
following:
b) Do the title deeds produced raise any doubt about its genuineness?
do the registration particulars number, date and page particulars etc.
as shown in the original title deeds and contents thereof tally with
the information as stated in the records of registration office as well
as with certified copy of the title deed?

c) Does the photograph of previous owner and of intending mortgagor

as affixed /seen in the title deed tally with records of registration
office as well as with certified copy of the title deed?
As per annexure A of L&A Circular No. 12/07 read as valuation of
property shall also be done by the incumbents by adopting one of the
following methods on the prescribed format

Also the incumbent in charge before accepting the IP being offered

as primary /collateral if belongs to third party would also exercise
due care with regard to the consideration involve in the transaction
so that the IP of the genuine third party is only obtain thereby
mitigating the chances of further complications at a later stage.

Also as per Para 2 of L&A Circular No. 07/09 reiterated L&A Circular
No 99/2011, where the value of property mortgaged/charged is
above Rs. 20 lac or the credit facilities are of above Rs. 1 crore, the
visit of property at least on yearly basis or earlier. The visit to the site
of mortgage property should also be done at the time of granting
additional facilities/enhancement of limits against the extension of
EM on the existing property. The official visiting the site of property/

41 | P a g e
 should enquire about the possession, tenancy, construction, dispute
if any, ownership of IP, valuation etc. the compliance of the aforesaid
instructions should be ensured by the inspectors/concurrent
auditors/higher officials from controlling office during their visit to
the branch.

10.IP security-BM visit and valuation: as per book of instruction Ch. 11

regarding Mortgage of IP on pg. 11.17 at point i) read as in respect of
fresh IP mortgage as securities including housing loan, independent
surprise verification should be got done by branches with the owner of
the property to ensure the intention of the owner to create the
mortgage.

As per pt. 2(iii) of L&A Cir. No. 70/04 reveal that the security inspection
should be conducted at builders/societys office in r/o title of the
borrower.

As per pt. 2 & 4 of L&A Cir. No. 121/10 at reveal that the
recommending/sanctioning authority should independently visit the IP,
carry out valuation of property, retain a copy of photograph of IP,
identify true owner of IP and obtaining of legal report/search
report/search report on prescribed format etc. in order to safeguard the
banks interest.
As per annexure-1 of circular No. 9/2009 of law division read as,
INVESTIGATION OF TITLE-SPECIFIC POINTS/ASPECTS TO BE TAKEN
CARE OF
1. OWNERSHIP OF PROPERTY
(a)(i) Who is/are the owner of the property which is to be mortgaged?
(b) Is the owners title a valid, absolute, clear and marketable one?
(c) Whether the property has been mutated in the names of the person
offering mortgage in the municipal records/local authorities/revenue
authorities (in case of agricultural land)?
(d) If the property does not stand or the title deed relating to the
property is not in the name of the person offering the mortgage, how
does the person offering the mortgage derive title?

42 | P a g e
 11.Sanction: the proposed project should be economically viable and
technically feasible before the credit facilities are sanctioned by
competent authority. The proposed loan should be sanctioned as per
the vested loaning power as per bank guideline. The sanctioning
authority has to ensure that all bank guideline have been adhered while
sanctioning the loan.

12.Documentation: after the sanctioned of credit facility, the concerned

branch should communicate the terms and conditions to the borrower
through a letter containing the details of the facilities sanctioned and
respective terms & conditions. The borrower/s will convey his/their
acceptance. In case of a company, necessary resolution authorizing the
signing official(s) to give such a letter, besides execution of documents
be obtained and kept on record. In case of companies with in stipulated
time.
All the loan documents should be signed/executed in the presence of bank
officials who should put their signatures in the balance confirmation and
documents register in the column provided for the purpose.
As per Para 5.6 of chapter 10, the book of instruction read as if the incumbent
incharge is satisfied that the company has the power to borrow and the
directors have the power to raise loan and the board has passed a proper
resolution for the same..

As per chapter 10 of book of instruction on loans, documentation has

mentioned as documents are primary evidence. If any lacuna is found in
documentation, this will jeopardise the interest of the bank and may even
adversely affect the right of recovery of the debt. It is, therefore, important to
get the document executed properly and correctly. Further, the document
should be stamped, wherever required, according to the provisions of Indian
stamp ACT. They should also be duly registered, wherever required (as
applicable to the state).
As Para 6.1, all documents prescribed for various facilities should be correctly
drawn up/filled up, duly executed by the borrowers before drawings are
permitted.

43 | P a g e
Para 6.2 documents should invariably be executed in the presence of bank
office only.
Pare 6.3 all blanks in the documents, including space for date should be duly
filled in.
Para 6.4 all alteration, additions, cuttings, overwritings, insertions, erasings,
interlinings, removal, tearing, deleting and cancellations must be authenticated
by the borrower/other executants under his full signature.
Para 7.7 loan documents should be obtained on the prescribed printed forms
of the bank (embossed with stamp)
Para 7.8 documents should neither be ante-dated nor without date.
Para 8.1, guarantee deed should be witnessed.
As per Ch. 4 (page. 4.1) of book of instruction reveals that all the loan
documents should be signed in the presence of bank officials. The officials in
whose presence the documents are executed should put their signatures in the
balance confirmation and documents are executed should put their signatures
in the balance confirmation and documents register in the column provided for
the purpose. Being the custodians, it is the primary duty of the
officer/incumbent in-charge to keep the document intact.
As per L&A Circular No. 99/2011 reveals that in case of credit limits Rs.2 crore
& above, documents have to be got vetted from the banks approved
advocate/solicitor, in terms of existing guidelines.

13. Disbursement : as per L&A Circular No. 99/2011, appendix IB, pre
sanction checklist point 5, under the heading DISBURSEMENT
incumbents are advised to ensure that all the terms and conditions laid
down in the sanctions are duly complied with before releasing the funds
to borrowers.

