Capsule On Banking

CAPSULE
ON
BANKING
TOPICS
Knowledge is not simply another
commodity. On the contrary,
knowledge is never used up. It
increases by diffusion and grows
by dispersion.
Courtesy:- 1
B S Bisht
Zonal Inspection Centre
Lucknow
B S Bisht
Lucknow
BANK OF BARODA
MAXIMISING GROWTH AND PROFIT THROUGH

ENHANCED CUSTOMER ORIENTATION
Foreword
Ever since the banking sector reforms have picked up pace in late nineties and early
twenties, there have been deluge of regulatory measures. At the same time, the banking
industry has been witnessing unprecedented competition opening up wide and divergent
choices to consumers. Banks have been facing stiff challenges to innovate and integrate
their strategies to cope up with the semantic changes. Product innovation, smart
negotiating skills to remain competitive in the market, care and concern for improved
quality of customer service to achieve optimum customer satisfaction, application of IT
skills, utilization of new IT infrastructure building up in the banks are some of the
challenges confronting the banks.
Following such reform measures and initiatives in the financial sector, banks are
witnessing inflow of large volumes of instructions/information. The media is publishing
on an online basis a cross section of analysis of developments, central bank policy
initiatives/announcements, interpretation of strategies of market players, shift of market
shares of different players, perception of customers, opinion of analysts and so on. The
combined impact adds further dimensions to the mass of information. There is thus a
systemic force on the bankers to remain active and conversant with the spate of changes
to maintain their operational efficiency. In the process, for aspiring bankers, knowledge
management has assumed critical significance in the career progression and smart
customer management.
In this background, it is felt essential to briefly bring out a synopsis of notes on banking
development to enable the bankers to get first hand information on the various topics. I
have taken up this rigorous job of compiling/rewriting some notes to make them
compatible to the readers. Practicing fellow bankers can get apprised of various
developments, which have already taken place. It also gives information on impending
changes. I have sourced most of the information from RBI sites, bank sites and rewritten
many of them to incorporate in the notes.
I am grateful to Dr K Srinivas Rao, Secretary to Board, who has inspired me in compiling

these notes. I also take this opportunity to thank Ms Kiran, Corporate Accounts
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B S Bisht
Lucknow
Department who has helped me in designing these notes. Any suggestions for
improvement of the contents are welcome.
B.S. BISHT
ZIC, Lucknow
July 10, 2010
MEMORY PAD FOR INTERVIEW
You may like to have a quick glance at the following
Sr. Name of Topic / Reference Source

No. Issue
1 About you - Academic Background Your marks
- Specialized subjects (if any) sheets, own
- Hobbies / Aptitude assessment,
- Sports Background (if any) Certificates
- Academic distinctions
- Year of CAIIB
- Your SWOT analysis
- 5 plus, 5 minus points
- Physical habits, walking
exercise etc.
2 About your career - List of last 5 postings Refer own track
- Which one did you like most, record in the bank
why? and make a list.
- Your unique achievements,
awards (if any)
- Your contribution to the bank
- Which one was worst posting
& why - How did you view it.
- Job satisfaction, Current
posting.
- Why you deserve for
Overseas Posting/Promotion
- Which territory/Area of
operation you would like to
be posted and why.
3 About Bank of - Size of Balance Sheet Annual Reports,
Baroda - Deposit-mix ratio, Deposits, Business Policy
Advances, growth rate of 3 guidelines,
years
- Market Share among Public
Sector Banks
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B S Bisht
Lucknow
- profitability trends
- ROA/EPS/NPAs/ Provisions
- What are our strengths?
- What are our immediate
challenges?
- How Competitive are we ?
- Our bank’s status in the
industry
- Business Policy Guidelines
2010-11
- International Operations
growth of overseas operations
4 About the banking - Reforms Newspaper

industry - Growth rates in the last 3 clippings, annual
years report of RBI and
- Bank rate, Deposit rates Magazines
- challenges before PSBs
- How new private bank’s have
affected PSBs.
- Deposits, Advances, ROA
- NPAs, Provisions
- Prudential Standards
- Transparency & Disclosure
Standards
- Technology levels
- Customer expectations
5 About the economy - GDP - last 3 years Newspaper
(India) - Gross Domestic Savings clippings, Bank’s
- Industrial Growth Rate publications, RBI
- Agricultural Growth Rate reports, Magazines
- Service Sector Growth Rate
- Forex reserves
- Exchange rate stability
- Fiscal Deficit
- Government borrowings
- Country rating by Moody’s
and Standard and Poor
6 Basics of Foreign -What is Foreign Exchange? Please go through
Exchange, which a -Exchange Rate notes in this book
prudent Banker is -Letter of Credit
supposed to know. -Stand By Letter of Credit
-Packing Credit/Post Shipment
-Credit
-FEMA
-E.C.B.
-GDR
-Derivative (Basic definition)
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B S Bisht
Lucknow
-Swaps (Basic definition)
-Options ((Basic definition)
-Off shore Banking
-Hedging (What does it mean)
-LIBOR
-Factoring
-Forfeiting
7 Other latest topics - Risk Management Paper clippings,

- Banking Sector Reforms copies of reports
- Full Convertibility Bank’s Economic
- Sub Prime Crisis Digest.
- Insurance Sector
liberalization
- Entry of banks into Insurance
- How much is our Foreign
Exchange Reserves
- Present interest rate scenario
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B S Bisht
Lucknow
Make Written Test a Successful Event
1. On eve of examination you must have a good and normal sleep and a relaxed
mind since a relaxed mind can think better and recall the facts quicker
2. On day before examination you should not study for longer period except for
important revision aspect.
3. Avoid consumption of spicy/oily/heavy foods on the night previous to the

examination.
4. Read each question carefully, before answering, as few questions are likely to be
not so direct.
5. Objective type questions make the task of candidate easy only when he has total
clarity about the fundamental aspects. Otherwise, these questions are risky to
attempt since you do not get opportunity to express what you have in mind.
6. Plan your time answering the questions. Provide 5 to 10 minutes at the end for
revising your answer.
7. While attempting your paper, the better understood questions should be solved
first. Please do not get stuck to a particular question. If you find that you cannot
recollect the answer immediately, skip it for the time being. You can come back
to such questions later.
8. In case of descriptive answers, divide your answer into small point and give point
wise answer for earning better score. Underline key words in answer.
9. Make your answer clear, specific and brief and do not go long or complex
sentences.
10. Answer should not exceed the allowed space.
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B S Bisht
Lucknow
11. Presentation of your answer plays a crucial role. Use appropriate terms wherever
necessary. Quote Sections/Acts/Committee names where you can. This will
provide added credibility to your answers
12. Neatness and good handwriting creates a good impression in the mind of examiner
13. Before handing over your answer book, make sure that you have written your Roll
No. and other particulars correctly and your answer sheet is properly stiched.
14. It is not your luck but planning, preparation, continued effort and your belief that
you can succeed, produce positive result.
15. Wish you the best in all your endeavors.
OUR LOGO
New Logo comprises the rising sun, radiating its rays across the letter form double B.
What does this symbolize.
 The rising sun is a symbol of change - the change from night to day. The Bank itself
is changing and changing radically.
 The sun is a universal symbol of energy. It gives, protects and sustains life. The
Bank is a source of support for its customers.
 The sun is universally recognized - across cultures and countries. Baroda is an
international bank and the sun means the same thing across its global footprints.
 There are 5 rays of the sun falling on the letterform double B. The 5 rays of the sun
signify that the Baroda Sun's rays fall on and provide energy to its customers across
the 5 continents.
 The logo itself is at an angle. It is not straight, not at a perpendicular to the base.
This means that the Bank is in a dynamic state - always pro-active, changing and
responding to the change in the environment. It is not static but always on the move.
 The second B in the double B letter form appears like a bird flying across the morning
sky. It is like Baroda flying in with 20th century values and into a new world of 21 st
century efficiencies. It is this blend of hi-tech and hi-touch that should differentiate
Baroda from private and foreign sector competition.
 Baroda's new corporate colors are Vermillion, a shade of orange. The international
Pantone code for Vermilion is 1655C. The RGB mix is 255:92:52 respectively.
Vermilion is the sindoor - a powder worn by married women in many parts of the
country. It symbolizes their loyalty to their husbands. The Vermilion for Baroda is a
symbol of its loyalty to its customers. This color is reportedly not used by at least the
top 500 banks of the world. This makes it unique and helps to differentiate Baroda
from competition.
 We call it the Baroda Sun.
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B S Bisht
Lucknow
RBI Annual Policy Statement 2010-11 and its Impact
SL.No. Policy Measures Impact

