RMDCir231 12

PUNJAB & SIND BANK
( \/ \/A GOVERNMENT OF INDIA UNDERTAKING)
.. . , , , , 21 ] , -110008
H.O. Risk Management Department, 7th Floor, Bank House, 21 Rajendra Place, New Delhi-110008
Fax. 011-25736542; - E-mail: ho.alm@psb.org.in Tel No. 011-25818490;

] Circular No. : 231/2012-13 H - 9021 50 147 /2012 Date: July 19th, 2012 Code No. of the Department : ] Number of pages of Circular : ] \ Running Circular No. of the Bank :
TO ALL THE BRANCHES/CONTROLLING OFFICES REG: MASTER CIRCULAR ON CREDIT RISK RATING FRAMEWORK & MODELS A Master Circular on Credit Risk Rating Framework was issued vide RMD Circular No.153 dated 26/08/2010. Further, a mechanism for mapping internal ratings of Short Term Loans (upto 1 year) with Short Term Ratings of External Credit Rating Agencies, was issued vide RMD Circular No.183 dated 23/12/2010. The Credit Risk Rating Framework and Models of the Bank were reviewed by the Board in its Meeting held on 22/06/2012 and the following were approved : a. The amendments in Credit Risk Rating Framework and Models contained in Annexure A (Page No.2-7) b. The revised Credit Risk Rating Framework & Models as per Annexure B (Page No.8-11) Henceforth, the Credit Risk Rating Models of the Bank shall be as under : Credit Risk Type Rating Models For Corporate 1) Rs. 2 crore & above Loans Credit Risk Rating Format for this model 2) More than Rs.2 Lacs but less than Rs.2 crore Credit Risk Rating Format for this model For Retail Loans 1) Housing, Consumer (including vehicle) & Personal Loans 2) Education Loans For PSB Doctors Special Scheme 2) Mechanism for Mapping of Internal Rating of Short Term Loans (upto 1 Year) with Short Term Ratings of External Credit Rating Agencies Annexure B(1) B(2) B(3) B(4) B(5) B(6) Page No. 11-20 21-25 26-31 32-34 35-40 41-45 46-49 50
All branches/ controlling offices are advised to ensure that Credit Rating of borrowers is done as per the Credit Rating framework/ Models & compliance of the guidelines stated in this circular. (A.S. Jolly) Chief Manager
2(50) ANNEXURE A AMENDMENTS IN CREDIT RISK RATING FRAMEWORK/ MODELS
(1) (A) Credit Risk Rating Models For Corporate Loans :Cut off limit for exposures to be rated under Rating models has been amended as under : Existing Models Revised Models 1) Rs. 1 crore & above 1) Rs.2 crore & above 2) More than Rs.2 Lacs but less than Rs.1 crore 2) More than Rs.2 Lacs but less than Rs.2 crore Rationale : a) Existing Credit Risk Rating Model for More than Rs.2 Lacs but less than Rs.1 crore is more quantitative than Model for Rs.1 crore & above, therefore cut-off limit for exposures to be rated under this model has been enhanced to Rs.2 crore, to cover more borrowers. b) This will also be in line with guidelines on Credit risk assessment i.e. fresh/ enhancement credit proposals above Rs.2 crore, with some exceptions are routed through HO RMD/ ZO Credit Risk cells, for Credit risk assessment. (B) Cases not required to be routed through HO RMD/ ZO Credit Risk cells (RMD), for Credit Risk Assessment :Existing Guidelines 1) Renewal / Reviewal 2) Temporary facilities 3) Central / State Govt. Guaranteed accounts 4) Existing borrowers falling under Credit Rating 1 to 4 (seeking fresh/ additional facilities), provided there is no downgrading of Credit Rating for more than 2 categories, from the previous sanction/renewal/reviewal etc. Example :- If Credit rating downgrades from 1 to 3, proposal may not be routed through RMD but if it downgrades from 1 to 4, the proposal be routed through RMD for confirmation of credit rating But, if Credit Rating downgrades from 4 to 5 or below, it may be routed through RMD. If the Credit Rating upgrades from any lower category to top 4 categories (1 to 4), it may not be routed through RMD Revised Guidelines 1) Renewal / Reviewal 2) Temporary facilities 3) Central / State Govt. / PSU accounts / Statutory corporations 4) Banks (with Basel II CRAR > = 12 %) 5) Existing borrowers (other than above) falling under Credit Rating 1 to 5 (seeking enhancement in existing facilities or any additional facilities), provided there is no downgradation of Credit Rating for more than 2 categories, from the previous sanction/renewal/reviewal etc. Example :- If Credit rating downgrades from 1 to 3, proposal may not be routed through RMD but if it downgrades from 1 to 4 or from 2 to 5 (i.e. downgrades by 3 categories), the proposal be routed through RMD for confirmation of credit rating. But, if Credit Rating downgrades from 4 to 6 or below, it may be routed through RMD. If the Credit Rating upgrades from any lower category to top 5 categories (1 to 5), it may not be routed through RMD In addition to above, following new guidelines have been inserted :
In case of existing borrowers, seeking enhancement in existing facilities or any additional facilities, if the case falls under the powers of higher sanctioning authority than the authority under whose powers the case was earlier sanctioned, the proposal may be routed through HO RMD or ZO Credit Risk Cells for Credit Risk Assessment, as the case may be. Example : If the existing case was earlier sanctioned under the powers of Branch Manager and now due to the proposed enhancement or additional facility, it falls under the powers of Zonal Manager, the same may be routed through Zonal Office Credit Risk Cell for Credit Risk Assessment. Similarly, if the existing case was earlier sanctioned under the powers of Zonal Manager and now due to the proposed enhancement or additional facility, it falls under the powers of HO, the same may be routed through HO RMD for Credit Risk Assessment.
(2) Modifications in Parameters under Credit Risk Rating Model Rs. 2 crore & above
(A) Industry Risk : Existing Parameter no.6 : Importance to Economy (in terms of Industry size/ contribution to Production, Export, Employment Generation, Forward/Backward linkages etc.) Very high 4 High 3 Moderate 2 Low 1 Negligible 0
New Parameter No. 6 (given below) inserted under Industry Risk, to replace existing parameter No.6: Segment under which the industry/ sector falls, as per Banks Loan Policy Preferred Segment 4 Normal Segment 2 Caution List 0
(C) MANAGEMENT RISK a) Existing Parameter No.1 : Promoters/Partners/Proprietors experience in the business/ industry (experience in group account(s) may also be considered, if nature of business is same) Years Marks > = 10 4 > = 7 < 10 3 >=4<7 2 >=2<4 1 <2 0
For computing no. of years, new clause for the above parameter is as under: Years of experience should be counted from date of commencement of business and not merely from the date of incorporation/ establishment of a company/ firm
4(50) 5) Ownership pattern/ Management S.No. Existing Clause Revised Clause Marks 1 Companies - Widely held & - Central Govt. Accounts, Maharatna / Navratna 4 professionalism at Top level PSUs, Banks with Basel II CRAR > = 12 %; Statutory corporations (public enterprises into existence by a Special Act of the Parliament) like Airport Authority of India, National Highway authority of India, Food Corporation of India etc. -Companies / firms / Societies / Trusts / NBFCs having Top 2 Long term rating grades (AAA/ AA not older than 15 months) of any debt instrument / Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 2 Companies - Widely / closely - State Govt. Accounts, Mini Ratna PSUs, Banks 3 held & Management with with Basel II CRAR > = 11< 12 % ; group of persons; other -Companies/firms/Societies/Trusts//NBFCs having constitutions like Society, Long term rating grade A (not older than 15 Trust months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 3 Companies - Widely/closely - Banks with Basel II CRAR > = 10< 11 %; 2 held & Management with -Companies/firms/Societies/Trusts/NBFCs having family; other constitutions Long term rating grade BBB (not older than 15 like Partnership concern months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 4 Ownership/ Management - Banks with Basel II CRAR > = 9< 10 %; 1 with individual/ proprietor -Companies/firms/Societies/Trusts/NBFCs having with a succession plan unrated claims/ not having any rated long term debt instrument (*) 5 Ownership/ Management - Banks with Basel II CRAR < 9 %; 0 with individual/ proprietor -Companies/firms/Societies/Trusts/NBFCs having with no succession plan Long term rating grade BB and below (not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) * In case of New Company/ SPV/firm, Rating of Promoter, if available may be taken into consideration for giving marks * In case of MSMEs, equivalent SME rating grades of above agencies along-with other agencies like SMERA may be considered. * If rating of 2-3 rating agencies/ Long term debt instruments is available, then the lowest rating of any instrument (not older than 15 months) by any of the above agencies should be taken into account, for giving marks
5(50) c) Parameter No.3) Quality of Management If If If If If highly qualified Management (technocrats) & adequate professionals qualified Management & adequate professionals qualified Management but few professionals (not adequate) Management not qualified but adequate professionals Management not qualified & inadequate/no professionals 4 3 2 1 0
The above parameter has been dispensed with. (D) FINANCIAL RISK Amendment in Existing Clauses as under : Existing Clause (a) In case of existing companies/ firms, the applicable parameters are to be worked out based on past financials. However, in case of existing companies/ firms undertaking New projects, the applicable parameters are to be worked out based on both past financials as well as future projections (b) for newly established firms/companies with no past financials, applicable parameters will be worked out based on projections accepted by the Bank (c) Revised Clause (a) No Change
(b) for newly established firms/companies and existing companies/ firms, which have not carried out operations since inception, with no past financials, applicable parameters will be worked out based on projections accepted by the Bank (c) New Clause Companies / firms, which are taken-over by New Management (in take-over / merger cases) - In such cases, applicable parameters are to be worked out based on both past financials as well as future projections. In such cases, applicable parameters for Management Risk may be considered based on New Management.
(E) SECURITY RISK

Change in following clause : Existing Clause c) Security Risk may be treated Not applicable for the purpose of working of credit rating in case of Central/ State Govt. guaranteed accounts, whether collateral security is available or not Revised Clause c) Security Risk may be treated as Not applicable for the purpose of working of credit rating in case of Central/ State Govt. accounts, Statutory Corporations, whether collateral security is available or not
6(50) In addition to above the following new clauses have been inserted : e) Annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights may be treated as tangible securities, for the purpose of giving marks under Security Risk, subject to conditions being met as per RBI guidelines given below. In terms of RBI guidelines vide RBI/2009-10/421, DBOD No. BP.BC. 96 / 08.12.014/ 2009-10, dated April 23, 2010, on Prudential norms on Advances to Infrastructure Sector, it has been decided that banks may treat annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights, where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved, as tangible securities subject to the condition that banks right to receive annuities and toll collection rights is legally enforceable and irrevocable. f) In case of Unsecured loans, Security Risk may be treated as Not applicable in following cases : i) If the borrower (or its promoter, in case of new company/ SPV/ firm) has top 2 Long term rating grades (AAA/AA - not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK. In case of MSMEs, equivalent SME rating grades of above agencies along-with other agencies like SMERA may be considered. ii) Banks with Basel II CRAR >=12 % iii) Maharatna/Navratna/Miniratna PSUs
(E) OPERATIONAL RISK