In case of sanction of CC limit, the borrowing firm is required to submit

stock statement on monthly/quarterly intervals on banks prescribed
format. On receipt of stock statement, the charged securities to be
verified by the bank officials and drawing power in cc limit to be allowed
after maintaining prescribed margin.

44 | P a g e
 Further in case of T/L, the amount of loan along with prescribed margin
to be paid directly to the suppliers and invoices to be obtained and kept
with bank documents and end use of bank loan is to verified by the bank
officials. All assets purchased should be charged to the bank and kept
insured against all risks as stipulated in the sanction.

As per L&A Circular No. 44/04 pertaining to model prescribed terms and
conditions is that the borrower shall deal with our bank/consortium
banks exclusively, shall not open current account/s with any other bank
without our prior permission and shall route all sale transaction through
accounts. The borrowers entire business relating to their activity
including deposit, bills etc. should be restricted only to the financing
banks.

14.Legal compliance certificate(LCC): as per L&A Circular No. 99/2011

reveals that the LCC is a in-house process by which all the branches have
to intimate to its circle office in prescribed format in r/o credit limits of
Rs. 10 lakh & above and fresh sanction/enhancement/renewal to
respective controlling office within 7 days from the end of the month in
which the facilities are disbursed. Any pending formalities are to be
reported separately.

15.Post sanction-post sanction follow ups: As per L&A Circular No. 99/2011
revels that the post-sanctioned follow-ups play an important part to
keep a loan account in check. The loans manager should ensure
compliance of accepted T&C of loan. The banks internal
auditors/concurrent auditors should ensure compliance of the guideline.
Any deviation should be reported to the sanctioning authority.

16.End use of funds: as per L&A Circular No. 99/2011 at point 4 on end use
of funds point reveal the following:-
i) End use of funds have to be ensured by the branches through
meaningful scrutiny of quarterly progress reports/operating
statement, regular inspection of borrowers assets charged to the
bank as security and periodical visits.

45 | P a g e
 ii) Certificate from the borrowers, particularly in case of corporate
loans, working capital finance, project finance, short term loan
etc. be obtained certifying that the funds have been used for the
purpose for which these were obtained and are not diverted to
capital market / some other use.
Further in case of term loans, the payments are to be made
directly to the suppliers through pay orders/drafts. The same has
been delivered to the suppliers directly and end use of the funds
so disbursed has to be verified.

17.End use of funds: as per L&A Circular No. 99/2011, reveals that
meaningful scrutiny of quarterly progress reports/operating statements,
regular inspection of borrowers assets charged to the bank as security,
periodical visits should be done to check the end use of funds. All
aspects of diversion of funds in the borrowal account should be duly
examined by field functionaries at the time of periodical reviews of the
limits/credit facilities.

18.Stock statement: As per L&A Circular No. 99/2011 reveals that the
branches must insist upon the borrowers for timely submission of stock
statement as experience shows that when the security is not in order,
there is an attempt by the borrower to avoid or delay the submission of
stock statement so that the adverse features that might have developed,
remain hidden from the banker. If any borrower delays submission of
stock statement consecutively for 2 months without satisfactory reason,
incumbents may adopt stiffer measures like giving notice for stopping
operating in the account and the matters should be reported to the
controlling office. The incumbents are also advised to keep the
controlling office posted if any shortage in margin is observed on
inspection of stocks of the borrowers.

Branches are advised to ensure that securities be checked regularly in all

credit account (including NPA/PA accounts). The incumbents should
satisfy themselves that the security is intact both qualitatively and
quantitatively, readily marketable and has not become old or obsolete or
deteriorated in any way. Monthly/quarterly inspection/checking may be
carried out alternatively by the manager and the assistant

46 | P a g e
 manager/officer as permitted under the instructions, it shall continue to
be the personal responsibility of the incumbent incharge to ensure that
the checking has been done in all cases every month/quarter or as per
stipulations made in the letter of sanction.
Also as per L&A Circular No. 44/04 annex B CC(stock) point 1 reveals that
the stocks to be checked/verified by the banks officials at least once in a
month at irregular intervals from the books of the borrower & also
physically and submit report.

19.Stock verification: as per point 18 of L&A Circular No. 99/2011 on

inspection of stocks reveal that branches are advised to ensure that
securities be checked regularly in all credit accounts (including NPA/PA
accounts). The incumbents should satisfy themselves that the security is
intact both qualitatively and quantitatively, readily marketable and has
not become old or obsolete or deteriorated in any way.

Monthly/quarterly inspection/checking may be carried out alternatively

by the manager and the assistant manager/officer. Whereas checking
may be entrusted to the assistant manager/officer as permitted under
the instruction, it shall continue to be the personal responsibility of the
incumbent incharge to ensure that the checking has been done in all
cases every month/quarter or as stipulations made in the letter of
sanction.

20.Book debt verification: as per annexure xiii of L&A Circular No. 99/2011
on check list of post sanction follow up reveals that for CC accounts
availing book debts limits, the branch officials to verify the statement
from the books of the party, at least once in a month at irregular
intervals, and satisfy themselves that:-
(i) The statement is in agreement with the book of accounts
maintained by the party;
(ii) The age-wise classification of debts is correctly done; and
(iii) The realisation of book debts is routed through our banks.
(iv) Book debts are out of genuine credit sales transaction.

21.Renew/review: as per L&A Circular No. 99/2011 revels that the branch
has to ensure that working capital limits are positively

47 | P a g e
 renewed/reviewed at least once a year without fail. For all term loans,
other than retail loans, with sanction limit of Rs. 1 crore & above, annual
review should be done as per prescribed format.

22. Safe keep of documents: as per Ch. 13, book of instruction, post
sanction supervision and follow-ups, Para 2.3, ,AINTAIN OF LOAN
DOCUMENT FILE reveal as the documents files should be kept in fire
proof safe and under proper custody of the loans incharge/incumbent
incharge.