1 Cash Reserve Ratio raised by 25basis RBI has reaffirmed its commitment to
points to 6% price, output and financial stability by
choosing gradualism over a big-bang
Repo Rate Raised by 25 basis points approach. By raising repo, reverse
to 5.25%(Now it is 5.50%) repo and CRR by a modest 25 basis
points each, it has signaled an interest
Reverse Repo Rate hiked by 25 basis rate regime that would help anchor
points to 3.75%(Now it is 4%) inflation expectations without hurting
the growth momentum(Mr. M D
Bank Rate retained at 6% Malya, CMD, Bank of Baroda)
Inflation will be contained and

inflationary expectations will be
anchored. The recovery process will
be sustained. Government borrowing
requirements and the private credit
demand will be met (RBI Monetary
Policy Statement 2010-11)
CRR hike will suck out Rs.12,000

crore of liquidity.
The gradual withdrawal of easy

monetary conditions is positive for
growth.. An attempt to tame rising
inflation
Lending rates may not be changed in

the near future. Banks’ margins may
come under pressure.
The RBI is presently facing the

challenges of managing high inflation
and need for supporting the growth
levers. It has taken the economy well
through the ‘managing crisis’ to
‘managing recovery’. Now the focus
has shifted to ‘managing inflation’.
The policy stance of RBI truly
reflects these emerging concerns.
This is balanced approach to support
large government borrowing as well
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B S Bisht
Lucknow
as private consumption demand.
2. RBI has allowed banks to park bonds Banks will not have to show losses on
issued by companies engaged in securities parked in the HTM basket
infrastructure activities, and with a if market prices of these securities fall
residual maturity of seven years, in the below the acquisition prices.
Held to Maturity bucket(HTM)
With no fear or erosion in the market
value of HTM bonds, banks will be
encouraged to invest in these papers.
RBI has facilitated the flow of banks’

funds to infrastructure sector without
having to make a separate
dispensation for such flows. This
obviates the need for companies to
provide huge margins to avail of
loans
3. The RBI has allowed banks to show So far all loans to road sector were
loans to road sector as ‘secured loans’ classified as ‘unsecured loans’ since
provided banks have the right to the land on which the road is
receive annuities, tolls collection and developed belongs to the government
it is legally enforceable and and thus cannot be taken as security
irrevocable. by lenders.
The move will improve flow of credit

to road sector.
The road sector is expected to receive

boost with RBI announcing new
measure to improve the flow of credit
to the sector.
4. RBI has lowered the provisioning Will help flow of banks funds to
requirement on sub-standard loans on infrastructure sector.
infrastructure loan accounts The
provisioning of sub-standard loans Measures at Sl. No. 2 to 4 will
have been lowered from 20% to 15% support infrastructure requirement
of around USD 1 trillion over next
five to seven years.
5. RBI has permitted recognized stock At present, Indian Residents are
exchanges to introduce plain vanilla permitted to trade in future contracts
currency options on the spot US in four currency pairs on the two
Dollars/rupee exchange rate for exchanges.
residents.
There are many advantages of options
trading in the currency market.
Options give buyers a right, but not
the obligation, to exercise it. Options
are also cheaper hedging tool
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B S Bisht
Lucknow
compared to futures. In the future
market, the investor has to pay the
mark-to-market differences. In
option, the risk is confined t the
premium that has already been paid.
The introduction of option trading is a

welcome move. This will lead further
deepening of the market
Importers and exporters as well as

commodity traders will find it
convenient to hedge their positions in
currency markets by buying or selling
call or put options, depending jupon
their requirements. While call
options are bought when prices are
expected to rise, pout options are
bought when prices are expected to
come down.
6. The RBI has allowed trading in At present only 10 year Government
interest rate futures (IRFs) on of India securities are available for
securities with short term maturities trading under exchange-traded IFRs.
such as two-year and five-year
securities and 91 days treasury bills. The introduction of these securities
will surely fill the gap in the interest
rate futures market.
More product will certainly deepen

the interest rate derivative market and
increase liquidity. At present the
daily volume in IRFs is negligible.
7 RBI has extended the time for More time has been given ARCs to
realizing the assets acquired by Assets realize their assets.
Reconstruction Companies(ARCs)
from five years to eight years. In
addition, ARCs are allowed to acquire
assets in their own books or directly in
the books of the trust set up by them.
8 RBI has proposed to mandate banks RBI’s decision will be positive for
not to insist on collateral security in MSE sector, benefiting large number
case of loans up to Rs.10 lacs as of such enterprises.
against the present limit of Rs. 5 lacs
extended to all units of micro and
small enterprises(MSEs) sector.
9 RBI has permitted banks to treat their This is an effort to promote the
exposure to unlisted non-statutory corporate bond market.
liquidity ratio debt securities as an
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B S Bisht
Lucknow
investments in listed securities at the Also this step is part of the efforts to
time of making investments. This gradually push companies from
benefit will be available provided the depending mainly on direct bank
paper is proposed to be listed in credit to raising funds from the
exchanges. market.
10 RBI has proposed to permit banks to Under the extant guidelines on BC
engage any individual, including those model, only certain select categories
operating Common Service such as NGOs, micro finance
Centres(CSCs), as Business agencies and other self help groups
Correspondent(BC) subject to banks’ are permitted to be engaged as BCs.
comfort level and their carrying out
suitable due diligence. This will provide more flexibility to
RBI will issue operational guidelines banks.
separately.
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B S Bisht
Lucknow
Where Do We Stand ???
As on 31 Mar 2010*
Rank Name of Global CASA Net Profit NPA CAR
the Bank Business Deposit [Rs.] [Net] [Basel-
[Rs.] %age %age II ]
1st PNB 4,36,000 40.85% Rs.3905 0.53% 14.16%