The parameter given below has been dispensed with. Parameter 6) Value of account to the Bank (Income to the bank i.e. interest, commission, exchange etc. as percentage (%) of total funded & non funded limits, taken on annualized basis) a) For borrowers availing funded limits (income to the Bank from funded limits as a percentage of total funded limits, taken on annualized basis) >=9% >=7%<9% >=5%<7% >=2%<5% < 2% SCORE 4 3 2 1 0
b) For borrowers availing Non fund limits (income to the Bank from non funded SCORE limits as a percentage of total Non funded limits, taken on annualized basis) >=3% 4 >=2%<3% 3 >=1%<2% 2 > = 0.50 % < 1 % 1 < 0.50 % 0
7(50) Note - for borrowers availing both Funded & Non funded limits, both the above tables will be applicable i.e. income to the Bank would be worked out separately for Funded & Non funded limits, as per the respective scoring guides and average score given accordingly (Example if the borrower gets a score 4 for a) & 3 for b), the average score works out to 3.50 (i.e. 4+3 / 2) out of 4, which would be considered for Value of account to the Bank)
(3) Modifications in Parameters under Credit Risk Rating Model for More than Rs.2 Lacs
but less than Rs.2 crore. Same clauses/ modifications are also to be incorporated in the above model, as made under Credit Risk Rating Model Rs. 2 crore & above, for the common parameters in both the models.
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8(50) ANNEXURE B CREDIT RISK RATING FRAMEWORK 1. Credit Risk Rating Models, are as under : Credit Risk Type Rating Models For Corporate 1) Rs. 2 crore & above Loans Credit Risk Rating Format for this model 2) More than Rs.2 Lacs but less than Rs.2 crore Credit Risk Rating Format for this model For Retail Loans 1) Housing, Consumer (including vehicle) & Personal Loans 2) Education Loans For PSB Doctors Special Scheme 2) Mechanism for Mapping of Internal Rating of Short Term Loans (upto 1 Year) with Short Term Ratings of External Credit Rating Agencies Annexure B(1) B(2) B(3) B(4) B(5) B(6)
3) Credit Rating of the borrower shall be intrinsic part of appraisal system i.e. credit rating of all loans & advances above Rs.2 Lacs is to be done (except exempted categories) irrespective of the fact whether rate of interest on such type of loan/ advance is linked with credit rating or not. 4) Credit Rating scale & nomenclature is as under :RATING SCALE NOMENCLATURE Weighted score >= 90 >=80 < 90 >=70 < 80 >=60 < 70 >=50 < 60 >=40 < 50 < 40 Credit Rating (CR) 1 2 3 4 5 6 7 8 9 Minimum Risk Marginal Risk Modest Risk Below Average Risk Average Risk Above Average Risk Caution NPA sub-standard assets NPA Doubtful & Loss assets
5) New/ Existing borrowers may be considered for sanction of fresh/enhancement/temporary facilities as under :CREDIT RATING SANCTIONING AUTHORITY 1 to 5 6 7 Respective sanctioning authority Next higher authority ED & above (as per respective discretionary lending powers)
9(50) - Renewal/ reviewal of borrowal accounts falling in all the Rating Categories may however be considered by respective sanctioning authorities. - For considering any exposure to borrowers falling under Credit Rating 6 & 7, specific reasons/ justification must be recorded. 6) Frequency of review of Credit Rating is as under :Credit Rating 1 to 5 Above 5 Periodicity of Review Yearly Half Yearly
However, it will be mandatory that credit rating is assessed at the time of renewal/ enhancement. 7) Credit Rating format/ calculation sheet will form a part of review sheet as prescribed in I.D.Circular No.1450. 8) Discretionary powers linked with Credit Rating is as under :Credit Rating Extent of discretionary powers 1 to 5 100 % Above 5 75 % * * 100 % discretionary powers in cases of renewal/ reviewal The above powers may be exercised at the time of renewal/ enhancement/ revision/ extension in the validity of existing credit limits in case of existing clients and sanction in case of new clients. 9) Interest Rate linked to Credit Rating : Guidelines on Interest (linked with Credit Rating) are as per I.D.Circular No.1628 dated 01/07/2010, I.D.Circular No.1632 dated 21/08/2010, I.D.Circular No.1635 dated 18/12/2010 & I.D.Circular No.1647 dated 26/09/2011 and will be as per circulars on the subject issued from time to time by HO Credit Monitoring & Policy Deptt. 10) If the borrower does not submit necessary financial papers/documents / information within three months of the due date of the renewal, its rating after the expiry of the said three months would be downgraded by one step from its previous credit rating, and interest charged as per downgraded rating, till the case is got renewed from the competent authority.
11) Basis of Computing Credit Rating :-
The basis of computing credit rating shall preferably be the latest Audited Balance sheet of the borrower. In case of inability of the borrower to furnish latest Audited Balance sheet, latest Provisional Balance Sheet verified by the chief executive of the borrowing organization may be considered. 12) Central Govt./ State Govt. guaranteed accounts Credit worthiness of these borrowers is high, even after being weak on certain financial parameters due to public commitments and it is an entity with a huge asset base and robust standing, a very low probability of default. The is also reflected in the low risk weight assigned to such entities under the
10(50) Basel-II guidelines. Therefore, the cases of Central / State Government Guaranteed Accounts will be kept outside the purview of the credit rating and pricing frame work. However, Credit Rating of such entities/ accounts will be worked out for academic purposes (which will not have any bearing whatsoever on the sanction of credit facilities to these accounts) and should invariably be entered in the Investment Statement, to enable HO RMD-CRG to study rating migration etc. 13) Cases not required to be routed through HO RMD/ ZO Credit Risk cells (RMD), for Credit Risk Assessment (#) :1) Renewal/ Reviewal 2) Temporary facilities 3) Central/ State Govt. / PSU accounts/ Statutory corporations 4) Banks (with Basel II CRAR > = 12 %) 5) Fresh / enhancement credit proposals up-to Rs.2 crores 6) Existing borrowers (other than above) falling under Credit Rating 1 to 5 (seeking enhancement in existing facilities or any additional facilities), provided there is no downgradation of Credit Rating for more than 2 categories, from the previous sanction/renewal/reviewal etc. Example :- If Credit rating downgrades from 1 to 3, proposal may not be routed through RMD but if it downgrades from 1 to 4 or from 2 to 5 (i.e. downgrades by 3 categories), the proposal be routed through RMD for confirmation of credit rating. But, if Credit Rating downgrades from 4 to 6 or below, it may be routed through RMD. If the Credit Rating upgrades from any lower category to top 5 categories (1 to 5), it may not be routed through RMD. Further, in case of existing borrowers, seeking enhancement in existing facilities or any additional facilities, if the case falls under the powers of higher sanctioning authority than the authority under whose powers the case was earlier sanctioned, the proposal may be routed through HO RMD or ZO Credit Risk Cells for Credit Risk Assessment, as the case may be. Example : If the existing case was earlier sanctioned under the powers of Branch Manager and now due to the proposed enhancement or additional facility, it falls under the powers of Zonal Manager, the same may be routed through Zonal Office Credit Risk Cell for Credit Risk Assessment. Similarly, if the existing case was earlier sanctioned under the powers of Zonal Manager and now due to the proposed enhancement or additional facility, it falls under the powers of HO, the same may be routed through HO RMD for Credit Risk Assessment. (#) HO RMD-CRG would conduct rating confirmation and provide industrial scenarios. As such, ZO Credit risk cells may also use Revised Credit Risk formats prescribed herein for confirmation of Credit Ratings for proposals being routed through them. As such, Credit Risk assessment by HO RMD / ZO Credit Risk cells would be restricted to only confirmation of credit rating & providing industry scenarios (subject to availability). HO RMD would also provide comments with regard to risk related to the case in the light of industry scenario. However, as per the policy, HO RMD would not give any comments related to the appraisal of the loan proposal. **********
11(50) ANNEXURE B (1) CREDIT RISK RATING MODEL FOR ADVANCES OF RS.2 CRORE & ABOVE (A) INDUSTRY RISK 1) Market potential/ Demand of the Product Market potential/Demand of the product is very good, Demand much higher than supply Market potential/Demand of the product is good, Demand higher than supply Market potential/Demand of the product is moderate, Demand in line with supply Market potential/Demand of the product is low, Supply is higher than demand, overcapacity Market potential/Demand of the product is poor, Supply likely to remain much higher than demand, serious overcapacity 2) Sensitivity to Government Policies (i.e. impact of Government policies) Nil 4 Low 3 Moderate 2 High 1 Very High 0 4 3 2 1 0
3) Extent of Competition (Domestic and/or International Threats of imports/ substitutes/ organized/ unorganized sector etc.) Nil Low Moderate High Very High 4 3 2 1 0 4) Input related Risk (Availability of Raw material) Abundant & easily available/ assured Generally available, almost assured Available subject to tie ups Not easily available/ assured, prices could fluctuate widely Quite difficult & supplier determines prices 5) Impact on Industry performance of cyclical fluctuation No effect 4 Minor 3 Moderate 2 High 1 Very High 0 4 3 2 1 0
6) Segment under which the industry/ sector falls, as per Banks Loan Policy Preferred Segment 4 Normal Segment 2 Caution List 0
12(50)
CREDIT RISK RATING MODEL FOR ADVANCES OF RS.2 CRORE & ABOVE
Additional parameters for exposure above Rs.5 crore (industry aggregates) (Ratios given below can be sourced from data-base like CMIE, CRISIL,ICRA, any reputed publication etc. If not available, may be sought from HO RMD, which will be provided on availability) 7) Return on capital employed (3 year industry average) * > = 15 % 4 > = 10 % < 15 % 3 > = 5 % < 10 % 2 >= 1%<5% 1 <1% 0
8) Operating profit (before interest) margin (3 year industry average) * > = 10 % 4 > = 7 % < 10 % 3 >=3%< 7% 2 < 3% 1 Negative 0
Note :- PBIT (Profit before interest & tax) margin may be used, if Operating profit margin is not available (scoring guide will remain same) 9) Net profit margin (3 year industry average) * > =5% 4 >=3%<5% 3 >=2%< 3% 2 < 2% 1 Negative 0
* if 3 year industry average is not available, latest year data may be relied upon (B) BUSINESS RISK a) Growth Parameters 1) Increase in Net sales over last year > = 15 % 4 > = 10 % < 15 % 3 > = 5 % < 10 % 2 < 5% 1 Decrease 0
2) Increase in Operating profit margin (Operating profit before interest / Net Sales x 100) over last year > = 3% 4 >=2%<3% 3 >=1%< 2% 2 < 1% 1 Decrease 0
3) Increase in Net profit margin (Net profit/Net Sales x 100) over last year >=2% 4 >=1%<2 % 3 > = 0.5 % < 1 % 2 < 0.5 % 1 Decrease 0
13(50)
EXAMPLE :- How to work out increase in Operating profit margin & increase in Net Profit margin over last year Previous Current Remarks FY FY Net Sales Net Profit (a) (c) 1000 100 50 10 5 1100 115 56 10.45 5.09 Net sales has increased by 10 % Operating profit has increased by 15 % Net Profit has increased by 12 % Increase in operating profit margin is (10.45 10) 10 x100 = 4.5 % (qualifies for 4 marks) Increase in Net profit margin is (5.09-5) 5 x 100 = 1.8 % (qualifies for 3 marks) Operating Profit (b) Operating profit margin (b/a x100) in % age Net profit margin (c/a x 100) in % age
However, in case for 2011 - Operating profit is 109 & Net profit is 54, Operating profit margin will be 9.91 % (109/1100 x 100) & Net profit margin will be 4.91 % (54/1100 x 100). In this case, the Operating profit margin & Net profit margin have decreased over the last year (2010), therefore both these ratios will qualify for 0 marks 4) Debtor's velocity (Debtors/Credit Sales x 360 days) = < 30 days 4 > 30 < = 75 days 3 > 75 < = 135 days 2 > 135 < =180 days 1 > 180 days 0
b) Select 4 most appropriate parameters, applicable for the business of the borrower, out of following 6 parameters (in case of few borrowers, less than 4 parameters may be applicable) :1) Technology (adopted by the borrower) Excellent/ Best technology Very Good technology no major changes likely in medium term 3 Contemporary/Good Old TechnologyTechnology is technology but Improved version/ Outdated/obsolete likely to undergo substitutes available changes 2 1 0
2) Distribution set up, support/ after sale services etc. of the borrower Excellent 4 Good 3 Average 2 Below Average 1 Poor 0
14(50)
3) Pricing flexibility (Flexibility to increase prices in line with costs vis--vis the competitors) Very High 4 High 3 Average 2 Low 1 Negligible 0
4) Product Range (single product dependence or wide range of products) Risk of product range is Risk of product range is Risk of product range is Risk of product range is Risk of product range is negligible due to wide range of products low due to reasonable range of products moderate due to limited range of products high due to very low range of products very high due to single product dependence 4 3 2 1 0
5) Geographical distribution of markets (Domestic & international Geographical diversification of market of borrower's products) Excellent 4 Good 3 Average 2 Below average 1 Poor 0
6) Locational advantage, Availability of utilities power, water etc. Excellent 4 Good 3 Average 2 Below average 1 Poor 0
(C) MANAGEMENT RISK (In takeover / merger cases, applicable parameters for Management Risk may be considered based on New Management) 1) Promoters/Partners/Proprietors experience in the business/ industry (experience in group account(s) may also be considered, if nature of business is same) Years Marks > = 10 4 > = 7 < 10 3 >=4<7 2 >=2<4 1 <2 0
Note :- Years of experience should be counted from date of commencement of business and not merely from the date of incorporation/ establishment of a company/ firm 2) Credibility For existing borrowers, Bank's past experience may be taken into account. For New borrowers, inputs may be derived from other Banks/FIs, market reputation, published material, CIBIL etc. If integrity, commitment, sincerity is good & no adverse record is found If integrity is good but some record of failing in commitment If there is some information about lack of commitment & sincerity but not fully substantiated If acceptable integrity but there is definite record of failure in commitment If Integrity not reliable due to repeated failure in commitment 4 3 2 1 0
15(50)
3) Payment record to Banks/FIs, including our Bank (for new borrower, payment record to other Banks/FIs may be taken into account) Early/Normal/Regular repayment 4 Regular repayment with occasional delay 3 Frequent delays in repayment 2 Delays in repayment leading to reschedulement, restructuring etc. 1 Default Account likely to become NPA, as per RBI guidelines 0 Note :- For Newly established firm/Co., Payment record to Banks/FIs of borrower's group/ sister concerns (if any) may be taken into account. For borrowers not availing credit facilities from any Bank/FI or not having any group/sister concern, this parameter will not be applicable 4) Ownership pattern/ Management 1 - Central Govt. Accounts, Maharatna/ Navratna PSUs, Banks with Basel II CRAR > = 12 %; Statutory corporations (public enterprises into existence by a Special Act of the Parliament) like Airport Authority of India, National Highway authority of India, Food Corporation of India etc. 4
-Companies/firms/Societies/Trusts/NBFCs having Top 2 Long term rating grades (AAA/ AA - not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 2 - State Govt. Accounts, Mini Ratna PSUs, Banks with Basel II CRAR > = 11< 12 %; 3 -Companies/firms/Societies/Trusts//NBFCs having Long term rating grade A (not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 3 - Banks with Basel II CRAR > = 10< 11 %; 2 -Companies/firms/Societies/Trusts/NBFCs having Long term rating grade BBB (not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) 4 - Banks with Basel II CRAR > = 9< 10 %; 1 -Companies/firms/Societies/Trusts/NBFCs having unrated claims/ not having any rated long term debt instrument (*) 5 - Banks with Basel II CRAR < 9 %; 0 -Companies/firms/Societies/Trusts/NBFCs having Long term rating grade BB and below (not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK (*) * In case of New Company/ SPV/firm, Rating of Promoter, if available may be taken into consideration for giving marks * In case of MSMEs, equivalent SME rating grades of above agencies along-with other agencies like SMERA may be considered. * If rating of 2-3 rating agencies/ Long term debt instruments is available, then the lowest rating of any instrument (not older than 15 months) by any of the above agencies should be taken into account, for giving marks
16(50)
Projections Vs Achievements (comparison of actual results with estimates/ projections submitted normally a year back, at the time of last sanction/renewal/reviewal) 5) Percentage achievement of Sales projections > = 100 % 4 > = 85 % < 100 % 3 > = 75 % < 85 % 2 > = 60 % < 75 % 1 < 60 % 0
6) Percentage achievement of Net Profit projections > = 95 % 4 > = 80 % < 95 % 3 > = 65 % < 80 % 2 > = 50 % < 65 % 1 < 50 % 0
7) Percentage achievement of Net Working Capital (NWC) projections > = 100 % 4 > = 85 % < 100 % 3 > = 75 % < 85 % 2 > = 60 % < 75 % 1 < 60 % 0
(D) FINANCIAL RISK (a) In case of existing companies/ firms, the applicable parameters are to be worked out based on past financials. However, in case of existing companies/ firms undertaking New projects, the applicable parameters are to be worked out based on both past financials as well as future projections (b) For newly established firms/companies and existing companies/ firms, which have not carried out operations since inception, with no past financials, applicable parameters will be worked out based on projections accepted by the Bank (c) Companies/ firms, which are taken-over by New Management (in take-over/ merger cases) - In such cases, applicable parameters are to be worked out based on both past financials as well as future projections. In such cases, applicable parameters for Management Risk may be considered based on New Management. 1) Operating profit margin (Operating profit before interest/ Net Sales x 100) > = 10 % 4 > = 7 % < 10 % 3 >=3%< 7% 2 < 3% 1 Negative 0
2) Net profit margin (Profit after tax/ Net Sales x 100) > =5% 4 >=3%<5% 3 >=2%< 3% 2 < 2% 1 Negative 0
3) Return on Capital Employed (Profit before tax + Interest) (Tangible Networth + Term Liabilities including unsecured loans + Bank borrowings) x 100 > = 15 % 4 > = 10 % < 15 % 3 > = 5 % < 10 % 2 >= 1%<5% 1 <1% 0
17(50)
4) Current ratio (Current Assets/ Current Liabilities) > = 1.33 4 > = 1.25 < 1.33 3 > = 1.17 < 1.25 2 > = 1.10 < 1.17 1 < 1.10 0
Current ratio for Sugar Industry > = 1.00 > = 0.95 < 1.00 4 3
> = 0.92 < 0.95 2
> = 0.88 < 0.92 1
< 0.88 0
5) Ratio of Total Outside Liabilities to Tangible Net worth (TOL/TNW) <= 2 4 > 2 < = 2.50 3 > 2.50 < = 3 2 > 3 < = 3.50 1. > 3.50 0
Note :- In case borrower is not availing any working capital facility, Current liabilities may be excluded from TOL for working of this ratio TOL/TNW in case of Infrastructure projects & NBFCs <= 3 > 3<= 4 > 4<= 5 > 5 < =6 4 3 2 1 Note :- In case of NBFCs, Net owned funds (NOF) may be used instead of TNW
> 6 0
6) Interest Coverage ratio - (Profit after tax + Interest + Depreciation) Interest > = 3.00 > = 2.50 < 3.00 > = 2.00 < 2.50 > = 1.50 < 2.00 < 1.50 4 3 2 1 0 7) Debt Service Coverage ratio - (Profit after tax + Interest + Depreciation) (Interest + Repayments due) > = 2.00 > = 1.75 < 2.00 > = 1.50 < 1.75 > = 1.25 < 1.50 < 1.25 4 3 2 1 0 Note :- Repayments due covers Deposits/Debentures/Instalments under term loans, DPGs etc. - refer this column under Current liabilities in CMA data. This ratio is not applicable if there are no repayments due 8) Contingent liabilities as a percentage of Tangible Net worth (Contingent liabilities/ Tangible Networth x 100) Nil < 5% > = 5 % < 15 % > = 15 % < 25 % > = 25 % 4 3 2 1 0 Note :- Contingent liabilities normally appear under Notes to accounts in Audited B/S REGARDING OPERATING PROFIT MARGIN (UNDER BUSINESS & FINANCIAL RISKS) In case where Operating profit cannot be properly worked out from the Balance Sheet & CMA data is not available, PBIT margin (Profit before interest & tax/ Net Sales x 100) may be used/ worked out (scoring guide will remain the same for both these ratios)
18(50)
(E) SECURITY RISK