23.Quarterly monitoring: as per point 16. Of L&A Circular No. 99/2011 on

quarterly monitoring system (QMS) reveals that incumbents are advised
that system of quarterly monitoring of irregular loan account should be
followed meticulously. The primary responsibility to ensure regular and
prompt submission of the complete information on the prescribed
formats and making meaningful analysis thereof is of the incumbent
incharge. Banks internal inspectors/auditors shall also look into the
compliance with this discipline and give appropriate comments in their
reports.

As per L&A Cir. 44/12 at point 10 reveal as penal interest of two percent
per annum for a period of one quarter on the outstanding under various
working capital limits sanctioned to a borrower, who fails to submit any of the
statement under quarterly monitoring system within the prescribed time limit
24.Diversion of funds: as per point 22.5 of L&A Circular No. 992011 on
diversion of funds reveals that in an effort to track the fund flow and end
use of funds, branches should monitor the working capital account of
the companies to check the diversion of funds with special emphasis on
end use verification. Further, for monitoring of borrowal account, more
emphasis be given to cash flow verification.

25.Cash withdrawals: as per point No. 22.2 of L&A Circular No. 99/2011 on
cash withdrawal through self-drawn cheques at a non-base branch
reveals that there are instance of heavy cash withdrawals from certain
borrowal accounts, which need immediate attention. Branches should
take necessary step as per guideline issue by insp. & audit division from

48 | P a g e
 time to time, to curb this tendency as it may lead to avoidable diversion
of funds by the borrower. Cash payment not exceeding Rs. 1 lac by non-
base branch may be allowed to the drawer for self-drawn cheque of
cash credit account. The drawer should be asked to write the
reasons/purpose on the reverse side of the cheque at the time of
permitting cash withdrawal.

26.Periodical visit to IP: As per Para 2 of L&A Circular No. 7/09 reiterated
L&A Circular No. 99/2011 reveals about the periodicity visits to the site
of mortgaged property. Where value of property mortgaged/charged is
above Rs. 20 lac or the credit facilities are of above Rs. 1 crore, at least
on yearly basis or earlier. The visit to the site of mortgage property
should also be done at time of granting additional
facilities/enhancement of limits against the extension of EM on the
existing property. The official visiting the site of property/ should
enquire about the possession, tenancy, construction, dispute if any,
ownership of IP, valuation etc. the compliance of the aforesaid
instruction should be ensured by the inspectors/concurrent
auditors/higher officials from controlling office during their visit to the
branch.

49 | P a g e
 CREDIT APPRISAL PROCESS
Receipt of application from applicant (Along with check list)

Receipt of document
(Balance sheets, KYC papers, registration no, MOA, AOA, and
properties documents)

Pre sanction visit by bank officers

Check for RBI defaulter list, wilful defaulter list, CIBIL data, ECGC
caution, approved rating report, (PNB TRAC, CRISIL rating)

Title clearance report of the properties to be obtain from

empanelled advocates

Valuation reports of the properties to be obtained from empanelled

properties valour / engineers.

Preparation of financial data

Proposal preparation

Assessment of proposal

50 | P a g e
 Sanction / Approval of proposal by appropriate sanctioning authority

Documentation, agreements, mortgages

Stamping and registration

Disbursement of loan

Post sanction activities such as receiving stock statement, review of accounts,

renew of accounts, etc.

Quantum flow

51 | P a g e
TIME NORMMS FOR SANCTION OF LOAN
PROPOSALS
For ready reference of field functionaries and to obviate the reference, the
guidelines on the times norms for disposal of loan proposals are as under:

Time Norms for RAPCs Time Norms for

SCHEME Branches other than
RAPCs
Mortgaged based loan 7 days 10 days
(Housing loan, Adv. Against IP,
Reverse Mortgage)

Education Loan 1 week-for loans falling under RAPC/Branch

powers
2 week- for loans falling under powers of CH&
Above.
Nan mortgaged based viz. NA 3 days
Vehicle,Gold,Personal,Pension
loans

The stipulated time norms (as mentioned above) are the upper time limit and
it should be insured that there is no delay in disposal of the loan proposal.
Sanction and Disbursement of retail loans shall be subject to the time norms a
mentioned above from date of receipt of complete application, accompanied
by all requisite documents, by the branch. During this period, RAPCs/Branch
(es) to ensure that proper pre- sanction appraisal is carried out.
Branch (es) to provide complete checklist of information/document(s) required
from the prospective borrower(s) in respect of their request for loan during
their first interaction/meeting itself.

52 | P a g e
 IMPORTANT TYPES OF CHARGE
Bank charge over properties confine itself to one or more of the following
types of charges:
ASSIGNMENT
It is a mode of providing security to a banker for an advance. It is a transfer of
right, property or a debt. The transfer is called assignor and the transferee
assignee. Borrower generally assigns the actionable claim to the banker as
security for an advance. In term of section 130 of the transfer of the property
act, the transfer of an actionable claim can be affected only by the execution of
an instrument in writing, signed by the transferor or by his duly authorised
agent. Section 3 of the transfer of property act define an actionable claims as a
claim to any debt other than debt secured by mortgage of immovable property
or by hypothecation or pledge of movable property or to any beneficial
interest in movable property, not in the possession of the claimant, which the
civil court recognised as affording grounds of relief. All the rights and remedies
of the transferor vest in the transferee. The transferee of an actionable claim
takes it, subject to all the liabilities and equities to which the transferor was
subject on the date of the transfer.
In banking practice, borrower may assign the book debt, money due from the
government department, and life insurance policies as security for an advance.

LIEN
Lien is the right of banker o retain possession of the goods and securities
owned by the debtor until the debt due from the latter is paid. The bankers
lien is an implied pledge. A banker acquires the right to sell the good which
came into its possession in the ordinary course of banking business, in case the
debt is not paid. Section 171 of the Indian contract act, 1872 give to banker an
absolute right of general lien on all goods and securities received by the
banker. However, when a customer inadvertently leaves a packets containing
certain shares certificate, life insurance policy, fixed deposits receipts of other
bank, etc. while leaving the bank premises, the banker will have no right of lien
over those securities those were not given to the banker in the normal course
of banking business.