crores crores
2nd BOB 4,16,000 35.63% Rs.3058 0.34% 14.36%

crores Crores
3rd Canara 4,04,000 29.85% Rs.3021 1.06% 13.43%

Bank crores crores
4th BOI 4,01,000 31.75% Rs.1741 1.31% 12.94%

crores crores
5th ICICI 3,83,000 41.07% Rs.4670 1.87% 19.40%

Bank Crores crores
6th Union 2,91,000 29.36% Rs.2075 0.81% 12.51%

Bank crores
7th HDFC 2,22,000 50.00% Rs.2949 0.31% 17.40%

Bank Crores crores
*[Source : Audited financial results available on Website of individual Bank & Financial Newpapers etc]
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B S Bisht
Lucknow
Major Ratios of our Bank as on 31.03.2010
Ratio How to Calculate Ratio as on
31.03.10(Figure in
bracket is of previous
year)
Net Interest Margin Total interest earned minus 2.74% (2.91%)
total interest paid divided
by average interest
earning assets
Cost Income Ratio Operating Expenses 43.57% (45.38%)
Divided by (Non interest
income plus interest
spread)
Return on Average Assets Net Profit divided by 1.21% (1.09%)
AWF
Return on Assets Net Profit divided by total 1.10% ( 0.98%)
assets
Cost of Deposit Interest Paid on Deposits 4.90% (5.71%)
divided by Average
Deposits
Capital Adequacy Ratio Total Capital including 14.36% (14.05%)
(Basel II) Tier I plus Tier II
multiplied by 100 and then
this figure is divided by
total Risk Weighted Assets
of the Bank
Interest Spread/Average (Total interest income 2.44% (2.64%)
Working Funds(AWF) minus total interest
expenses) divided by AWF
Operation Expenses/AWF Operating expenses 1.56% (1.84%)
divided by AWF
Return on Net Worth Net Profit Divided by NW 22.19% (19.56%)
Dividend Payout Ratio Dividend including 20.90% (17.22%)
corporate dividend tax
divided by Net Profit
Credit Deposit Ratio Total Advances divided by 84.55% (82.36%)
Customer Deposit(Total
deposits minus inter bank
deposits)
Net Profit/AWF Net Profit divided by 1.26% (1.15%)
AWF
Interest Income/AWF Total Interest income 6.86% (7.78%)
divided by AWF
Interest Expenses/AWF Total interest expenses 4.42% (5.14%)
divided by AWF
Business per employee Total Deposits plus total Rs. 10.68 Crore (Rs.9.13
advances divided by No. crore)
of employees
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B S Bisht
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Average Business per Average Deposits plus Rs. 8.94 Crore (Rs.7.57
employee average advances divided crore)
by No. of employees
Net Profit per employee Net Profit divided by No. R. 7.85 lacs (Rs.6.05 lacs)
of employees
Net Profit per Branch Net Profit divided by No. Rs. 0.97 crore (Rs 0.75
of branches crore)
Earning per share Net Profit divided by Rs. 83.96 (Rs 61.14)
equity multiplied by Ten
Book Value per share Net Worth (excluding Rs. 378.44 (Rs.312.61)
Revaluation Reserve)
divided by equity
multiplied by Ten
• Average Working funds(AWF) - Fortnightly Average of Total Assets

• Average Deposits – Fortnightly Average of Total Deposits
• Average Advances – Fortnightly Average of Total Advances
• Average Business – Total of Average Deposits plus total of Average
Advances
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B S Bisht
Lucknow
Business Policy Guidelines 2010-11
Performance of Bank during 2009-10(Global)
• Global Business Rs.4,16,080 crore (Global deposits Rs.2,41,044 crore, Global

Advances Rs.1,75,035 crore)
• Net Profit Rs.3058.33 crore (Up by 37.32%)
• Net Interest income up by 15.90%
• Return on Average Assets 1.21%
• Return on Equity 22.19%
• CD Ratio 84.55%
• Capital Adequacy Ratio Basel II 14.36%, Basel I 12.84
• Net NPA 0.34%
• EPS 83.96
• Income from Treasury operations 1047 crore
• Business per employee 10.68 crore
• Net Worth Rs.13,785 crore
• Share holding by Government of India 53.81%
Motto for the year 2010-11:
‘LEVEERAGING TECHNOLOGY FOR AUGMENTING BUSINESS GROWTH

AND PROFITABILITY’
Business Model focusing on Sustained Growth:
(Remember 4 Cs)
• CASA – Building a healthy CASA portfolio

• CREDIT – Well diversified advances portfolio with enhanced emphasis on
MSME, Retail and agriculture Sector.
• CLEANING OF BALANCE SHEET – Better NPA management through
arresting slippages and recovering the NPA/Written off accounts
• CORE FEE BASED INCOME – Supplementing Net Interest income with a
handsome core fee based income
Strategies and Action Points:
Resource Mobilization:
• ‘KYC’ is our Survival Kit

• Know Customer as potential for canvassing business or potential risks for
safeguarding our exposure
• ‘KYCR’ – Know your customer’s risks
• Aim for at least 38% CASA share on an average basis
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B S Bisht
Lucknow
• Share of Current Account Deposit must be 8% to 10% within CASA.
• Emphasis on canvassing term deposits of higher maturity.
• Recurring Deposit must be provided necessary boost.
• NRI deposit – low cost deposit – be provided necessary boost especially.
• Deposit mobilization to be broad based
• Need to diagnose the reasons for negative branches and branches with negligible
growth
• 70% of the branches contribute to the business growth and remaining branches are
showing less than 10% growth.
• Percentage of performing branches to be increased at least to 85% during this
year.
• Customer base of 36 million – cross selling other products
• Various characteristics of the customers are properly captured in the system.
Credit Deployment:
• Fast processing of loan proposals

• Profiling and capturing the credit risk of the borrower
• 26% to 27% growth for retail sector as a whole.
• Evolve new retail products.
• Need to market products with non-funded exposure.
• Wholesale Banking – Infrastructure lending is most important area where we will
hav e to adopt an aggressive approach. 9% of GDP would be spent on
infrastructure products by 2014.. Auto sector, pharma, capital goods industries
would be best bet in the near future. Strengthening existing relationships.
• MSME Banking – Second largest source of employment. Account 40% of
industrial production, 95% of industrial units and 34% of exports. Low credit
availability. Comprises 95% of total industrial units, employing more than 65
million people. Yet only 8% of total bank credit finds its way into this sector.
Ensure credit availability to this sector.
• Rural and Agri. Banking – Bank is lagging behind on meeting the mandatory
target of Direct Agriculture lending. Need to bridge this gap during this year.
Branch expansion and use f Business facilitators. Agriculture credit without
compromising on quality.
• Retail Credit – Area still remains untapped. Housing loan constitute 44% of total
retail loan. Estimated shortfall of 19.4 million housing units in India Ban should
be able to tap and build the opportunities.
Non Interest Income:
• NIM under pressure. .Necessity to augment non interest income. Not getting
adequate attention.
• Zone/Region to accept challenging targets for increasing fee based income
• Fee based income should be good enough to cover non interest expenses..
Government Business:-
• Good revenue generation opportunity.
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• To create awareness amongst staff with regard to the profitability of the
Government Business.
• Popularize e-payment facility for payment of Direct and Indirect Taxes by non
customers and/or Baroda Connect users.
Wealth Management:-
• ‘India will have one trillion dollar worth ingestible funds by 2012’
• Target size of 42 million hose holds as against 13 million in 2007
• ‘India First Life Insurance’ – a joint venture
• Large number of branches – should come forward for enrolling customers for life
products
• Tie up in the area of general insurance, asset management, equity trading, etc –
generate fee based income.
.
E-Business:-
• The multiple delivery channels

• Baroda Connect, RTGS, NEFT
• Popularize e business facility amongst the clients.
• Net Based transactions through debit cards.
Asset Quality and NPA Management:-
• Adopt risk mitigation techniques so that slippages can be avoided in the first
place.
• Not hesitate to employ all the tools of recovery that are at our disposal
• Need to guard against ‘take over’ of weak accounts.
• Improve Asset quality further.
• Capturing early warning signals in time and continuous dialogue with the
borrower can go a long way in arresting slippages which sometimes come as a
last minute shock.
• Developing alerts to catch warning signals.
• Target for cash recovery Rs.425 crore. Recovery Target in PWO/Write off
Rs.550 crore, Target for up gradation Rs.250 crore.
Customer Service:-
• Staff to have complete and up dated knowledge about products.

