Statement Of Practice - Sample
- 1. LOAN POLICY AND PROCEDURE C O M PA N Y N A M E
- 2. TABLE OF CONTENTS PREAMBLE Pg 03 0 1 SCOPE AND OBJECTIVES OF LOAN POLICY Pg 05 02 POLICY DIRECTIVES OF THE RESERVE BANK OF INDIA Pg 08 03 POLICY DIRECTIVES ON SECTOR‐WISE EXPOSURE Pg 15 04 LOAN PROCESSING POLICY Pg 18 05 POLICY DIRECTIVES ON CREDIT DISPENSATION Pg 23 06 POLICY DIRECTIVES ON LOAN PRICING Pg 29 07 POLICY DIRECTIVES ON CREDIT ASSESSMENT & RISK MONITORING Pg 33 08 POLICY ON LOAN PRODUCTS‐ EXISTING AND NEW Pg 39 A ANNEXURES Pg 42 B APPENDIX Pg 55
- 3. SCOPE AND OBJECTIVES OF LOAN POLICY 3
- 4. SCOPE AND OBJECTIVES OF LOAN POLICY ABCDE Investments & Trading Company Private Ltd (ABCDE, “the Company”), is a Lending Finance Company of DOLAT GROUP OF COMPANIES (DOLAT), which is the flagship company of Dolat Capital Limited. ABCDE is registered with the Reserve Bank of India as a non – deposit accepting, systemically important, Non–Banking Financial Company (NBFC‐ND‐SI). Currently CITCPL’s main business is asset based lending to clients primarily referred to it by various group entities , consultants. ABCDE is uniquely positioned to capitalize on the opportunity thrown by the capital market financing, real estate backed lending and fixed income structured products spaces on account of the strong promoter linkages to growth companies and prime short‐term credit rating. Hence, the Company will offer multiple products to its clients depending upon their requirements. With the gradual expansion of ABCDE Investments lending book, a formally accepted exposure norm would help all employees have a clear understanding of management risk appetite, circumscribed by regulatory norms. The norms formulated in this document will be modified from time to time, subject to board approval to take cognizance of changed economic conditions, changed management risk appetite or changed strategic focus. The Risk Group will also, from time to time, highlight to the credit committee the changes in the credit environment and the changing credit risk profile of different sectoral exposures. This policy holds or all lending transactions. more specifically wholesale-lending . While the company is predominantly in the secured financing business, any other structure, such as ICDs, mezzanine finance, structured finance etc can be explored with the approval of the Credit Committee after a detailed credit and risk note is placed before it. The company shall however not grant on demand loans. The document supersedes any current lending policy document 1.0 4
- 5. Scope and Objectives of Loan Policy This Loan Policy Document broadly deals with the following: • Product Offering of the company • Risk containment measures to mitigate the credit and Credit for the gamut of products offered by the Company • Loan sanctioning authority and delegation • Sectoral exposure limits 1.1 SCOPE OF THE LOAN POLICY Scope and Objectives of Loan Policy The objectives of the Loan Policy are the following: • To have a loan portfolio which generates adequate risk adjusted returns. • Ensure all deal managers have a clear understanding of the composition of the incremental portfolio, • Define clearly the size and nature of deals that must be brought to the credit committee for approval before disbursement, • To ensure operational efficiency and effectiveness • To comply with the norms set by the Regulators and stakeholders from time to time, • Enable Standardization of Procedures 1.2 OBJECTIVES OF LOAN POLICY 5
- 6. Scope and Objectives of Loan Policy 2.1.1 SINGLE BORROWER LIMIT ABCDE shall limit its exposure on a single borrower and borrowers belonging to a group to the following limits • Single Borrower :- 15% of the NBFC’s own funds • Group Borrower :- 25% of the NBFC’s own funds For FY15 the limits in absolute amounts are • Single Borrower Rs.__________ • Group Borrower Rs.__________ Single borrower is defined as an individual borrower that may be an individual, a proprietorship, a private or public company, listed company, etc. Borrowers belonging to a group can be defined as business entities having one or more common partner/director. In the case of public limited companies, the group definition is based on the concept of commonality of management and effective control (that means if a professional is a director in two public companies and does not have substantial shareholding/management control, such companies would not be classified as group companies. A limited company which is a subsidiary of another limited company or a closely held company with substantial interest (i.e. more than 50% of the equity share capital of the company is held by the other company) would be said to belong to the same promoter group. The single borrower limit shall be reviewed every year after the audited financial results of the year have been prepared. 2.1 PRUDENTIAL EXPOSURE NORMS 6
- 7. Scope and Objectives of Loan Policy 2.1 PRUDENTIAL EXPOSURE NORMS 2.1.2 CAPITAL MARKET EXPOSURE The following exposures shall qualify as capital market exposure: • Direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds • Advances against shares/convertible bonds and debentures or other securities including loans to retail borrowers for margin, IPO financing as well as ESOP financing • Bridge loans to borrowers against expected equity inflows • Exposures to venture capital funds 2.1.3 PROHIBITED EXPOSURES Lending for the following purposes and to the following categories of borrowers is prohibited: • Sanction of fresh loans to declared NPA Accounts • Lending to borrowers for illegal /illicit activity • Restricted Industry as declared from time to time 7
- 8. 3.1 CREDIT RISK APPETITE MATRIX The following table lists the current appetite of the management for the following industries: Activity / Industry Classification Maximum Exposure (Rs. in lakhs) Activity / Industry Classification Maximum Exposure (Rs. in lakhs) Agriculture 250 Trading 150 Small Scale Industries 500 Retail Trade 150 ITES & Software 250 E-commerce 200 Education Sector 250 Infrastructure 500 Hospitality Sector 300 Transport & Logistics 500 Redevelopment Projects 1,000 Auto Ancillary/ Cements/Steel 250 Construction Services 500 Consumer Durables 150 Advances to Capital Market 1,500 Others 1,000 (Amit to advise on changes) Any change in sector cap (once put in place), must be approved by the Credit Committee. All credit proposals must clearly specify to which industry grouping the borrower belongs. Supporting data such as turnover from sector, order book, regulatory classification etc must be provided. Risk Management must ensure that all sector limits are in conformance with RBI norms for non deposit taking NBFCs that might be prevalent at that time. 8
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