53 | P a g e
HYPOTHECATION
Hypothecation is legal term that refers to the granting of a hypothec to a
lender by a borrower. In practice, the borrower pledges an asset as collateral
for a loan, while retaining ownership of the assets and enjoying the benefits
therefrom. The term comes from civil law; although its usage varies from
jurisdiction to jurisdiction, it is nearly synonymous to a lien or mortgage.
The term hypothecation means a charge in or upon movable property, existing
or future, created by a borrower in favour of a secured creditor , without
delivery of possession of the movable property to such creditor , as a security
for financial assistance an includes floating charge and crystallization of such as
into fixed charge on movable property. The mortgage of movable property is
called hypothecation.
The best example of this types of arrangement are car loan. In this car vehicle
remains with the borrower but the same is hypothecated to the bank/
financer.
Difference in pledge, hypothecation and mortgage
Pledge hypothecation Mortgage

Types of security Movable Movable Immovable

Possession of the Remain with Remain with Usually remains

security lender (pledgee) borrower with borrower

Example of loan Gold loan , Car/vehicle loan, Housing loan

where used advance against Adv. against stock
NSCs, Adv. against and debtors
goods (also give
under
hypothecation)

PLEDGE

54 | P a g e
It is used when the bank(or lender, known as pledge takes actual possession of
the securities, such as goods, certificate, golds, etc.,(you provide it to bank to
avail loan ) which are generally movable in nature. Bank keeps the securities
with itself, and provide loan to you.
Bank will return the securities (possession of the goods) to you (borrower,
known as pledger), after you repay all the debts (i.e., loan) to the bank. In case
you are unable to pay back, then the bank has the right to sell the assets, and
recover the loan amount (with interest).

MORTGAGE
It is used when you (borrower) have the actual possession of the asset, for
which you are granted loan (e.g., house mortgaged). Mortgage is generally
those assets which are permanently attached with earth surface, like house,
land, factory etc.
In Case you are unable to repay the loan amount, the bank has the right to
seize and sell the mortgage, and recover the loan amount (with interest).

TYPES OF MORTGAGE
1. Simple mortgage
2. Mortgage by conditional sale
3. Usufructuary mortgage
4. Mortgage by deposit to title of deeds
5. Anomalous mortgage
6. English mortgage

55 | P a g e
 CREDIT RISK MANAGEMENT
Credit risk is the possibility of loss associate with changes in the credit quality
of the borrower or counter parties. The counter parties may include an
individual, small & medium enterprise, corporate, bank, financial institution, or
a sovereign. In a banks portfolio, losses stem from outright default due to
inability or unwillingness of a borrower or counter party to meet, commitment
in relation to lending, settlement and other financial transaction.

CREDIT RISK MANAGEMENT SYSTEM IN PNB

A comprehensive credit risk management system, which is in place in the bank,
encompasses the following process.
Identification of credit risk
Measurement of credit risk
Grading of credit risk
Reporting and analysis of rating related data
Control of credit risks

CREDIT RISK IDENTIFICATION

In order to take informed credit decision, it is necessary to identify the areas of

credit risk in each borrower as well as each industry. Risk management division
HO, in coordination with other HO divisions involved in disbursal of credit and
also the risk management department of various zonal office/circle office
identifies these risk areas and develops necessary tools and processes to
measure and monitor the risk.

56 | P a g e
 CREDIT RISK MEASUREMENT
In order to measure the credit risk in bank portfolio, the bank has developed
the following models:
s. Credit Risk AAPPLICABILITY
no. Rating Model
Total Exposure Turnover
1 Large Above Rs.15Crore (OR) Above Rs 100 crore,
Corporate except Trading concerns
2 Mid Above Rs.5 Cr and up to Rs.15 Above Rs.25 Cr and up
corporate Cr (OR) to Rs. 100 Cr.
All trading concerns falling in the large Corporate
category shall also be rated under this model

3 Small Loans Above Rs.50 lakh& Up to Rs.5 Up to Rs.25 Cr.

Cr(AND)

4 Small Loans II
Above Rs.2 lakh & up to Rs.
50lakhs
5 NBFC All Non-Banking Financial Companies irrespective of limit
6 New Projects Above Rs.5 Cr. (OR) Cost of Project above
Rating Rs.15 Cr
7 Entrepreneur Borrower setting up new Cost of Project up to
New Business business and requiring finance Rs.15.Cr
Model above Rs 20 lac up to Rs. 5 Cr
(AND)
New Non-Banking Financial Companies (NBFCs)/New
Micro Finance Institutions (MFIS).
New borrower Entities setting up new business requiring
only working capital/NFB limit of above Rs.5 Crore but
not involving setting up of any project as such.
Projects already completed with own finance, audited
results for first year of operations are not yet available
and proposal is only for sanction of WC/NFB facilities.
However, all new trading business irrespective of limits
shall be rated under this model

57 | P a g e
8 Half Yearly i).All listed companies rated on large/mid corporate rating
Review of models.
Rating ii).Other borrowals accounts Rated on large/ mid
corporate rating models availing limits (FB+NFB) above
Rs. 50.00 crore from our bank.
9 Credit Risk All banks and financial institutions
Rating
models for
banks/FI

The credit risk rating models have been developed with a view to provide a
standard system for assigning a credit risk rating to all the borrowers on the
basis of the overall credit risk involved In them. Inputs to the models are the
financial, management, business and conducted of account, industry
information. The evaluation of a borrower is done by assessment on various
objective/ subjective parameters. The model evaluates the credit risk rating of
a borrower on a scale of AAA to D with AAA indicating minimum risk and D
indicating higher risk.