• Prompt and hassle free service
• Educate customers about our products
• Prompt redressal of complaint under advice to customer.
• Seek guidance from higher authority without loss of time.
• Use of bank’s various IT initiatives
• Customers’ waiting time to be reduced.
• Make Bank of Baroda, the ‘Most Admired & Profitable Bank’
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B S Bisht
Lucknow
Domestic Business Plan 2010-11
Parameters (Remember Five Rs) Growth in % p.a.

Resource Mobilization Total Deposits: 23% to 25%
CASA Deposit: 24% to 26%
Average CASA: 24% to 26%
Resource Deployment Gross Advances: 25% to 27%
Average Advances: 25% to 27%
Retail Advances: 26% to 27%
MSME Advances 24%
Priority Sector: 24%
Agriculture: 20%
Recovery in NPA 20% to 22%
Revenue Core non interest income 25% to 30%
Return Return on Average Assets 1.10% to 1.20%
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Lucknow
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B S Bisht
Lucknow
TECHNOLOGY INITIATIVES DURING 2009-10
• The Bank has achieved 100% CBS for all its domestic branches during
September,2009.
• The Bank’s Internet Banking, viz. Baroda Connect, is an important delivery
channel, both for its retail and corporate customers, providing facility to
transfer funds, query account status, pay both Direct and Indirect Taxes
online, certain State Taxes, make payment of utility bill and book rail
tickets, online inter bank payment using NEFT/RTGS. Online bill
presentation and payment and shopping for selected portal and donation
to selected temples SMS Alert facility are provided to eBanking customers
To protect our customers from phishing attempts, beneficiary registration
for third party fund transfer activities has been introduced. The Bank has
also launched School Fee Collection Module.
• The Bank has implemented the ATM Switch application to meet the Bank’s
objective of integrating with a wide variety of front end delivery channels
including ATM, POS, Payment, Gateway, Debit Card Management System
and providing online authorization services by connecting to Bank’s Core
Banking Solution, BASE 24 is fully operational for all domestic ATMs and
for ATMs in 7 overseas territories. The Bank has launched School Fee
Collection Module in August 2009 which enables payment of
School/Institution fees through Bank’s ATM. The Bank has also
implemented multiple accounts being linked to a single Debit Card. Debit
Card is also enabled for online shopping to the merchant website.
• The Bank has launched Phone Banking facility to customers, which
enables them to get the Bank’s products information, enquire balances in
their account, status of cheques, order statement of account through fax or
email.
• All CBS branches of the Bank are enabled for inter bank remittances
through RTGS and NEFT.
• The Bank has completed a 3D Secure Implementation under the Internet
Payment Gateway Project (IPG). The IPG facilitates direct customer
merchant transactions and settlement through the Bank’s central ATM
Switch.
• The Bank has launched Corporate Cash Management services, which
enables its corporate customers to manage their funds efficiently through
bulk payment services, local / outstation fund collection ( paper based or
electronic) and liquidity through fund pooling facility.
• The Bank has also launched Institutional Trading under the Online Trading
Project on 17th October,2009.
• The bank has implemented Global Treasury Solution in UK, UAE,
Bahamas, Bahrain, Hong kong. The Global Treasury for India too went live
on 14th December 2009.
• The Bank’s Back office functions have been centralized at the branch level
to relieve the operational staff from the loan of cumbersome back office
functions and enable them to focus more on sales and service.
• The Bank has set op three Regional Back Offices, at Baroda, Jaipur and
Coimbatore, for the process of centralized account opening and issuance
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Lucknow
of personalized cheque book,. The Centralized Pension Payment Cell was
also rolled out in Baroda on 7th October,2009.
• The Bank has implemented Payment Messaging Solution (PMS) in 126 of
its domestic branches ( B category branches ) and 13 overseas territories.
The PMS facilitates Straight through Processing (STP) of SWIFT
messages generated from the CBS, and also goes through the ALM (anti-
money laundering) check.
• The bank has fully implemented Enterprise wide General Ledger in India
and in 19 overseas territories.
• The Bank is also in the process of implementation of Data Warehouse
Project (DWH). The DWH systems will enable the bank to use their data in
making strategic decision and forecasting future business trends.
• The Bank has already implemented Anti Money Laundering system (AML)
in 14 overseas territories viz. Oman, UAE, Fiji, Mauritius, Seychelles,
Tanzania, Bahamas, Kenya, Uganda, Guyana, Hongkong, Botswana,U.K.,
S. Africa. The AML has also been implemented in India and 14 overseas
territories through a Batch Process mode.
• The Bank has successfully implemented the Human Resource Networking
for Employees Service with the main objective of creating a centralized
database of its employees for facilitating decision making, promotion and
selection exercise as also for automating other HR processes. In Payroll,
Salary module, e-TDS modules have been implemented for all domestic
offices in India. The “Leave Module” has also been launched and the
employees are provided with the functionality of self service.
• To ensure Business Continuity at all times, the Bank has implemented a
state –of-the-art Data Centre and also a Disaster Recovery (DR) Site. The
drills are being conducted at regular intervals and the operations are
transferred to the DR site seamlessly to ensure continuity of operations at
all times.
Courtesy:- 21
B S Bisht
Lucknow
How to emerge as winner in Competitive Environment:-
a. Reorienting our systems and procedures towards customer

convenience & enhanced customer satisfaction.
b. Formulating and adhering to best corporate governance practices
with an aim to set high standard of ethical values, transparency and
disciplined approach to achieve excellence.
c. Focussing upon a consistent and broad-based resource
mobilisation plan.
d. Enlarging the base of retail customers by leveraging technology
besides implementing many technology based initiatives.
e. Diversifying the Loan Book and managing the credit risk.
f. Penetrating deeper into hitherto unbanked centres/ customer
segments.
g. Aggressively canvassing non-fund based business so as to improve
the share of fee based income.
h. Maintaining a fine balance between the Size (Top line) and the
Strength (Bottom line) of the Balance Sheet by managing Net Interest Margin
(NIM), Risk Profile of the Bank and improving the Cost-Income Ratio.
i. Enhancing the image of the Bank as a Customer Centric
Organization.
Key Challenges Bank is facing to - day:
• Maintaining and enhancing our market share in domestic and international arena.
• Protecting our NIM
• Increasing the proportion of low cost deposits in our deposit base to control the
cost of funds.
• Increasing our Non fund based income or Fee-based income.
• Asset Quality Management in the wake of sustained credit demand.
• Product and service innovation.
• Hiring and retaining best talents and skills.
Courtesy:- 22
B S Bisht
Lucknow
NAVNIRMAAN
BARODA NEXT
As a learning organization and an organization which is continuously evolving, we

an not remain static. Market place dynamics have triggered transformation in
progressive organizations in order to grow. We have launched a comprehensive
transformation programme called “NAVNIRMANNA”. It will be centered around
our customers and our employees, and will have two core elements – business
process reengineering (BPR) and organization restructuring.
Primarily, the main objectives of this program revolves around the following :
• Ensure best in class customer service.