a) Primary Security (Property) may be added to collateral security (if any), only for the purpose of working of marks for Security Risk/credit rating, in cases ODP/ LAP b) In case of Term Loan against Land and/ or Fixed Assets/ construction/ project financing etc., where Land/building/Plant & machinery/other fixed assets etc. are proposed as Primary Security, 100 % value of Land, 75 % value of Building & 50 % value of Plant & Machinery (valuation of all as per extant Bank guidelines) may be added to collateral security (if any), only for the purpose of working of marks for Security Risk/Credit rating. Any other type of assets proposed as primary security may not be added to collateral security for this purpose c) Security Risk may be treated as Not applicable for the purpose of working of credit rating in case of Central/ State Govt. accounts, Statutory Corporations, whether collateral security is available or not d) Exposure of Non- fund limits may be reduced to the extent of cash margin available, for the purpose of working of marks for Security Risk/credit rating e) Annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights may be treated as tangible securities, for the purpose of giving marks under Security Risk, subject to conditions being met as per RBI guidelines given below. In terms of RBI guidelines vide RBI/2009-10/421, DBOD No. BP.BC. 96 / 08.12.014/ 2009-10, dated April 23, 2010, on Prudential norms on Advances to Infrastructure Sector, it has been decided that banks may treat annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights, where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved, as tangible securities subject to the condition that banks right to receive annuities and toll collection rights is legally enforceable and irrevocable. f) In case of Unsecured loans,Security Risk may be treated as Not applicable in following cases : i) If the borrower (or its promoter, in case of new company/ SPV/ firm) has top 2 Long term rating grades (AAA/AA - not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE & FITCH AND BRICKWORK. In case of MSMEs, equivalent SME rating grades of above agencies along-with other agencies like SMERA may be considered. ii) Banks with Basel II CRAR >=12 % iii) Maharatna/Navratna/Miniratna PSUs
19(50)
Scoring guide for Security Risk