The credit risk-rating models incorporate therein all possible risk factors,
which are important for determining the credit quality/ rating of a borrower.
These risks could be:
Internal and specific to the company
Associated with the industry in which the company is operating or
Associated with the entire economy and can influence the repayment
capacity and/ or willingness of the company.

Evaluation methodology under rating model

The score are assigned to each of the parameters on a scale of 0 to 4
with 0 being very poor and 4 being excellent. The scoring of some of
these parameters is subjective while for some other it is done on the
basis of pre-defined objective criteria.

58 | P a g e
 The score given to the individual parameters multiplied by allocated
weights are then aggregated and a composite score for the company is
arrived at, in percentage terms. Higher the score obtained by a
company, the better is its credit. Weights have been assigned to
different parameters based on their. Weights have been assigned to
different parameters based on their importance. After allocating /
calculated and displayed by the software.

The overall percentages score obtained is then translated into a rating

on a scale from AAA to D according to a pre-defined range of scores.

Wherever a particular parameter is not applicable , no score should be

given and the parameters should be made not applicable

For multi-divisional companies, which are involved in more than one

industrial activity, evaluation should be done separately for each
business.

GRADING OF BORROWERS UNDER THE RATING SYSTEM

In order to provide a standard definition and benchmarks under the credit risk
rating system, following matrix has been adopted in all the risk rating models.
Rating Description Score(pre%) obtained Grade within the
category Rating category

PNB-AAA Minimum risk Above 80.00 PNB-AAA

PNB-AA Marginal risk Above 77.50 up to 80.00 PNB-AA+
Above 72.50 up to 77.50 PNB-AA
Above 70.00 up to 72.50 PNB-AA-
PNB-A Modern risk Above 67.50s up to 70.00 PNB-A+
Above 62.50 up to 67.50 PNB-A
Above 60.00 up to 62.50 PNB-A-
PNB-BB Average risk Above 57.50 up to 60.00 PNB-BB+
Above 52.50 up to 57.50 PNB-BB
Above 50.00 up to 52.50 PNB-BB-

59 | P a g e
PNB-B Marginally Above 47.50 up to 50.00 PNB-B+
Acceptable risk
Above 42.50 up to 47.50 PNB-B
Above 40.00 up to 42.50 PNB-B-
PNB-C High risk Above 30.00 up to 40.00 PNB-C
PNB-D Caution risk 30.00 and below 30.00 PNB-D

INTEREST RATES ON ADVANCES

BASE RATE-9.60% (W.e.f from 01.05.2017)
Master table
Internal risk External rating
Rating/PNB AAA AA A BBB unrated BB &
score/PNB below
score SME
A1 >80 MCLR+ MCLR+0.25 MCLR+0.65 MCLR+ MCLR+ MCLR+
0.20 1.25 1.50 2.05
>70<=80 MCLR+ MCLR+0.35 MCLR+0.65 MCLR+ MCLR+ MCLR+
A2 0.20 1.25 1.50 2.10
A3 >64<=70 MCLR+ MCLR+0.65 MCLR+1.00 MCLR+ MCLR+ MCLR+
0.55 1.60 1.85 2.45
A4 >58<=64 MCLR+ MCLR+1.15 MCLR+1.55 MCLR+ MCLR+ MCLR+
1.10 2.15 2.40 3.00
B1 >52<=58 MCLR+ MCLR+1.65 MCLR+2.05 MCLR+ MCLR+ MCLR+
1.60 2.65 2.90 3.50
B2 >46<=52 MCLR+ MCLR+2.60 MCLR+2.95 MCLR+ MCLR+ MCLR+
2.50 3.55 3.80 4.40
B3 >40<=46 MCLR+ MCLR+4.45 MCLR+4.85 MCLR+ MCLR+ MCLR+
4.40 5.00 5.00 5.00
C1 >35<=40
C2 >25<=35 MCLR+5.00
C3 =25

60 | P a g e
 PREVENTNG MONITORING SYSTEM
OBJECTIVE OF PMS
The objective of PMS is to track & evaluate the health of borrowers account
on a continuous basis and detect:
Unsatisfactory/ adverse signals/ indicators at an early stage in a
comprehensive manner.
Thorough probe into increase behind observed signals and analysis
thereof.
Speedy corrective/ remedial action/steps to prevent the account from
becoming NPA as well as to minimize the loan losses.
PMS is a post sanction credit monitoring tool consisting of a number of
parameter for evaluating the health of a borrower account on a continuous
basis. It is a micro level monitoring tool which is diagnostic in nature ad pro-
active in approach.
It assign numerical score to each signal and denotes the health of an account
based on indicators of past one year in single numerical value called PMS
index.

Preventive monitoring system consists of two parts:

1. PMS Index and Rank
PMS index is a numerical index consisting of 29 indicators parameters into 6
sections. Penalty rates (weights) in the form of numerical values have been
assigned to each indicator depending upon their degree of impact on health
of an account. The score assigned to any parameters is stored for last one
year at any point of time, which is known as cumulative score. The section
wise maximum of cumulative score is to be summed up to arrive at PMS
which is known as PMS ranking scale. The PMS rank indicates the state of
health of an account. The lower the PMS rank, better the health of account
and vice-versa.

61 | P a g e
 2. PMS report
PMS report, which has eight parts, described brief of the borrower, position
of accounts, details of signals contribution to PMS index score, reasons
behind adverse signals and proposes corrective / remedial steps with time
frame.

PMS is to be prepared by the branches quarterly and submitted within 15 days

from the close of the quarter to which it relates.

62 | P a g e
CASE-1
Pioneer presently engaged in design, engineering &construction since 1958,
and serving the industries, to their entire satisfaction. We offer, a complete
range of engineering service, as ours is an integrated engineering entity. Our
group over the year has followed a consistent policy of augmenting the
capacity and resource in the organisation, for upgrading technology and,
meeting the growing demand of customer we undertake, design, fabrication,
supply, installation and commissioning of different types of carbon steel, mild
steel and stainless steel equipment & material; and also, provide a complete
turnkey execution of mechanical, instrumentation, electrical and civil work on
contract basis.