• Streamline processes to make life simpler for employees and customers.
• Equip you with the best tools and techniques to discharge your roles
effectively.
• Align the Bank’s organization structure and systems to help build “Baroda
Next” and drive the new strategy.
This initiative will focus on solving the challenges that we face in our respective
roles and will work with our ideas in making change happens at all levels in the
organization. The Bank’s success will be defined by our success.
We have partnered with McKinsey & Company in this exciting journey and have
also put in place a dedicated team from our side for anchoring this effort and
taking this initiative forward to each and every nook and corner of the
organization. It is programme which is enormous not only in its scope and
magnitude but also in the value and benefits that it brings to the Bank and to
each one of us, individually.
Courtesy:- 23
B S Bisht
Lucknow
HR Initiatives:
• ‘SAMPARK’ – SOS Helpline for employees. Under this Help line, employees
who are in distress can directly approach CMD for immediate relief. Matters
requiring urgent attention like life and death issues, medical emergency,
overwhelming circumstances in the personal life of employees, hardships due to
natural calamities etc. are dealt on priority and relief is provided, where required.
• ‘PARAMARSH’ - Personal Counseling services for employees. The centre is
set up to provide psychological assistance and guidance to employees to enable
them to overcome any stress, complexities, conflicts in their personal and
professional lives through experienced clinical counselors. It works on the
principle of neutrality and confidentiality.
• ‘KHOJ’- A talent Identification & Development Programme to nurture talented
human resources.
• PASAS- Performance Appraisal System for Award Staff. With a view to bring
an organization wide performance culture, hitherto uncovered category of
employees i.e. clerical and sub staff has been brought under a new performance
appraisal system called PASAS
• Project Leap – Leadership development initiative for grooming and developing
300 leaders with the help of Grow Talent Co Ltd. The process involves (a)
Identifying a competency framework for future leaders in Bank. (b)
Administration of psychometric instruments and 360 degree feedback for each
identified executive for building on their strength and working in the areas where
development is needed.(c) Classroom orientation and Action Learning Projects
(d) Succession Planning
• HR Blueprint for business driven HR Reforms - Board approved strategy
paper outlining various organization wide HR Reforms/Interventions
• Ideaonline@ .com.- To harness the power of small ideas. The programme is
designed to identify, select, groom and deploy the talented staff in key
functions/roles. Special fast track career growth opportunities are lined up for the
right candidates.
• Introduction of Performance-linked Incentive Scheme.
Courtesy:- 24
B S Bisht
Lucknow
BANK’S CORE STRENGTH
• A large public sector bank with modern and contemporary personality. As per
Bankers’ Magazine, London its world Rank is 283 among Prime Banks
• Uninterrupted Record of profit making.
• Strong domestic presence throughout the country
• Bank’s operation extended in 26 countries
• Global business Rs.4,16,080.00 crore as on 31.03.2010
• Has been able to withstand to the turbulence more effectively during 2009-10
mainly due to its strong fundamentals
• Providing financial services to over 36 million customers across globe
• Baroda SUN- is a well accepted and recognized brand of Indian
Banking Industry
• Bank the common values of Honesty, Simplicity, Dedication and commitment
• Bank’s rapid and significant Technology progression
• Bank has been enjoying ‘trust and confidence’ of its stakeholders over a period of
time.
• Bank met its stakeholders’ expectations in terms of performance, transparency,
corporate governance and integrity in guidance during the last couple of years.
• Bank’s presence in all leading financial centers of the world like London,
Brussels, New York, Bhamas, Dubai, Hong Kong and Singapore.
• Bank’s international operations account for 24% of Bank’s global business and
around 29% of its net profits.
BANK’S MAJOR WEAKNESSES
• Very little sales focus. 80% of work force at branch level is doing something
except selling.
• Inflexible and sub-optimimum staffing at Branch level
• Low utilization of alternate delivery channels. ATM utilization is 1%. Figures
for internet, phone banking channels are in fact negligible.
• 3% to 4% of branch staff is spent in selling. Best practice is 50% to 60% on
selling activities.
• Staffing is not matched with customer arrival time.
• Product per customer ratio is 1.2. Best practice is around 3.
Courtesy:- 25
B S Bisht
Lucknow
Multi-Specialist Banking-Redefinition of Critical Business Segments
In Bank’s Business Policy Guidelines 2007-08, corporate moto was chosen as ‘Moving
towards Multi-specialist Banking’. This most has been chosen, as ‘one- size-fits-for all’
approach has become redundant and irrelevant in the face of fierce competition and
specialized banking.
Business segmentation if the practice of dividing the customer base into homogenous
groups whose requirements, needs and behavior are similar in specific ways such as age,
gender, interests, spending habits, type of business, activity and so on. Business
segmentation allows organizations to target groups effectively and allocate resources to
best effect.
Business segmentation allows managers to:-

• Divide market into meaningful and measurable segments.
• Determine the profit potential of each segment by analyzing the revenue and cost
impacts of serving each segments.
• Target segments according to their profit potential and the organization’s ability to
serve them in an efficient way.
• Invest resources to tailor product, service and marketing and distribution programs
to match the needs of each target segment.
• Measure performance of each segment and adjust the segmentation approach over
time as market conditions change.
Advantages of Business Segmentation:

• To prioritize new product development efforts
• To develop customized marketing programs
• To design and develop specific distribution strategy.
• To fine tune processes required to serve each customer segment.
• To determine appropriate product pricing.
• To plan for skill set requirement in people.
• To determine strategy to increase the ‘Share of Wallet’.
As the Bank embarks on its journey to transform into a ‘Multi-Specialist Bank’, the Bank
would need to segment its business and its customers into strategic business
segments/units(SBUs). For this purpose, it would be imperative to measure and monitor
Bank’s performance by the strategically defined business segments as opposed to current
monitoring mechanism, which focuses primarily on performance by geographically(by
Zones/Regions) and by outstanding balances in deposits and advances.
To focus more clearly on the current and emerging business opportunities.