(Value of collateral security as a percentage of total proposed funded & non funded exposure) > = 150 % 10 > = 100 % < 150 % 09 > = 90 % < 100 % 08 > = 75 % < 90 % 07 > = 60 % < 75 % 06 > = 50 % < 60 % 05 > = 40 % < 50 % 04 > = 30 % < 40 % 03 > = 20 % < 30 % 02 > = 10 % < 20 % 01 < 10 % 0 (F) OPERATIONAL RISK 1) Conduct of account Excellent (interest/ instalment on time, no overdrawing, No return of Cheque/ bills purchased or discounted, No devolvement of LC/invocation of BG, no cash withdrawal etc. Generally interest/ instalment on time but sometimes delayed (not beyond a week), Return of cheques/bills purchased or discounted, cash withdrawal 1-2 such instances only Generally interest/ instalment on time but sometimes delayed (not beyond 2 weeks), Return of cheques/bills purchased or discounted, cash withdrawal 3-4 such instances only Delay in payment of interest/ instalment upto a month, Return of cheques / bills purchased or discounted, cash withdrawal more than 4 such instances Frequent delay in payment of interest/ instalment, Frequent cases of Return of cheques/bills purchased or discounted, cash withdrawal, any devolvement of LC/invocation of BG 2) Turnover in the account (i.e. Business income/sales routed in the account) > = 90 % > = 75 % < 90 % > = 60 % < 75 % > = 50 % < 60 % < 50 % 4 3 2 1 0 Note :- applicable in case of borrowers availing working capital limits from our Bank only 3) Submission of QIS/ MSOD/ Stock/Book Debts Statements Timely submission Delayed submission upto 2 occasions Delayed submission upto 4 occasions Delayed submission upto 5 occasions Delayed submission above 5 occasions 4 3 2 1 0 4 3 2 1 0
20(50)
4) Submission of Renewal data/Financial Papers etc. Timely submission Delayed submission upto 15 days Delayed submission beyond 15 days & upto 30 days Delayed submission beyond 30 days & upto 45 days Delayed submission beyond 45 days 4 3 2 1 0
5) Length of past relationship with Bank (Point no. 1,2,3,4 under this head, compliance of terms & conditions of sanction etc. over the years, may be considered to assess whether the relationship is satisfactory or not) Satisfactory relationship with the Bank for duration > = 5 years Satisfactory relationship with the Bank for duration > = 3 < 5 years Satisfactory relationship with the Bank for duration > = 1 < 3 years Not very Satisfactory relationship in the past (irrespective of any duration) Unsatisfactory relationship in the past (irrespective of any duration) 4 3 2 1 0
Note :- The above parameter will not be applicable for borrowers having satisfactory relationship with the Bank for less than 1 year. However, if relationship with such borrowers is not satisfactory, this parameter becomes applicable & such borrowers be given 0 mark For Consortium Accounts :- For borrowers availing facilities under Consortium banking arrangement (having at least 3 member banks, including our Bank), 10 % marks may be added to the total marks obtained under Operational Risk however, weighted score not to exceed 20 i.e. maximum weight for Operational Risk
Weights assigned to different risk modules Module Score Maximum Weight (3) obtained score*
RISKS
Weighted score
(c) Newly (1 2) x 3 established firm/ co. 15 25 25 20 15 0 100
(1)
(2)
(a) Existing account 05 15 15 35 10 20 100
(b) New account 10 25 20 35 10 0 100
INDUSTRY BUSINESS MANAGEMENT FINANCIAL SECURITY OPERATIONAL TOTAL SCORE * for the parameters applicable in the account
21(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________
CREDIT RISK RATING FORMAT (FOR CREDIT RISK RATING MODEL FOR
ADVANCES OF RS.2 CRORE & ABOVE)
A
1 2 3
INDUSTRY RISK
Market potential/ Demand of the Product Sensitivity to Government Policies (i.e.impact of Government policies) Extent of Competition (Domestic and/or International Threats of imports/ substitutes/ organized/ unorganized sector etc.) Input related Risk (Availability of Raw material) Impact on Industry performance of cyclical fluctuation Segment under which the industry/ sector falls, as per Banks Loan Policy
MAXIMUM SCORE SCORE AWARDED 4 4 4
REMARKS (IF ANY)
4 5 6
4 4 4
Additional parameters for exposure above Rs.5 crore (industry aggregates) 7 8 9 Return on capital employed Operating profit margin Net profit margin 4 4 4
TOTAL (INDUSTRY RISK)
B
1 2 3 4
BUSINESS RISK
Increase in Net sales over last year Increase in Operating profit margin over last year Increase in Net profit margin over last year Debtor's velocity
MAXIMUM SCORE SCORE AWARDED 4 4 4 4
GIVE COMPUTATION & REMARKS, IF ANY
22(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________ B BUSINESS RISK MAXIMUM SCORE SCORE AWARDED REMARKS (IF ANY)
Select 4 most appropriate parameters, applicable for the business of the borrower, out of following 6 parameters (in case of few borrowers, less than 4 parameters may be applicable) 5 6 7 Technology borrower) (adopted by the 4 4 4
Distribution set up, support/ after sale services etc. of the borrower Pricing flexibility (Flexibility to increase prices in line with costs vis--vis the competitors) Product Range (single product dependence or wide range of products) Geographical distribution of markets (Domestic & international Geographical diversification of market of borrower's products)
10 Locational advantage, Availability of utilities power, water etc.
TOTAL (BUSINESS RISK)
C
1
MANAGEMENT RISK*
Promoters / Partners / Proprietors experience in the business/ industry Credibility Payment record to including our Bank Banks/FIs,
MAXIMUM SCORE SCORE AWARDED 4
REMARKS (IF ANY)
2 3 4
4 4 4
Ownership pattern/ Management
*In takeover/ merger cases, applicable parameters for Management Risk considered, based on New Management.
23(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________ C MANAGEMENT RISK MAXIMUM SCORE SCORE AWARDED
GIVE COMPUTATION & REMARKS, IF ANY
Projections Vs Achievements (comparison of actual results with estimates/ projections submitted normally a year back, at the time of last sanction/renewal/reviewal) 5 6 7 Percentage achievement of Sales projections Percentage achievement of Net Profit projections Percentage achievement of Net Working Capital projections 4 4 4
TOTAL (MANAGEMENT RISK)
GIVE MAXIM SCORE SCORE TOTAL COMPUTATION UM AWARD AWARD SCORE (Based on Audited/ Provisional/ SCORE ED A ED - B AWARDED- OF RATIOS & Projected Financials for REMARKS, IF (#) (*) (A + B) ___________________)
FINANCIAL RISK
ANY
1 2 3 4 5 6 7 8
Operating profit margin Net profit margin Return on Capital Employed Current ratio Ratio of Total Outside Liabilities to Tangible Net worth Interest Coverage ratio Debt Service Coverage ratio Contingent liabilities as a percentage of Tangible Net worth
4 4 4 4 4 4 4 4
TOTAL (FINANCIAL RISK)
24(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________ (#) applicable ratios under this column are to be worked out based on past financials, preferably Audited B/s this column (A) is applicable in case of existing companies/ firms (*) applicable ratios under this column are to be worked out based on projections accepted by the Bank this column (B) is applicable in case of newly established firms/companies and existing companies/ firms, which have not carried out operations since inception, with no past financials. (A) + (B) both these columns are applicable in case of existing companies/ firms undertaking New projects and in case of companies/ firms, which are taken-over by New Management (in take-over/ merger cases) - In such cases i.e. applicable ratios are to be worked out based on both past financials as well as future projections. In such cases, Maximum score for each applicable ratio will be 8 (i.e. 4 for past financials + 4 for projections)
SECURITY RISK
GIVE COMPUTATION OF MAXIMUM SCORE COVERAGE OF EXPOSURE & SCORE AWARDED REMARKS, IF ANY
TOTAL (SECURITY RISK)
10
F
1 2 3 4 5
OPERATIONAL RISK
Conduct of account Turnover in the account Submission of QIS/ MSOD/ Stock/Book Debts Statements Submission of Renewal data / Financial Papers etc. Length of past relationship with Bank
GIVE COMPUTATION FOR MAXIMUM SCORE PARAMETER 2 & REMARKS, SCORE AWARDED IF ANY
4 4 4 4 4
TOTAL (OPERATIONAL RISK)