LOCATION
The factory is located at saraswati industrial estate partapur (developed by u.p.
state industrial development corporation) on meerut-delhi road, 10 km. away
from Meerut city; in the state of Uttar Pradesh. Pioneer has total area of
92000sq.ft. Out of which 70,000=00sq.ft.

MANAGEMENT
Pioneer is a private limited company managed by technocrats in civil,
mechanical engg. Guided by Mr
Sr .No Nature of the facilities Amount
1. CC stocks & book debts Rs. 5,00,00,000/-
Rupees five crore only.
2. Adhoc cc stock & book debts Rs. 1,00,00,000/-
Rupees one crore only.
3. Bank guarantee(BG) Rs. 5,00,00,000
Rupee five crore only.
4. ILC limit within the BG limit Rs. 2,00,00,000/-
Rupees two crore only.
5. Total (overall limits) Rs. 11,00,00,000/-
Rupees eleven crore only.

63 | P a g e
 RATION ANALYSIS OF PIONEER LIMITED
RATIO YEAR 16 YEAR 15
current ratio 1.04 1.005

quick ratio 0.32 0.27

net profit 3.70 1.09

Stock turnover ratio 4.62 6.66

Interest coverage ratio 0.88 0.29

Fixed asset turnover ratio 5.24 5.49

Debtor turnover ratio 7.42 8.72

Inventory turnover ratio 4.25 4.8

ROCE 19.1 5.07

ROE 0.05 0.06

EPS 27.08 8.69

Debt equity ratio 0.19 0.15

CASE 2
Cake factory
Smt. Garima Mittal is presently engaged in manufacturing business of bakery &
confectionary item in Meerut under the name and title the cake factory the

64 | P a g e
retail outlet is located at saket. Now she is starting another unit of same
business in Meerut and title at Bombay bazaar, hanuman chowk, Meerut. The
scope of sale of bakery & confectionery both items has a lot of potential in the
market. There is huge demand of this food item if it is sophisticated and
hygienic.
She is experience in manufacturing business of bakery & confectionary as
already having the manufacturing. Unit in Meerut from last 9 years.
Major Competitors:
1. New way bakers
2. Avon bakers
3. King bakers

She has done the Wilton basic cake decorating course from Wilton plantation
Florida (U.S.A). She has done patisserie course (bakery & confectionary) from
International institute of culinary arts, New Delhi.
The project viable in term of demand and supply and profit. To start the
production, a term loan of Rs. 15 lakh

GIST OF THE PROPOSAL

1.A Name of the borrower and The cake factory

constitution
Sole proprietorship

B Address of regd office Existing retail outlet at

opposite dhanvati hospital,
saket,meerut

C Work/ factory Prayag farm, garh road,

opposite medical college
Meerut

D Date of incorporation 2009

/ establishment
65 | P a g e
E Dealing with PNB since 18.08.2009

F Business activity Manufacturing (cakes, biscuits

, pastry etc.)

2 Branch office/co Civil line saket , Meerut

3.A Directors/partners/ Smt. Garima Mittal w/o sh.

proprietors Manish Mittal
Name , address R/O prayag farm, post office,
garh road, Meerut
B Whether any of the RBIs NA
caution list
Defaulters list, if yes reason

C If any of them ,related to NA

director
SR. office of PNB

D Shareholding pattern 100%

FINANCIAL POSITION OF THE BORROWER IN LACS

Key financial figure 31.3. 31.3. 31.3.2016 31.03.
2014 2015 2017
Audited Audited estimated audited Estimated

Gross sale 40.99 43.25 56.68 56.6 72

Other income 00 00 00 00 00

Operating profit/ loss 3.02 3.25 3.08 4.29 2.53

Profit before tax 3.02 3.25 3.08 4.29 2.53

Profit after tax 3.02 3.25 3.08 4.29 2.53

Cash profit/ loss 5.05 4.94 6.03 7.40 8.8

66 | P a g e
Block assets 13.66 11.63 30.50 31.96 42.49

Depreciation 2.03 1.69 3.01 3.11 6.27

Net asset 11.63 9.94 27.49 28.85 36.22

Secured loan 14.23 9.74 22.99 22.99 29.64

Unsecured loan 1.59 1.59 1.59 3.59 2.59

Paid up capital 6.94 11.70 11.70 9.59 14.23

Tangible net worth 6.94 7.70 11.70 9.59 14.23

Net working capital 6.30 5.87 4.38 2.99 5.17

Current ratio 2.22 2.56 1.77 1.37 1.77

Debt equity ratio 1.58 1.05 1.73 2.32 1.91

Operating profit/sales% 7.37% 7.51% 5.43% 7.57% 3.51%

Comments on financial indicators

Sales:
All the financial figures are satisfactory. The party has achieved sales of Rs
56.68 lacs during FY 2014-15 and Cr summations as on 31.03.2016 are RS 17.32
lacs against the Cr summations of RS 6.47 AS ON 31.03.2015. Cr summations as
on 30.9.2016 are Rs 16.30 lacs .Current ratio comes to 1.37 for the FY2015-16
as 1.77. Current ratio is above the bench mark ration and can be termed
satisfactory.

Profit:
The party has achieved the profit Rs 4.29 lacs for the FY 2015-16 against the
profit of Rs 3.25 lacs for the FY 2014-15 whereas the same has been projected
for FY 2016-17 as 2.53 lacs.

67 | P a g e
Unsecured loan:
Part has raised the unsecured loan to the tune of Rs 2.59 lacs as on
31.03.2016.against Rs 1.59 lacs as on 31.03.2015 and projected the same as Rs
2.95 lacs as on 31.03.2017.

Tangible net worth:

Tangible net worth of the firm is sufficient due to retention of profit.