In order to move towards ‘Multi-specialist Banking, the Bank has redefined its line of
business into 4 critical business segments i.e. Retail, SME, Wholesale and Rural/Agri
Courtesy:- 26
B S Bisht
Lucknow
Business. Each segment is being headed by a General Manager at Baroda Corporate
Centre.
Retail Banking
• Labiality Side – All individual, HUF, sole proprietorship firms and institutions
permitted by RBI to open Savings Bank Account(except Clubs & Trusts)
• Assets Side – Consumption/Personal loans to all individuals, including, including
NRIs, irrespective of credit limits.
• Small Business Loans to individuals and Sole proprietorship firms engaged in
small business, retail trade, self-employed, professionals – rendering
services(other than agriculture & manufacturing) –with credit limit upto Rs.1
crore
SME Banking
• Small Scale Industries(SSI) – as per regulatory definition.
• Micro, Small and Medium Enterprises – as per regulatory definition.
• All other entities with their annual sales turnover of Rs. 1 crore to Rs.150 crore.
• Individuals and sole proprietorship firms engaged in small business with credit
limit of over Rs.1 crore.
• Clubs, Trusts etc.
Wholesale Banking(Mid corporate and Large Corporate)

• Entities (including private sector, PSU and Foreign) with their annual
sales/income turnover of over Rs.150 crore.
• Customers irrespective of their annual turnover – (i) Financial Institutions,
including banks, and all types of NBFCs(excluding RRBs sponsored by our bank)
(ii) Central and State Governments (iii) Associate/sister concerns of Wholesale
Banking Customers.
• Large Corporates – Customers with their annual sales turnover of over Rs.500
crore.
• Mid Corporates – Customers with their annual sales turnover of Rs.100 crore to
Rs.500 crore.
Rural/Agri. Banking
• Two dimension – (i) Based on agri. Business Banking (ii) Based on geographical
location of branches.
• Direct Agriculture and Indirect Agriculture.
• Micro Finance.
• Value Chain enhancement of agri-business by alliances with agri-corporates.
• RRBs sponsored by our Bank
• All other banking business (Assets & Liabilities) i.e. SME and Retail segment
business at semi urban and rural branches.
• Rural and Agri. Business Segment will exclude all Wholesale Banking segment
customers.
Courtesy:- 27
B S Bisht
Lucknow
ROLE OF BRANCH MANAGERS IN THE NEW CONTEXT
With the implementation of CBS in large number of branches across the country, Branch
Managers will have the added responsibility to fully leverage technology for business
development, customer acquisition and improving service delivery quality. From
transaction processing, they have to elevate their role to driving the marketing and selling
efforts at the branches. Besides marketing of Bank’s products, they have also to drive
marketing of third party products at the branch counters. Branch Manager’s role will also
include transforming their branches into ‘Sale and Service Centres’ and ensuring highest
level of customer satisfaction and zero customer complaints.
Electronic Products & Services
• Transaction-enabled internet banking for Anywhere Banking.

• Mobile Banking/Phone Banking – for information services.
• ATM cum Debit Cards in association with VISA Electron for 24 Hour Banking.
• Baroda easy Pay – an electronic Bill Presentment & Payment Facility.
• Rapid Funds2India – an on line money transfer service to India from UAE, Oman,
UK and Mauritus
• BOB Cash Reach-A cash management product for corporates.
• RTGS – An interbank electronic fund transfer facility for customers.
• NEFT – An interbank electronic fund transfer facility.
• Central Funds Management System(CFMS) – An on line Negotiated Dealing
System for Government Securities.
• Electronic Data Interchange(EDI) – for payment of custom duty and duty
drawback.
• Web Based Lending Automation Process System(LAPS) – for corporate and retail
lending.
• Corporate internet & e mail – A Web based electronic communication information
Sharing and Knowledge Management System
SME Products
• Baroda Laghu Udhyami Credit Card

• Baroda Artisans Credit Card
• Loan under Technology Upgradation Fund Scheme for Textile units
• Loans under Credit Linked Capital Subsidy Scheme.
• Composite Loans to SSI Units.
• Collateral Free Loans under Credit Guarantee Fund Trust Scheme
• Loans under National Equity Fund Schemed
• SME Short Term Loan
• SME Medium Term Loan
• Baroda SME Gold Card
• Loans under KVIC Margin Money Scheme
• Scheme for Financing Energy Efficiency Projects
• Baroda Overdraft against Land & Building
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B S Bisht
Lucknow
• Baroda Vidyasthali Loan
• Baroda SME Pack
Rural Products
• Loans to Agriculture and Allied Activities

• Micro credit through Self Help Groups (SHGs)
• Baroda Kisan Credit Card
• Baroda General Credit Card
• Baroda Rural Internet Kiosk Finance Scheme
• Retail Products
• Baroda Home Loan

• Baroda Education Loan
• Baroda Auto Loan
• Baroda Mortgage Loan
• Baroda Personal Loan
• Baroda Ashrey (Reverse Mortgage Loan)
• Baroda Loan to Doctors
• Baroda Traders Loan
• Baroda Loan against Securities
• Loan against Future Rent Receivables
Courtesy:- 29
B S Bisht
Lucknow
Subsidiaries, Associates and Joint Ventures
(As on 30.06.2010)
Sl. Name Extent of Ownership

No.
Subsidiary (Domestic)
1 Nainital Bank Ltd 98.39%
2 BOBCARDS Ltd 100%
3 BOB Capital Market Ltd 100%
Subsidiary(Foreign)
1 Bank of Baroda (UK) Ltd 100%
2 Bank of Baroda(Uganda) Ltd 80%
3 Bank of Baroda (Kenya) Ltd. 86.70%
4 Bank of Baroda (Guyana) Ltd 100%
5 Bank of Baroda (Botswana) Ltd 100%
6 Bank of Baroda (Tanzania) Ltd 100%
7 Bank of Baroda (Trininad & Tobago) 100%
Ltd.
8 Bank of Baroda (Ghana) Ltd. 100%
9 Baroda(New Zealand) Ltd 100%
Associates (Domestic)
1 Baroda Pioneer Asset Management 49%
Company Ltd
2 Jhabua Dhar K G Bank 35%
3 Nainital Almora K G Bank 35%
4 Baroda Gujarat K G Bank 35%
5 Baroda Rajasthan Gramin Bank 35%
6 Baroda U P Gramin Bank 35%
Associate (Foreign)
1 Indo Zambia Bank Ltd 20%
Joint Venture (Domestic)
1 India First Life Insurance Co Ltd. 44%
Representative Offices
1 Thailand
2 Malaysia
3 Australia
• Off – shore Banking 5- OBU Nassau, OBU Mauritus, OBU Mumbai, OBU
Singapure, OBU Baharain
• Total 81 Overseas Offices in 26 countries (as on 30.06.2010) .
Courtesy:- 30
B S Bisht
Lucknow
Initiatives taken by RBI towards Current account Convertibility
• Permitting Indian companies as well as registered partnership firms to invest in

overseas Joint Venture (JV)/Wholly owned subsidiaries(WOS) upto 400% of their
Net Worth under automatic route.
• Increasing the existing limit of 35% of the net worth for portfolio investments by
listed companies to 50% of Net Worth and dispensing with the requirement of
10% reciprocal shareholding in the listed Indian companies by the overseas
companies.
• Increasing the aggregate ceiling for overseas investment by mutual funds

registered with SEBI from USD5 billion to USD7 billion while continuing with
the existing facility of investing up to USD1 billion in overseas exchange traded
funds that may be permitted by SEBI
• Enhancing existing limit under Liberalised Remittance Scheme(LRS) for resident

individuals from USD100000 to USD200000 per financial year.
• Permitting to allow refund of export proceeds for goods re-imported into India on
account of poor quality subject to an undertaking by the exporter that the goods
would be re imported within three months from the date of remittance.
• Permitted to remit business processing outsourcing(BPO) companies in India