Note Use separate sheet for computation of ratios and remarks, if required
WEIGHTS ASSIGNED TO DIFFERENT RISK MODULES

(FOR CREDIT RISK RATING MODEL FOR ADVANCES OF RS.2 CRORE & ABOVE)
Module
Score Maximum Weight (3) obtained score* (1) (2)

(a) Existing account 05 15 15 35 10 20 100 (b) New account 10 25 20 35 10 0 100
Weighted score
(c) Newly (1 2) x 3 established firm/ co. 15 25 25 20 15 0 100
RISKS
A) INDUSTRY B) BUSINESS C) MANAGEMENT D) FINANCIAL E) SECURITY F) OPERATIONAL
TOTAL SCORE
* for the parameters applicable in the account
TOTAL WEIGHTED SCORE
CREDIT RATING
NOMENCLATURE
26(50) ANNEXURE B (2) CREDIT RISK RATING MODEL FOR ADVANCES OVER RS. 2 LACS BUT LESS THAN RS.2 CRORE
(A) MANAGEMENT RISK

1) Promoters/ Partners/ Proprietors experience in the business/ industry (experience in group account(s) may also be considered, if nature of business is same) No. of Years > = 10 > = 7 < 10 >=4<7 >=2<4 <2 Marks 4 3 2 1 0 Note :- In case of promoters/ partners have technical qualification i.e., degree/ diploma related to the concerned trade/ industry, 1 additional mark may be given, however, maximum score not to exceed 4 Years of experience should be counted from date of commencement of business and not merely from the date of incorporation/ establishment of a company/ firm 2) Credibility (For existing borrowers, Bank's past experience may be taken into account. For New borrowers, inputs may be derived from other banks, market reputation, published material, CIBIL etc.) If integrity, commitment, sincerity is good & no adverse record is found 4 If integrity is good but some record of failing in commitment 3 If there is some information about lack of commitment & sincerity but not fully substantiated 2 If acceptable integrity but there is definite record of failure in commitment 1 If integrity not reliable due to repeated failure in commitment 0 3) Payment record to Banks/FIs, including our Bank (for new borrower, payment record to other Banks/FIs may be taken into account) Early/Normal/Regular repayment Regular repayment with occasional delay Frequent delays in repayment Delays in repayment leading to reschedulement, restructuring etc. Default Account likely to become NPA, as per RBI guidelines 4 3 2 1 0
(In takeover/ merger cases, applicable parameters for Management Risk may be considered based on New Management)
Note :- For Newly established firm/Co., Payment record to Banks/FIs of borrower's group/ sister concerns (if any) may be taken into account. For borrowers not availing credit facilities from any Bank/FI or not having any group/sister concern, this parameter will not be applicable Projections Vs Achievements (comparison of actual results with estimates/ projections submitted normally a year back, at the time of last sanction/renewal/reviewal) 4) Percentage achievement of Sales projections > = 100 % > = 85 % < 100 % > = 75 % < 85 % 4 3 2 5) Percentage achievement of Net Profit projections > = 95 % > = 80 % < 95 % > = 65 % < 80 % 4 3 2 > = 60 % < 75 % 1 < 60 % 0
> = 50 % < 65 % 1
< 50 % 0
27(50)
CREDIT RISK RATING MODEL (For Advances over Rs. 2 lacs but less than Rs. 2 crore)
(B) FINANCIAL RISK

(a) In case of existing companies/ firms, the applicable parameters are to be worked out based on past financials. However, in case of existing companies/ firms undertaking New projects, the applicable parameters are to be worked out based on both past financials as well as future projections (b) for newly established firms/companies and existing companies/ firms, which have not carried out operations since inception, with no past financials, applicable parameters will be worked out based on projections accepted by the Bank (c) Companies/ firms, which are taken-over by New Management (in take-over/ merger cases) - In such cases, applicable parameters are to be worked out based on both past financials as well as future projections. In such cases, applicable parameters for Management Risk may be considered based on New Management. 1) Percentage increase in Sales/ Income over last year > = 15 % > = 10 % < 15 % > = 5 % < 10 % 4 3 2
< 5% 1
Decrease 0
2) Percentage increase in Net profit over last year > = 10 % > = 7 % < 10 % >=3%< 7% < 3% Decrease 4 3 2 1 0 Note :- If Net profits are showing an increasing trend for past 3 years, 1 additional mark may be given, however, maximum score not to exceed 4 3) Operating profit margin (Operating profit before interest/ Net Sales x 100) > = 10 % > = 7 % < 10 % >=3%< 7% < 3% Negative 4 3 2 1 0 Note :- In case where Operating profit cannot be properly worked out from the Balance Sheet & CMA data is not available, PBIT margin (Profit before interest & tax/ Net Sales x 100) may be used/ worked out in place of Operating profit margin (scoring guide will remain the same for both these ratios) 4) Net Profit margin (Profit after tax/ Net Sales x 100) > =5% >=3%<5% >=2%< 3% 4 3 2
< 2% 1
Negative 0
5) Return on Capital Employed - (Profit before tax + Interest) (Tangible Networth + Term Liabilities including unsecured loans + Bank borrowings) x 100 > = 15 % > = 10 % < 15 % > = 5 % < 10 % >= 1%<5% <1% 4 3 2 1 0 6) Current ratio (Current Assets/ Current Liabilities) > = 1.33 > = 1.25 < 1.33 > = 1.17 < 1.25 4 3 2
> = 1.10 < 1.17 1
< 1.10 0
28(50)
7) Ratio of Total Outside Liabilities to Tangible Networth (TOL/TNW) <= 2 > 2 < = 2.50 > 2.50 < = 3 > 3 < = 3.50 > 3.50 4 3 2 1. 0 Note :- In case borrower is not availing any working capital facility, Current liabilities may be excluded from TOL for working of this ratio 8) Debt Service Coverage ratio - (Profit after tax + Interest + Depreciation) (Interest + Repayments due) > = 2.50 > = 2.00 < 2.50 > = 1.75 < 2.00 > = 1.50 < 1.75 < 1.50 4 3 2 1 0 Note :- Repayments due covers Deposits/Debentures/ Instalments under term loans, DPGs etc. - refer this column under Current liabilities in CMA data. This ratio is applicable (for both term loan & working capital) even if there are no repayments due, in which case, it will assess interest coverage 9) Contingent liabilities as a percentage of Tangible Net worth (Contingent liabilities/ Tangible Networth x 100) Nil < 5% > = 5 % < 15 % > = 15 % < 25 % > = 25 % 4 3 2 1 0 Note :- Contingent liabilities normally appear under Notes to accounts in Audited B/S
(C) SECURITY RISK (Value of collateral security as a percentage of total proposed funded &
non funded exposure)
1) - For Advances over Rs.25 Lacs but less than Rs.2 crore
> = 150 % > = 100 % > = 90 % > = 75 % > = 60 % > = 50 % > = 40 % > = 30 % > = 20 % > = 10 % < 10 % < < < < < < < < < 150 % 100 % 90 % 75 % 60 % 50 % 40 % 30 % 20 % 10 09 08 07 06 05 04 03 02 01 0
2) - For Advances over Rs.2 Lacs upto Rs.25 Lacs

> = 150 % > = 100 % < 150 % > = 75 % < 100 % > = 50 % < 75 % < 50 % 04 03 02 01 0
29(50)
Note :a) Primary Security (Property) may be added to collateral security (if any), only for the purpose of working of marks for Security Risk/credit rating, in cases ODP/ LAP b) In case of Term Loan against Land and/ or Fixed Assets/ construction/ project financing etc., where Land/building/Plant & machinery/other fixed assets etc. are proposed as Primary Security, 100 % value of Land, 75 % value of Building & 50 % value of Plant & Machinery (valuation of all as per extant Bank guidelines) may be added to collateral security (if any), only for the purpose of working of marks for Security Risk/Credit rating. Any other type of assets proposed as primary security may not be added to collateral security for this purpose c) Security Risk may be treated as Not applicable for the purpose of working of credit rating in case of Central/ State Govt. accounts, Statutory Corporations, whether collateral security is available or not d) Exposure of Non- fund limits may be reduced to the extent of cash margin available, for the purpose of working of marks for Security Risk/credit rating e) Annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights may be treated as tangible securities, for the purpose of giving marks under Security Risk, subject to conditions being met as per RBI guidelines given below. In terms of RBI guidelines vide RBI/2009-10/421, DBOD No. BP.BC. 96 / 08.12.014/ 2009-10, dated April 23, 2010, on Prudential norms on Advances to Infrastructure Sector, it has been decided that banks may treat annuities under build-operate-transfer (BOT) model in respect of road/highway projects and toll collection rights, where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved, as tangible securities subject to the condition that banks right to receive annuities and toll collection rights is legally enforceable and irrevocable. f) In case of Unsecured loans,Security Risk may be treated as Not applicable in following cases : i) If the borrower (or its promoter, in case of new company/ SPV/ firm) has top 2 Long term rating grades (AAA/AA - not older than 15 months) of any debt instrument/ Bank Loan Rating from RBI accredited rating agencies like CRISIL, ICRA, CARE, FITCH AND BRICKWORK. In case of MSMEs, equivalent SME rating grades of above agencies along-with other agencies like SMERA may be considered. ii) Banks with Basel II CRAR >=12 % iii) Maharatna/Navratna/Miniratna PSUs
30(50)
(D) OPERATIONAL RISK