PRIMARY SECURITY
Working capital facility:
Hypothecation of stocks of raw material semi-finished goods / work in
progress, finished goods like cake/ pastries / biscuits etc.

Term loan facility

The existing as well as the proposed credit facilities are to be primarily secured
by way of hypothecation of plant and machinery, equipment and other misc.
fixed assets of the firm already created to be created.

PNB SME SCORE DETAILED REPORT

UNITS DETAIL
Name of the unit : THE CAKE FACTORY
Address of the unit : BOMBAY BAZAR, HANUMAN CHOWK, MEERUT
Constitution of the unit : PROPRIETERSHIP
CBS customer ID : dsp006739

68 | P a g e
Facility to be /renew required
Working capital : no proposed rate of Intt (%)
Term loan: YES amount: 2441595 proposed rate of intt (%) : 12.35
Repayment period (in month) : 81
Non fund based: NO
Details of liabilities
Capital 959000
Quasi capital 0
Reserve and surplus 0
Net worth 959000
Unsecured loan 359000
Total long term liability 2224834
Short term bank borrowing including 433000
bills discounted
Trade creditors 227000
Other current liabilities 152000
Total current liabilities 812000
Total outside liabilities 3036834
Total liabilities 3995834

Details of asset
Fixed asset 3196000
Accumulated depreciation 311000
Net fixed asset 2885000
Inventories 1015834
Receivable(debtor) 33000
Cash and bank balance 48000
Other current asset 14000
Total current asset 1110834
Total asset 3995834

69 | P a g e
 HOUSING FINNANCE SCHEME
1. ELIGIBILITY: Individual .Joint owners are also available
2. PURPOSE: 2.1 For construction of house/flat; 2.2 For purchase of built
house/ flat. 2.3 For purchase of under construction house/flat from Housing
Boards / development authorities/ Co-operative societies/ Approved Private
Builders/Projects. 2.4 For carrying out repairs/renovation/ alterations/ cost of
furnishing to the house/flat. 2.5 For meeting cost escalation in the cases of
under- construction flats to existing Housing Loan borrowers. 2.6 For carrying
out Additions to the house/flat. 2.7 For purchase of land/plot for house
building.
3 MARGIN: Margin for all purposes except to purchase of land/plot, Housing
Loan Upto RS.75 LAC 20%* above RS 75 lac 25%* Purchase of land/plot for
House Building 25%

4 SECURITY: Equitable/registered mortgage of the property.

5 DISBURSMUENT: For outright purchase of house/flat & plot , the loan will be
paid in lump sum to the vendor at the time of registration after satisfying that
borrower has paid/provided for the balance amount/his contribution.

For house/flat under construction, the loan amount will be disbursed in stages
depending on progress of construction, i.e., at stage like completion of plinth,
construction upto lintel level, completion of roof etc. and/or demand raised by
selling agency after ensuring that the borrower has invested his pro-rata share
towards required margin.

6 INSURANCE: The property will be kept insured for reconstruction cost in

respect of fire riots and wherever required , against other appropriate hazards,
such as earthquake, flood, etc. by the borrower, with usual bank clause.

BMs should ascertain by reviewing on an on-going basis that the adequate

coverage of insurance is available for the reconstruction cost at all times, as

70 | P a g e
the cost may increase during the period of insurance policy, which generally is
being taken for a period of 10 year.

7 REPAYEMENT: For carrying out repairs/ renovation / alterations to the

house/flat: Loan along with interest is to be re-paid in equated monthly
instalments within a period of 15 years inclusive of moratorium period ,if any.

FOR OTHERS: Loan along with interest is to be re- paid in equated monthly
Instalments within a period of 30 years inclusive of moratorium period, if any.

8 PRE PAYMENT CHARGES: Loans sanctioned under floating rate of interest

Basis: No pre-payment charges be levied on floating rate of interest on
Housing loans.

Loans sanctioned under fixed rate basis: No pre-payment charges are to be

levied.

9 PENAL INTEREST: FOR ALL CASES INCLUDING PURCHASE OF PLOT/LAND: In

case of default in repayment of loan, the borrower shall liable to pay penal
interest as per the guidelines circulated vide IMRD, L&A Cir. And subsequent
circular from time to time.

71 | P a g e
 EDUCATION LOAN
1 OBJECTIVE: The Education Loan aims at providing financial support to
meritorious students for pursuing higher education. The main emphasis is that
a meritorious student, through poor, is provided with an opportunity to pursue
education with the financial support from the banking system with affordable
terms and conditions.

2 ELIGIBILITY CRITERIA; 2 (i) STUDENT ELIGIBILITY

a) Should be an Indian National.

b) Should have secured admission to a higher education course in
recognized institutions in India through entrance test/Merit Based
selection process after completion of HSC. However, entrance selection
purely based on marks obtained in qualifying examination.
c) In case of admission under management Quota, meritorious student
who has qualified for a seat under merit Quota and chooses to pursue a
course under management Quota be considered eligible for loan under
the Education Loan.
2 (ii) COURSES ELIGIBLE (STUDIES IN INDIA)
A. APPROVED COURSES leading to Graduate degree and PG Diploma
conducted by recognised colleges/universities recognised by
UGC/Govt./AIBS/ICMR etc.
B. Courses like ICWA, CA, CFA, etc.
C. Approved courses offered in India by reputed foreign universities.
D. Research Programmes recognized by designated academic authority
/regulatory body.