towards the cost of equipment to be imported and installed at their overseas sites.
• Airlines companies were allowed to make advance remittance without bank

guarantee up to USD50 million.
• To allow reimbursement of pre incorporation expenses incurred in India up to five

percent of the investment brought in or USD100,000 whichever is higher.
• Indian corporates with a proven track record were allowed to make remittances
out of their foreign exchange earnings for setting up chairs outside India.
• Banks were delegated powers to allow donations by Indian Corporates for

specified purposes, subject to a limit of one per cent of the foreign exchange
earnings during the previous three financial years or USD 5 million whichever is
less
• The limit for consultancy services procured from outside India by Indian
companies executing infrastructure projects has been enhanced from USD 1
million to USD 10 million per project.
Courtesy:- 31
B S Bisht
Lucknow
• Interest Rate ceiling on FCNR(B) was increased to LIBOR/Swap rate plus 25bps
of respective maturity of the currency. Interest rate on NRE Deposit increased to
USD LIBOT/Swap Rate plus 100bps for the respective maturity.
• Indian entities were allowed to invest in overseas unincorporated entities in oil

sector upto 400% of their Net Worth as on date of last audited Balance Sheet.
• ECB upto USD500 Mio per borrower per financial year permitted for lrupee
expenditure and/or foreign currency expenditure.
• ECB Borrowers permitted either to keep proceeds offshore or to remit to India for
credit to their rupee account with banks in India pending utilization of permissible
end – use
• AD Category I Banks permitted to convey ‘No objection’ under FEMA for

creation of charge over immovable assets and financial securities and issue of
corporate or personal guarantees on behalf of borrowers in favour of overseas
lenders to secure ECB under automatic/approval Route.
• The limit of USD100000.00 enhanced to USD300000.00 for making remittances

for imports where the import documents are directly received by importer from
overseas supplier.
• The limit for advance remittance for import of .services without bank guarantee
enhanced rom USD10000.00 to USD500000.00
• Banks are allowed to borrow funds from their overseas branches and
correspondents upto a limit of 50% of their unimpaired Tier I capital as at the
close of previous quarter or upto 10 Million whichever is higher.
• Exchange Traded currency future started on 29.08.08
Courtesy:- 32
B S Bisht
Lucknow
NRI
Person who is not resident Indian
Person resident outside India who is citizen of India or person of Indian origin
To obtain declaration Under FEMA 1999- that transaction is not designed to

contravene or evade the provisions of the act or any directions under the act
In case of reason to believe - report to RBI
Who is NRI?
 Abroad - employment or carrying out business or vocation or any other

purpose indicating indefinite period stay outside India
 Indians working abroad on assignments - Fgn Govt, UNO, IMF
 Officers of Govt PSU deputed abroad on assignment with Fgn Govt
Organization posted to their own offices
Persons of India Origin

 Persons of Indian Origin citizen of any other country other than Bangladesh
and Pakistan if he:-
 Holds Indian Passport
 He/his parents/grand parents were citizen of India by virtue of Constitution of
India of the Citizenship Act 1955
Students studying abroad are NRI provided

 Intention to stay for uncertain period
Schemes- NRE/NRO/FCNR Accounts
NRE Account
 Prescribed application form

 Undertaking to inform his date of arrival in India
 Documentary evidence to confirm his NRI status
 In case of temporary visit satisfy that he is not ceased to be Non-resident
 Joint Account - with Non Resident only
Credits: -
 Remittance to India
 Cheque on Foreign Currency account
 T/Cs issued outside India
 Currency - CDF if US$5000/-
 T/C -CDF if US $10000/-
 T/C Currency to be tendered by himself
 Transfer from NRE/FCNR account
Courtesy:- 33
B S Bisht
Lucknow
 Interest
 Interest on Govt. securities provided----
 Maturity proceeds of Govt. securities provided---
 Refund of share/debenture subscription provided---
 Refund of earnest money deposited with House building agencies provided
 Transfer from EEFC/RFC/
 Current income - rent, dividend, pension, interest provided AD is satisfied and
income tax is deducted.
 Any other credit permitted by RBI
Debits:-
 Local disbursements
 Remittance outside India
 Transfer to NRE/FCNR account of Account holder
 Investments provided it is covered by regulations made
 Any other permitted by RBI
Interest: -
 Savings Bank- Rate of interest applicable to Domestic Savings Bank account
 FD - should not exceed LIBOR/Swap rate for US$ of corresponding maturity
plus 175 basis points .
 The period of deposit is 1 to 3 years. Bank may exceed the period but interest
will be applicable for max period of 3 years only.
NRE Savings Deposits

The interest rate on NRE savings deposit accounts would be at the rate applicable to
domestic savings deposits .
TOD- Rs.50000 max upto 2 weeks To be cleared by Inward Remittance
Overdue Deposit - Max period 14 days for overdue interest

Rate applicable (i) date of maturity (ii) date of renewal whichever is less
Premature withdrawal:-
 Bank will allow
 Depositors be made aware of penal interest
 No penalty for RFC deposit
 NRE- to FCNR (B) penalty provision is applicable.
FCNR (B)
Period 1 to5 years
Interest should not exceed LIBOR/Swaps plus 100 bps for corresponding maturity
Courtesy:- 34
B S Bisht
Lucknow
Interest payment- 360 days a year. One year deposit, no compounding effect
Change of status - continue till maturity
Nomination
Taxation
POA- Not allowed
Premature withdrawal - Penalty provision to be clearly brought to the knowledge of a/c

holder. Otherwise has to be borne by bank
Overdue interest - same
Forward cover - allowed
NRO Accounts
Eligible- A person/entity resident outside India

For putting through bonafide transaction
Bangladesh/Pakistani nationality require prior approval of RBI
Types -
Joint A/c - with resident allowed
Credits- same as NRI

 Sale proceeds of assets including immovable property acquired out of
rupee/foreign currency or by way of inheritance.
Debits-
 Local payment subject to compliance
 Current income remitted outside India
 In case of NRI/PIO remittance upto US$ one Million per financial year for
bonafide purpose to the satisfaction of AD
Sale proceed of immovable property:-
Remittance allowed upto One Mio US Dollars per financial year without any lock in
period
Citizen of foreign state - not of Pakistan, Bangladesh, Nepal, Bhutan
 Has retired
 Has inherited assets from person resident in India
 Is widow of resident outside India and has inherited assets
 May remit unto US $ 1 million per calendar year on production of
documentary evidence
Courtesy:- 35
B S Bisht
Lucknow
Foreign national of Indian origin on visit to India
 NRO Account can be opened
 At the time of departure balance can be repatriated provided account is
maintained for a period not exceeding six months and account has not been
credited with any local funds.
Loan against FCNR/NRE FDR – Maximum ceiling Rs.100 lacs
Features of Various Deposits Schemes available to NRIs
Particulars FCNR(B) NRE Account NRO Account