1) Conduct of Account Excellent (interest/ installment on time, no overdrawing, No return of Cheque/ bills 4 purchased or discounted, No devolvement of LC/invocation of BG, no cash withdrawal etc. Generally interest/ instalment on time but sometimes delayed (not beyond a week), Return of 3 cheques/bills purchased or discounted, cash withdrawal 1-2 such instances only Generally interest/ instalment on time but sometimes delayed (not beyond 2 weeks), Return 2 of cheques/bills purchased or discounted, cash withdrawal 3-4 such instances only Delay in payment of interest/ instalment upto a month, Return of cheques / bills purchased 1 or discounted, cash withdrawal more than 4 such instances Frequent delay in payment of interest/ instalment, Frequent cases of Return of cheques/bills 0 purchased or discounted, cash withdrawal, any devolvement of LC/invocation of BG 2) Turnover in the account (i.e. Business income/sales routed in the account) > = 90 % > = 75 % < 90 % > = 60 % < 75 % > = 50 % < 60 % < 50 % 4 3 2 1 0 Note :- applicable in case of borrowers availing working capital limits from our Bank only 3) Submission of QIS/ MSOD/ Stock/Book Debts Statements Timely submission Delayed submission upto 2 occasions Delayed submission upto 4 occasions Delayed submission upto 5 occasions Delayed submission above 5 occasions 4) Submission of Renewal data/Financial Papers etc. Timely submission Delayed submission upto 15 days Delayed submission beyond 15 days & upto 30 days Delayed submission beyond 30 days & upto 45 days Delayed submission beyond 45 days 4 3 2 1 0 4 3 2 1 0
31(50)
5) Length of past relationship with Bank (Point no. 1,2,3,4 under this head, compliance of terms & conditions of sanction etc. over the years, may be considered to assess whether the relationship is satisfactory or not) Satisfactory relationship with the Bank for duration > = 5 years 4 Satisfactory relationship with the Bank for duration > = 3 < 5 years 3 Satisfactory relationship with the Bank for duration > = 1 < 3 years 2 Not very Satisfactory relationship in the past (irrespective of any duration) 1 Unsatisfactory relationship in the past (irrespective of any duration) 0 Note :- The above parameter will not be applicable for borrowers having satisfactory relationship with the Bank for less than 1 year. However, if relationship with such borrowers is not satisfactory, this parameter becomes applicable & such borrowers be given 0 mark
Weights assigned to different risk modules Module Maximum Weight (3) Score obtained score * (1) (2)
(a) Existing account 20 40 20 20 100 (b) New account 30 40 30 0 100
Weighted score
(c) Newly (1 2) x 3 established firm/ co. 40 20 40 0 100
RISKS
MANAGEMENT FINANCIAL SECURITY OPERATIONAL TOTAL SCORE * for the parameters applicable in the account
CREDIT RATING
NOMENCLATURE
CREDIT RATING FORMAT (FOR CREDIT RISK RATING MODEL FOR ADVANCES
OVER RS.2 LACS BUT LESS THAN RS.2 CRORE)
A
1 2 3
MANAGEMENT RISK*
Promoters / Partners / Proprietors experience in the business/ industry Credibility
GIVE COMPUTATION MAXIMUM SCORE FOR PARAMETERS 4 & 5 SCORE AWARDED AND REMARKS, IF ANY
4 4
Payment record to Banks/FIs, including our 4 Bank Projections Vs Achievements (comparison of actual results with estimates/ projections submitted normally a year back, at the time of last sanction/renewal/reviewal) 4 Percentage achievement of Sales projections 4 5 Percentage achievement of Net Profit 4 projections TOTAL (MANAGEMENT RISK)
*In takeover/ merger cases, applicable parameters for Management Risk considered based on New Management
GIVE MAXIM SCORE SCORE TOTAL COMPUTATION UM AWARD AWARDE SCORE (Based on Audited/ Provisional/ SCORE ED A D - B AWARDED- OF RATIOS & Projected Financials for REMARKS, IF (#) (*) (A + B) ___________________)
FINANCIAL RISK
ANY
1 2 3 4 5 6 7 8 9
Percentage increase in Sales/ Income over last year Percentage increase in Net profit over last year Operating profit margin Net profit margin Return on Capital Employed Current ratio Ratio of Total Outside Liabilities to Tangible Net worth Debt Service Coverage ratio Contingent liabilities as a percentage of Tangible Net worth
4 4 4 4 4 4 4 4 4
NA NA
TOTAL (FINANCIAL RISK)

NA Not applicable in case of projections
33(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________ (#) applicable ratios under this column are to be worked out based on past financials, preferably Audited B/s this column (A) is applicable in case of existing companies/ firms (*) applicable ratios under this column are to be worked out based on projections accepted by the Bank this column (B) is applicable in case of newly established firms/companies and existing companies/ firms, which have not carried out operations since inception, with no past financials (A) + (B) both these columns are applicable in case of existing companies/ firms undertaking New projects and in case of companies/ firms, which are taken-over by New Management (in take-over/ merger cases) - In such cases i.e. applicable ratios are to be worked out based on both past financials as well as future projections. In such cases, Maximum score for each applicable ratio will be 8 (i.e. 4 for past financials + 4 for projections), except for parameters1 & 2 (where maximum score will be 4)
SECURITY RISK
GIVE COMPUTATION OF MAXIMUM SCORE COVERAGE OF EXPOSURE & SCORE (#) AWARDED REMARKS, IF ANY
TOTAL (SECURITY RISK)
10 / 4
(#) for Advances over Rs.25 Lacs (less than Rs.2 crore), Maximum score is 10 (#) for Advances over Rs.2 Lacs upto Rs.25 Lacs, Maximum score is 4
D
1 2 3 4 5
OPERATIONAL RISK
Conduct of account Turnover in the account Submission of QIS/ MSOD/ Stock/Book Debts Statements Submission of Renewal data / Financial Papers etc. Length of past relationship with Bank
MAXIMUM SCORE SCORE AWARDED 4 4 4 4 4
GIVE COMPUTATION FOR PARAMETER 2 AND REMARKS, IF ANY
TOTAL (OPERATIONAL RISK)

Note Use separate sheet for computation of ratios and remarks, if required
WEIGHTS ASSIGNED TO DIFFERENT RISK MODULES

(FOR CREDIT RATING MODEL FOR ADVANCES OVER RS.2 LACS BUT LESS THAN RS.2 CRORE)
Module
Score Maximum Weight (3) obtained score * (1) (2)

(a) Existing account 20 40 20 20 100 (b) New account 30 40 30 0 100
Weighted score
(c) Newly (1 2) x 3 established firm/ co. 40 20 40 0 100
RISKS
A) MANAGEMENT B) FINANCIAL C) SECURITY D) OPERATIONAL
TOTAL SCORE
* for the parameters applicable in the account
CREDIT RATING
NOMENCLATURE
35(50) ANNEXURE B (3) RETAIL CREDIT RISK RATING MODEL FOR HOUSING LOANS, CONSUMER LOANS (INCLUDING VEHICLE LOANS) & PERSONAL LOANS 1. Necessity of Retail Credit Risk Rating Model As the characteristics of the retail borrower are different from Large Corporate / SME borrowers, a separate model is necessary for retail loans. 2. Risk Management Tool It would be a risk management tool for prospective fresh borrowers at the preliminary stage itself. As soon the loan application form for a retail loan is received along with all the complete relevant papers, credit risk scoring of retail loan borrower should be done simultaneously along with processing of proposal and before sanction of loan 3. Pricing Credit rating for retail loans will not be linked to pricing i.e. fixation of rate of interest. 4. Applicability The retail credit risk rating model will be applicable for Housing Loans, Consumer Loans (including Vehicle loans) & Personal Loans, with sanctioned limits of over Rs.2 Lacs, excluding Staff and Government sponsored cases. Further, Retail Credit Risk Rating model will be applied to only those borrowers who satisfy the eligibility criteria laid down in the respective schemes for Retail lending. 5. Rejection Some parameters also give a reject status like Age, Income to instalment ratio etc. i.e. rejection of the loan application, where basic minimum criteria is not fulfilled. 6. Credit Rating scale & nomenclature will be same as applicable for existing Credit Risk Rating models for Corporate Loans, to maintain uniformity :RATING SCALE Weighted score >= 90 >=80 < 90 >=70 < 80 >=60 < 70 >=50 < 60 >=40 < 50 < 40 Credit Rating (CR) 1 2 3 4 5 6 7 8 9 Minimum Risk Marginal Risk Modest Risk Below Average Risk Average Risk Above Average Risk Caution NPA sub-standard assets NPA Doubtful & Loss assets NOMENCLATURE
36(50)
PUNJAB & SIND BANK