72 | P a g e
 3 MARGIN: Upto RS 4lac NIL, Above Rs 4 lac 5% Up
Scholarship/assistantship be included in margin Margin may be brought
in on year basis as and when disbursements are made on a pro - rata
basis.
4 SECURITIES
Upto Rs 7.50 lac: Parent(s) guardian be made joint borrower(s). No
tangible security and/or third party guarantee be obtained.
ABOVE Rs 7.5 lac: Parent(s)/guardian be joint borrower (s). Tangible
collateral security of suitable value acceptable to bank. The loan
Document should be executed by the student and the parent/guardian
as joint- borrower.
5 REPAYMENT: i) Repayment of the loan will be in equated monthly
instalments (EMIs) for a period of 15 years for all categories.
ii) Repayment holiday /Moratorium: Course period + 1 year.
6 INSURANCE: Life insurance policy of student availing Educational Loan
be taken at the option of student borrower in terms of guidelines issued
from time to time.
7 JOINT BORROWER: Joint borrower should be parent(s)/guardian of the
student borrower. In case of married person, joint borrower can be
spouse or the parent(s)/parent(s) in- law. In case parents are not alive,
grandparents be taken as joint borrower.
8 ILLUSTATIVE CHECK LIST: i) loan application on banks format ii)
Passport size photograph. iii) Proof of address iv) Proof of age v) Copy of
pan of student Borrower vi) Proof of having cleared last qualifying
examination. vii) Letter of admission viii) Prospectus of the course
wherein charges like admission fee, Examination fee, Hostel charges etc.
are mentioned. ix) Details of assets and liabilities of parent /co

73 | P a g e
 obligates/guarantors. X In case loan is to be collaterally secured by
mortgage of IP, copy of tittle deed, valuation certificate and Non-
encumbrance certificate from approved lawyer of the bank be obtained
at the cost of the borrower.

74 | P a g e
 CONVEYANCE LOAN FOR CAR
1 PURPOSE: To purchase i) New car/ Jeep/ Multi utility vehicle (MUV) OR
Sports utility vehicle (SUV) ii) Old car /Van/Jeep /MUV/SUV which are not older
than three years.

2 ELIGIBILITY: i) For private use: Individuals ii) Joint borrowers are also eligible,
i.e., parent(s)/spouse/Earning Children. However, out of these only one joint
borrower shall be permitted.

3 MARGIN: 1 For New Vehicle: 15% of on-road price inclusive of one time road
tax & insurance. 2 Margin in case of Tie up arrangement with
Manufacturer/Dealer: 10% of on-road price OR NIL on ex -showroom price. 3
For old Vehicle: 30% of the value of the vehicle.

4 REPAYEMENT PERIOD: 1 For New Car/Van/Jeep/MUV/SUV: The loan

amount together with interest is to be repaid maximum in 84 equated monthly
instalments comprising of principal and interest commencing from the
succeeding month. 2 For Old Car/Van/Jeep/MUV/SUV: The loan amount
together with the interest is to be repaid maximum in 60 equated monthly:
instalments. 3 For new/old car/van /jeep/MUV/SUV: In case of persons
engaged in agriculture & allied activities, sanctioning authority may fix
repayment schedule at half yearly/ yearly intervals coinciding with the time of
harvest. However, the repayment period should not exceed 7 year (new
vehicle) or 5 years (old vehicle).

5 INSURANCE: To obtain comprehensive insurance policy with agreed bank

clause and policy to remain deposited with the bank. Bank to ensure that every
Car/ vehicle is insured at all times during the pendency of loan because in case
the vehicle in not insured, in the eventualities like theft, accident, etc., the

75 | P a g e
bank will not be able to get the insurance claim and the loan will be remain
unsecured.

76 | P a g e
 CONCLUSION
Housing and industrial loan is developed rapidly during the last two
decades due to the enthusiastic interest of Government of India to cut-
short the housing problem of the country.
Residential property markets constitute almost 80% of the real estate
market in terms of volume and growing every year.
The property markets are moving from fragmented to organized and
the sector is likely to institutionalize with the relaxation in foreign direct
investment.
Banking sector plays the most important role in providing housing
finance. As the housing finance is undoubtedly the most secured
investment, the government as well as private sector banks remain
interested to grab a major share of housing finance market. They
already have a wide view circle of existing customers and a broad
network of infrastructure through their branches. Meerut city is not an
exception of this phenomenon Here a strong web of branches of
different banks can be seen everywhere, which are willingly ready to
provide desired amount of housing finance to eligible customers.
There are 22 Nationalised banks that are functioning in Meerut City
with a network of more than 205 branches offices. The Punjab National
bank is the leading bank is the leading bank in respect of branch
network in Meerut city, having strength of 49 branches. State Bank of
India and Allahabad bank stand on the 2 and 3 places with their network
of 43 and 20 branches respectively. Syndicate Bank and Oriental Bank of
Commerce got a network of total 18 branches; Bank of Baroda has 11
branches while all other banks have less than 10 branch offices.

77 | P a g e
 Interestingly it can be noted that 6 banks have only one branch office in
the city and 4 banks have 2 branch offices.

78 | P a g e
 SUGGESTION
Following are few suggestions in the light of the research study
Finance is a market with infinite growth potential. The govt as well as
financing agencies should effort more to improve the creditability and
functioning of finance system in India.
The major problem of various kind of finance sector of India are
shortage of funds, inadequate mortgage and securitisation laws,
unhealthy competition among finance agencies and traditional thinking
of Indians etc. most of these problems of shortage of funds can be
minimised by giving an industry status to housing finance sectors by the
govt of India.
The steps of government of India such as to cut down the interest rates
on housing finance and to provide tax reb
ate on loan interest can be be appreciated for boosting up the housing
finance market in India.
They should devise innovative housing finance finance schemes for
targeting the economically weaker section (EWS) and low income group
beneficiaries, with suitable subsidy support from the government.

79 | P a g e
 CITATION AND REFERENCE/ BIBLOGRAPHY
BOOKS AND DOCUMENTS
Origin OF PNB. Retrieved 18 feb 2014
PNBOAS updated up to 28-02-2017
PNB ANNUAL REPORT
PNB RESEARCH PAPPER
RBI GENERAL

WEBSITE
WWWINVESTOPEDIA.COM
WWWPNBINDIA.IN
PROFIT.NDTV.COM
WWWMONEYCONTROL.COM

80 | P a g e
81 | P a g e
82 | P a g e