Branch : __________________________
CREDIT RISK SCORING/ RATING SHEET FOR RETAIL LOANS
Name of applicant Application No. (if any) Date of application Name of Retail Loan Scheme Amount of Loan proposed Date of scoring/ Rating
BREAK UP OF MARKS SCORED BY THE BORROWER VIS--VIS MAXIMUM SCORE ELIGIBLE FOR EACH PARAMETER Sr. Parameter Maximum Score No. Marks (*) obtained Age 1 04 Educational Qualification 2 08 Occupation & Nature of business 3 12 Length of experience in the occupation 4 08 Marital status & number of dependents 5 04 Type of residence 6 08 Income to instalment ratio (IIR) 7 20 Loan to value ratio (LTV) 8 12 Net worth of guarantor as percentage of loan amount 9 08 secured 10 Tenor of Loan 04 11 Past Relationship with the any Bank (including PSB) (A) Deposit account with any Bank 06 (B) Loan account/ Credit history with any Bank 06 TOTAL 100 (*) for parameters applicable in the account Credit Rating = Score obtained/ Maximum Marks (*) x 100
37(50)
DETAILS OF PARAMETERS/ SCORE FOR RETAIL LOANS
Age Score to be Score Maximum Score : 04 awarded obtained Below 18 years Reject > = 18 years < 25 years 02 > = 25 years < 35 years 03 > = 35 years < 50 years 04 > = 50 years < 65 years (#) 03 > 65 years (#) Reject (#) 65 or whatever the maximum age permitted as per respective schemes of Bank 2 Educational Qualification Maximum Score : 08 Doctors/ Engineers/ Computer/ Law professionals/ CA/ CS/ ICWA/ MBA/ CFA/ Teaching professionals and / or other such professional qualifications Other Post graduates & Graduates Diploma holders Under graduates Below Matriculates Occupation & Nature of Business (*) Maximum Score : 12 Salaried Government (all Govt.jobs) / PSU employee Salaried other than Govt. jobs Pvt. Banks/ Insurance Co.s/ Public Ltd Co./ Recognized Universities/ Colleges affiliated to such universities/ Recognized schools; Self employed professionals (Doctors / CAs / ICWA/ Architects / software professionals/ Technical Consultants like Management, HR, Project etc.) Self employed Businessman Partnership / Proprietorship Salaried Pvt. Ltd. Co./ Society / Trust / Partnership / Proprietorship firms Any other self employed professional / category not covered in the above Score to be awarded 08 Score obtained
06 04 02 01 Score to be awarded 12 10 Score obtained
10 08 06
(*) 2 extra marks if salary/ income credited with our Bank and/ or deduction certificate is available (maximum score not to exceed 12 )
38(50) 4 Length of experience in the occupation Maximum Score : 08 > = 10 years > = 5 years < 10 years > = 2 years < 5 years > = 1 year < 2 years Less than 1 year Marital status & number of dependents Maximum Score : 04 Married & upto 1 dependent Married & with 2 dependents Married & more than 2 dependents Single & upto 1 dependent Single & with 2 dependents Single & more than 2 dependents Type of Residence Maximum Score : 08 Self owned House/ Flat (no loan outstanding against the same) Parents / Ancestral House/ Flat (no loan outstanding against the same) Self owned House/ Flat, Parents / Ancestral House/ Flat, financed with loan (still outstanding) Company/ employer provided/ Rented accommodation Any other Income to Instalment Ratio (IIR) * (Income/ Instalment) Maximum Score : 20 >=5 > = 3.33 < 5 > = 2.50 < 3.33 > = 2.00 < 2.50 > = 1.66 < 2.00 < 1.66 Score to be awarded 08 06 04 02 01 Score to be awarded 04 03 02 03 02 01 Score to be awarded 08 06 04 02 01 Score to be awarded Score obtained Score obtained
Score obtained
Score obtained
20 16 10 06 03 Reject
* Income would mean the total income of the borrower (including co-borrower, if any) and Instalment would mean total deductions including the current term loan.
39(50) 8 Loan to value ratio (LTV) * (Loan Amount/Value of Security x 100) Score to be awarded Score obtained
Maximum Score : 12 > = 100 % 00 > = 80 % < 100 % 04 > = 70 % < 80 % 06 > = 60 % < 70 % 08 > = 50 % < 60 % 10 < 50 % 12 * This parameter is not applicable in case where no security is required to be obtained as per any Retail Loan scheme of the Bank 9 Net worth of guarantor as % age of loan amount Maximum Score : 8 > = 200 % > = 150 % < 200 % > = 100 % < 150 % < 100 % No guarantor Tenor of Loan (Housing) Maximum Score : 4 Repayment of loan upto 7 years Repayment of loan > 7 years upto 15 years Repayment of loan > 15 years upto 20 years Tenor of Loan (other Retail Loans) Maximum Score : 4 Repayment of loan upto 3 years Repayment of loan > 3 years upto 5 years Score to be awarded 08 06 04 02 00 Score to be awarded 04 03 02 Score to be awarded 04 03 Score obtained
10 (A)
Score obtained
10 (B)
Score obtained
40(50) 11. Past Relationship with the any Bank (including PSB) A Deposit account with any Bank Maximum Score : 06 >=3 years >=1 years < 3 years (*) >= 6 months < 1 year (*) < 6 months / no deposit account with any Bank Score to be awarded 06 04 02 01 Score obtained
(*) 2 extra marks, if deposit account is with PSB (maximum marks not to exceed 6) B Loan account/ Credit history with any Bank (if any) (#) Maximum Score : 06 Early / Normal / Regular repayment Regular repayment with occasional delay Frequent delays in repayment Delays in repayment leading to reschedulement, restructuring, Special Mention accounts (SMA) etc. Default Account likely to become NPA, as per RBI guidelines Score to be awarded 06 04 02 01 Reject Score obtained
(#) Payment record to Banks/FIs of borrower's group/ sister concerns (if any) may also be taken into account (#) This parameter is not applicable in case of borrowers not having any Credit history/ Loan Account with any Bank
41(50) ANNEXURE B(4) RETAIL CREDIT RISK RATING MODEL FOR EDUCATION LOAN GUIDELINES 1. Necessity of Retail Credit Risk Rating Model for Education Loan As the characteristics of Education loan are different from other category of retail loans, a separate model is necessary for Education loan. 2. Risk Management Tool It would be a risk management tool for prospective fresh borrowers at the preliminary stage itself. As soon the loan application form for an Education loan is received along with all the complete relevant papers, credit risk scoring of Education loan borrower should be done simultaneously along with processing of proposal and before sanction of loan 3. Pricing Credit rating for Education loan will not be linked to pricing i.e. fixation of rate of interest. 4. Applicability The model will be applied to borrowers who satisfy the eligibility criteria laid down in the Banks Education Loan scheme. 5. Credit Rating scale & nomenclature will be as under :RATING SCALE NOMENCLATURE Weighted score >= 90 >=80 < 90 >=70 < 80 >=60 < 70 >=50 < 60 >=40 < 50 < 40 Credit Rating (CR) 1 2 3 4 5 6 7 8 9 Minimum Risk Marginal Risk Modest Risk Below Average Risk Average Risk Above Average Risk Caution NPA sub-standard assets NPA Doubtful & Loss assets
42(50)
PUNJAB & SIND BANK

Branch : __________________________
CREDIT RISK SCORING/ RATING SHEET FOR EDUCATION LOAN
Name of applicant Application No. (if any) Date of application Amount of Loan proposed Credit Rating Date of scoring/ Rating BREAK UP OF MARKS SCORED BY THE BORROWER VIS--VIS MAXIMUM SCORE ELIGIBLE FOR EACH PARAMETER Sr. Parameter Maximum Score No. Marks (*) obtained PARAMETERS RELATED TO THE STUDENT Age 1 04 Course for which loan applied 2 04 Performance at the last examination 3 05 Work experience 4 03 Any scholarship/ sponsorship 5 02 Type of residence 6 05 PARAMETERS RELATED TO THE COBORROWER Occupation & Nature of business 1 04 Length of experience in the occupation 2 05 Income to instalment ratio (IIR) 3 05 OTHER PARAMETERS Loan sought/ total cost of education course 1 06 Tenor of Loan 2 03 Past Relationship with the any Bank (including PSB) 3 04 TOTAL 50 (*) for parameters applicable in the account Credit Rating = Score obtained/ Maximum Marks (*) x 100
43(50)
DETAILS OF PARAMETERS/ SCORE FOR EDUCATION LOAN
A) PARAMETERS RELATED TO THE STUDENT 1 Age Maximum Score : 04 Below 25 years > = 25 years < 30 years > = 30 years < 35 years > = 35 years Course for which Loan applied Maximum Score : 04 Professional courses (*) Other Post graduate & graduate courses Diploma courses Under graduate courses Score to be awarded 04 03 02 01 Score to be awarded 04 03 02 01 Score obtained
Score obtained
(*) Doctor/ Engineer/Law/ CA/ CS/ ICWA/CFA/ Post graduate degree/ diploma courses in Management/Computers/Finance/Economics/Banking/sales/Marketing/ Journalism / Teaching and / or other such professional qualifications considered by the Bank. Other Post graduate & graduate courses from reputed universities/ institutes, offering good campus placement may also be considered at par with professional courses i.e. 1 extra mark may be given (maximum marks not to exceed 4) 3 Performance at the last examination (*) Maximum Score : 05 > = 80 % & above > = 70 % < 80 % > = 60 % < 70 % > = 50 % < 60 % < 50 % Score to be awarded 05 04 03 02 01 Score obtained
(*) in case where grades are applicable, score may be awarded based on equivalent percentage corresponding to the grade. If no percentage is specified, 5 marks may be given for highest grade, 4 for next higher grade & so on. 4 Work experience Maximum Score : 03 > = 2 years > = 1 < 2 years Less than 1 year or No work experience Score to be awarded 03 02 01 Score obtained
44(50) 5 Any scholarship/sponsorship Maximum Score : 02 Yes No Type of Residence Maximum Score : 05 Self owned House/ Flat (no loan outstanding against the same) Parents / Ancestral House/ Flat (no loan outstanding against the same) Self owned House/ Flat, Parents / Ancestral House/ Flat, financed with loan (still outstanding) Company/ employer provided/ Rented accommodation Any other Score to be awarded 2 1 Score to be awarded 05 04 03 02 01 Score obtained
Score obtained
B) PARAMETERS RELATED TO THE CO-BORROWER 1 Occupation & Nature of Business Maximum Score : 04 Salaried/ Professional Business Farmer Retired/ others Length of experience in the occupation Maximum Score : 05 > = 10 years > = 5 years < 10 years > = 2 years < 5 years > = 1 year < 2 years Less than 1 year Score to be awarded 04 03 02 01 Score to be awarded 05 04 03 02 01 Score obtained
Score obtained
Income to Instalment Ratio (IIR) * Score to be Score (Income/ Instalment) awarded obtained Maximum Score : 05 >=5 05 > = 3.33 < 5 04 > = 2.50 < 3.33 03 > = 2.00 < 2.50 02 > = 1.66 < 2.00 01 < 1.66 00 * Income would mean the total income of the borrower (including co-borrower, if any) and Instalment would mean total deductions excluding the current education loan.
45(50) C) OTHER PARAMETERS Loan sought/ total cost of education course (*) Score to be Score Maximum Score : 6 awarded obtained Upto 75 % 06 > 75 % upto 85 % 04 > 85 % upto 100 % 02 (*) excluding expenses, not eligible for finance, as per Banks prevalent Education Loan scheme Tenor of Loan (*) Score to be Score Maximum Score : 3 awarded obtained Repayment of loan upto 3 years 03 Repayment of loan > 3 years upto 5 years 02 Repayment of loan > 5 years upto 7 years 01 (*) from the start of repayment, as per Banks prevalent Education Loan scheme 3. Past Relationship with the any Bank (including PSB) Deposit account with any Bank Score to be Score Maximum Score : 04 awarded obtained >=3 years 04 >=1 years < 3 years (*) 03 >= 6 months < 1 year (*) 02 < 6 months / no deposit account with any Bank 01 (*) 1 extra mark, if deposit account is with PSB (maximum marks not to exceed 4) B Loan account/ Credit history with any Bank (if any) (#) Maximum Score : 04 Score to be awarded Early / Normal / Regular repayment 04 Regular repayment with occasional delay 03 Frequent delays in repayment 02 Delays in repayment leading to reschedulement, 01 restructuring, Special Mention accounts (SMA) etc. Default Account likely to become NPA, as per RBI Reject guidelines Score obtained A 2 1
(#) Payment record to Banks/FIs of borrower's group accounts (if any) may also be taken into account (#) This parameter is not applicable in case of borrowers not having any Credit history/ Loan Account with any Bank. However, if borrower is having any Credit history/ Loan account with the bank, only parameter B will be applicable
46(50) ANNEXURE B (5) CREDIT RISK RATING MODEL FOR PSBs DOCTORS SPECIAL SCHEME GUIDELINES 1. Necessity of Credit Risk Rating Model for PSB Doctors Special Scheme As some features of the PSB Doctors Special Scheme are unique, a separate model is necessary for this scheme. 2. Risk Management Tool It would be a risk management tool for borrowers at the pre-sanction stage. As soon the loan application form under this scheme is received along with all the complete relevant papers, credit risk rating should be done simultaneously along with processing of proposal and before sanction of loan. 3. Pricing Credit rating for Doctors covered under this scheme will not be linked to pricing i.e. fixation of rate of interest. 4. Applicability The credit risk rating model will be applicable for Doctors availing credit facilities under the above scheme only. 5. Credit Rating scale & nomenclature will be same as applicable for existing Credit Risk Rating models for Corporate Loans, to maintain uniformity :RATING SCALE NOMENCLATURE Weighted score >= 90 >=80 < 90 >=70 < 80 >=60 < 70 >=50 < 60 >=40 < 50 < 40 Credit Rating (CR) 1 2 3 4 5 6 7 8 9 Minimum Risk Marginal Risk Modest Risk Below Average Risk Average Risk Above Average Risk Caution NPA sub-standard assets NPA Doubtful & Loss assets
47(50)
PUNJAB & SIND BANK

Branch : __________________________
CREDIT RISK SCORING/ RATING SHEET FOR PSB DOCTORS SPECIAL SCHEME Name of applicant & branch Application No. (if any) Date of application Amount of Loan proposed Date of scoring/ Rating BREAK UP OF MARKS SCORED BY THE BORROWER VIS--VIS MAXIMUM SCORE ELIGIBLE FOR EACH PARAMETER Sr. No. 1 2 3 4 5 6 7 Parameter Qualification Length of experience in the occupation Credibility Payment record to Banks/FIs, including our Bank Total Exposure to Average Income Coverage of security Income to Instalment Ratio (IIR) TOTAL (*) for applicabe parameters Credit Risk Rating = Score obtained/ Maximum Marks (*) x 100 Hurdle Points a) If the score obtained under any of the parameters i.e. Credibility and Payment record to Banks/FI is 0, any Credit Rating obtained be downgraded to 6. However, if Credit Rating obtained is 6, the same be downgraded to 7. b) If the score obtained under any of the parameters i.e. Credibility and Payment record to Banks/FI is 1, any Credit Rating obtained may be downgraded by one notch (except Credit Rating 7). Maximum Marks (*) 4 8 4 4 8 10 12 50 Score obtained
48(50)
DETAILS OF PARAMETERS/ SCORE FOR PSBS DOCTORS SPECIAL
Qualification Maximum Score : 04 MD, MS or equivalent MBBS/ BDS Length of experience in the occupation Maximum Score : 08 > = 10 years > = 7 years < 10 years > = 4 years < 7 years > = 2 year < 4 years < 2 years Credibility Maximum Score : 04 If integrity, commitment, sincerity is good & no adverse record is found If integrity is good but some record of failing in commitment If there is some information about lack of commitment & sincerity but not fully substantiated If acceptable integrity but there is definite record of failure in commitment If Integrity not reliable due to repeated failure in commitment
Score to be awarded 04 02 Score to be awarded 08 06 04 02 01 Score to be awarded 04 03 02 01 00
Score obtained
Score obtained
Score obtained
Note :- For existing borrowers, Bank's past experience may be taken into account. For New borrowers, inputs may be derived from other Banks/FIs, market reputation, published material, CIBIL etc. Payment record to Banks/FIs, including our Bank Score to be Score Maximum Score : 04 awarded obtained Early/Normal/Regular repayment 04 Regular repayment with occasional delay 03 Frequent delays in repayment 02 Delays in repayment leading to reschedulement, 01 restructuring etc. Default Account likely to become SMA/ NPA, as per 00 RBI/ Bank guidelines guidelines Note :- For new borrower, payment record to other Banks/FIs of the borrower and / or its group may be taken into account - For borrowers not availing credit facilities from any Bank/FI or not having any any group/sister concern, this parameter will not be applicable 4
49(50) Total Exposure (*) to Average annual Income (based on Income tax returns) Maximum Score : 08 > = 5 times > = 4 < 5 times > = 3 < 4 times > = 2 < 3 times Below 2 times (*) including proposed exposure from our bank 5 6 Coverage of Security * (Value of Security/ Loan amount x 100) Maximum Score : 10 > = 150 % > = 100 % < 150 % > = 80 % < 100 % > = 70 % < 80 % > = 60 % < 70 % > = 50 % < 60 % > = 40 % < 50 % > = 30 % < 40 % > = 20 % < 30 % > = 10 % < 20 % < 10 % Score to be awarded 02 04 06 07 08 Score to be awarded Score obtained Score obtained
10 09 08 07 06 05 04 03 02 01 00
* In case of CGTMSE cover, 75 % value may be taken as value of security. * In case of Term Loan against Fixed Assets/ construction/ project financing etc., where Land / building, Equipments, other fixed assets etc. are proposed as Primary Security, 100 % value of Land, 75 % value of Building and 50 % value of equipments, vehicles etc. may be added to collateral security, if any, for the purpose of working of score for coverage of security. Any other type of assets like furniture/ fixtures, computers etc. proposed as primary security may not be taken for this purpose. 7 Income to Instalment Ratio (IIR) * (Income/ Instalment) Maximum Score : 12 >=5 > = 3.33 < 5 > = 2.50 < 3.33 > = 2.00 < 2.50 > = 1.66 < 2.00 < 1.66 Score to be awarded Score obtained
12 10 08 06 02 00
* Income would mean the total income of the borrower (including co-borrower, if any) and Instalment would mean total deductions including proposed loan (s).
50(50) ANNEXURE B (6)
REG: Mapping of Internal Rating of Short Term Loans (upto 1 Year) with Short Term Ratings of External Credit Rating Agencies A mechanism for mapping of internal ratings of short term loans (upto 1 year) with Short Term Ratings of External Credit Rating Agencies, on similar lines as risk weight mapping given by RBI, has been approved vide Board Resolution No.19160 dated 07/12/2010. The Rating symbols of External Credit Rating Agencies were revised as per RBI guidelines and circulated vide RMD Circular No. 215 dated 20.10.2011. RMD Circular No. 224 w.r.t. addition of Brickwork Rating India Pvt Ltd as eligible Credit Rating Agency was issued on 17.04.2012. Henceforth, the mapping of internal ratings of short term loans (upto 1 year) with Short Term Ratings of External Credit Rating Agencies shall be as under : INTERNAL CREDIT RATING SCALE 1 2 3 4 5 6 7
SHORT TERM RATINGS OF DOMESTIC RATING AGENCIES CARE CARE A1+ CARE A1 CARE A2+ CARE A2 CARE A3 CARE A4 CARE D CRISIL CRISIL A1+ CRISIL A1 CRISIL A2+ CRISIL A2 CRISIL A3 CRISIL A4 CRISIL D FITCH FITCH A1+ FITCH A1 FITCH A2+ FITCH A2 FITCH A3 FITCH A4 FITCH D BRICKWORK BRICKWORK A1+ BRICKWORK A1 BRICKWORK A2+ BRICKWORK A2 BRICKWORK A3 BRICKWORK A4 BRICKWORK D ICRA ICRA A1+ ICRA A1 ICRA A2+ ICRA A2 ICRA A3 ICRA A4 ICRA D
Where + or - notation is attached to the rating, the corresponding main internal rating category should be used for A3 and below, unless specified otherwise. For example, A3+ or A3- would be considered to be in the A3 rating category and assigned Internal Rating 5. Short term loans (upto 1 year) of the borrower whose Short Term Ratings by above External Credit Rating agencies are available will not be rated on Banks Internal Credit Rating Models and would be assigned internal credit rating based on mapping as per the above table. If rating of 2-3 rating agencies/ short term instruments is available, then the lowest rating of any instrument by any of the above agencies should be taken into account for such mapping. Borrowers, whose Short Term Ratings by above External Credit Rating agencies is not available, will continue to be rated on Banks Internal Credit Rating Models.
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PUNJAB & SIND BANK

( \/ \/A GOVERNMENT OF INDIA UNDERTAKING)

Fax. 011-25736542; - E-mail: ho.alm@psb.org.in Tel No. 011-25818490;

2(50) ANNEXURE A AMENDMENTS IN CREDIT RISK RATING FRAMEWORK/ MODELS

(E) SECURITY RISK

(E) OPERATIONAL RISK

> = 0.92 < 0.95 2

> = 0.88 < 0.92 1

(E) SECURITY RISK

Scoring guide for Security Risk

(a) Existing account 05 15 15 35 10 20 100

(b) New account 10 25 20 35 10 0 100

21(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________

MAXIMUM SCORE SCORE AWARDED 4 4 4

REMARKS (IF ANY)

TOTAL (INDUSTRY RISK)

MAXIMUM SCORE SCORE AWARDED 4 4 4 4

GIVE COMPUTATION & REMARKS, IF ANY

10 Locational advantage, Availability of utilities power, water etc.

TOTAL (BUSINESS RISK)

MAXIMUM SCORE SCORE AWARDED 4

REMARKS (IF ANY)

Ownership pattern/ Management

TOTAL (MANAGEMENT RISK)

TOTAL (FINANCIAL RISK)

TOTAL (SECURITY RISK)

TOTAL (OPERATIONAL RISK)

25(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________

WEIGHTS ASSIGNED TO DIFFERENT RISK MODULES

Score Maximum Weight (3) obtained score* (1) (2)

TOTAL WEIGHTED SCORE

(A) MANAGEMENT RISK

(B) FINANCIAL RISK

> = 1.10 < 1.17 1

2) - For Advances over Rs.2 Lacs upto Rs.25 Lacs

(D) OPERATIONAL RISK

TOTAL WEIGHTED SCORE

32(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________

TOTAL (FINANCIAL RISK)

TOTAL (SECURITY RISK)

MAXIMUM SCORE SCORE AWARDED 4 4 4 4 4

GIVE COMPUTATION FOR PARAMETER 2 AND REMARKS, IF ANY

TOTAL (OPERATIONAL RISK)

34(50) NAME OF THE BORROWER/ BRANCH :_____________________________________________

WEIGHTS ASSIGNED TO DIFFERENT RISK MODULES

Score Maximum Weight (3) obtained score * (1) (2)

TOTAL WEIGHTED SCORE

PUNJAB & SIND BANK

CREDIT RISK SCORING/ RATING SHEET FOR RETAIL LOANS

06 04 02 01 Score to be awarded 12 10 Score obtained

PUNJAB & SIND BANK

CREDIT RISK SCORING/ RATING SHEET FOR EDUCATION LOAN

PUNJAB & SIND BANK

Score to be awarded 04 02 Score to be awarded 08 06 04 02 01 Score to be awarded 04 03 02 01 00

50(50) ANNEXURE B (6)

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