Account
Type of Term Deposit Savings, Savings, Current, Recurring, Fixed
Account only Current, Deposit.
Recurring,
Fixed Deposit
Eligibility NRIs(Individuals NRIs(Individual Any person resident outside
/entities of s/entities of India(other than a person resident in
Bangladesh/Pakis Bangladesh/Pak Nepal and Bhutan)
tan istan Individuals/entities of
nationality/owner nationality/own Bangladesh/Pakistan nationality
ship require prior ership require ownership require prior approval of
approval of RBI prior approval RBI.
of RBI
Currency Pound Sterling, Indian Rupees Indian Rupees
US Dollars,
Japanese Yen,
Euro, Australian
Dollar and
Canadian Dollars
Interest Subject of cap Fixed Deposit:- Fixed Deposit:-
LIBOR/SWAP Subject to cap Banks are free to determine interest
plus 100bps of should not rates
respective exceed
currency/maturiti LIBOR/Swap Savings Bank:-
es rates for US Rate applicable to Domestic
Dollars of Savings Bank Account
corresponding
maturity plus
175 basis points
Savings Bank:-
Rate applicable
to Domestic
Savings Bank
Account
Courtesy:- 36
B S Bisht
Lucknow
Repatriability Repatriable Repatriable Not repatriable except for the
following in the accounts:-
(1) Current income.
(2) Up to US$ 1 million per

financial year /sales proceeds of
assets/immovable Property..
Loan against Max Rs100 lacs Max Rs100 lacs
FCNR/NRE
Deposits
When a person resident in India leaves India for Nepal and Bhutan for taking up
employment or for carrying on business or vocation or for any other purposes indicating
his intention to stay in Nepal and Bhutan for an uncertain period, his existing account will
continue as a resident account. Such account should not be designated as on Resident
(Ordinary) Rupee Account (NRO)
Authorised Dealers may open and maintain NRE/FCNR(B) accounts of persons resident
in Nepal and Bhutan who are citizens of India or of Indian Origin, provided the funds for
opening these accounts are remitted in freely convertible foreign exchange. Interest
earned in NRE/FCNR(B) accounts can be remitted only in Indian Rupees to NRIs and
Person of Indian Origin resident in Nepal and Bhutan
Authorised dealers may open and maintain Rupee accounts for a person resident in
Nepal/Bhutan.
Courtesy:- 37
B S Bisht
Lucknow
Objective Type Questions
Maximum limit for second hand tractor loan Rs.2 lacs
In education loan, tangible collateral security is not Rs.7.5 lacs
required upto
RBI permits______% higher prudential exposure limit to 5%.
infrastructure sector.
Guarantee issued for receiving advance by contractor is Financial Guarantee
called___________
Limitation period for guarantee favoring government is 30 years
______Yrs.
Derivative involving only interest component of loan is Interest Rates Swap
________.
CDR can be triggered by Bank / FI with 20 % share in any or more or the secured
working capital / term finance. creditors who have
minimum 20% share in
either working capital or
term finance
Time norm for disposal of priority sector loan Rs.25,000/- Within a period of two
is ____ days weeks
As per Nayak Committee recommendation, working capital 20%
requirement is ______% of the turn over.
Number of representative offices abroad _________ 3
CIBIL maintains centralized database on willful defaulters. False
Contribution to RIDF is Priority Sector True
Letter of negative lien gives automatic right to possession. True
The date of bill of lading of a ‘Shipped on Board’ bill of True
lading is the date of shipment.
The borrowing power of the limited company are defined False
in its’ article of association.
OMNIBOB is a transaction based Internet Banking. False
A substandard account referred to CDR becomes standard False
account.
Base Rateis based on cost of funds. True
Unutilized portion of ceiling prescribed in investment in False
shares of previous financial year can be carried over.
Banks can sell goods under pledge without issuing notice False
to borrower / guarantor.
Fresh BP for adjustment of overdue BP is ever greening. True
Confirming bank assumes the status of LC opening Bank. True
Financing of supply bill is through Receipted Challan
Operative limit in working capital is determined on the QIS
basis of
Adhoc becomes NPA when not Renewed within 180 days
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B S Bisht
Lucknow
Advance guaranteed by Central Govt. is NPA when Invoked and repudiated
Repo rate is 5.50..%
Financial data in tabular form is Spread sheet
Provisioning requirement for standard assets in 1%
Commercial Real Estate Sector
Direct Advance to Agriculture and SME 0.25%
All other loans 0.40%
Risk weight for secured loan to staff members 20%

Credit Card/Personal Loans 125%
Retail Loans(other than mortgage loans) 75%
Resident individuals permitted to remit per financial year
USD 2 lakh
Interest on CRR balance with RBI 0%
Hypothecation has been defined under which act SARFAESI Act 2002
Limitation period for demand loan 3 years
Special mention accounts Which are overdue beyond
30days
Ceiling on Investment in plant and machinery for Small Rs. 5 crore
Enterprises
ESOPs Employee stock option plan
Maximum amount for compensation that Ombudsman can Rs. 10 lakh
award
Courtesy:- 39
B S Bisht
Lucknow
Bank cannot grant loans against NRE/FCNR Rs.100 lacs
deposit or renew existing loan against
NRE/FCNR deposit in excess of
Maximum Loan against security of shares held in Rs.20 lacs
Demant
In EEFC Credit can be given upto____of inward 100%
remittance
Prepayment of ECB upto____is allowed USD 500 Mio
Commission on handling PPF and Senior Citizen (a)In case of Receipt –Rs.45 per
Savings Scheme transaction
(b) In case of payment- 9 paisa per
Rs.100/-
Ad hoc Export Credit proposals to be sanctioned 7 days
when
Maximum exposure ceiling to infrastructure 20% capital fund employed
project
Cut off amount for reference under CDR Rs.10 crore
CDR is not applicable in Finance given by single bank
Investment ceiling in equipments in Small Rs200 lacs
(Service) Enterprises
Current Ratio means Ratio of Current Assets to Current
Liabilities. It measures liquidity of
an entity.
Baroda Advance against property is repayable in 10 years
The number of SME loan factories 34 as on 31.03.2009
BSVS stands for Baroda Swarojagar Vikas Sansthan
Notice period required for possession of Assets 30 days
under SARFAESI Act
Service Charges in incoming RTGS Nil
Minimum Balance in Super Savings Account in Rs.25,000.00
Metro
Pensioner are required to give life Certificate Once in a year
Under ‘Baroda Connect’ daily limit for third party Rs.50,000.00
transfer is
Documents of title in a documentary bill are Railway Receipt, Bill of Lading,
Airway Bill, Courier Receipt, Motor
Transport Receipt
SLR for Banks 24% of demand and time liabilities
No. of overseas offices 81(as on 30.06.2010)
Pledge of stocks means automatic right to sale in False. Proper notice should be given
the event of default before going for sale
Three types of Risks as per Basel II Credit, Market, Operation
PASAS stands for Performance Appraisal system for
Award Staff
Target for agriculture advance for Public Sector 18% of Adjusted Net Bank Credit or
Bank credit equivalent of Off Balance
Sheet Exposure whichever is higher
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B S Bisht
Lucknow
Maximum member under Self Help Group 20(It can be upto 25 if the group is a
Registered )
Income criteria for DRI loan in rural area Rs.18,000.00
Assets not covered under SARFAESI Act Pledge of Moveables
Lien on goods
Aircraft
Vessel
Hire Purchase/Lease
Any Security interest not exceeding
Rs.1 lacs
Agriculture land
Where 80% of total dues have been
paid
Minimum amount for RTGS is Rs. One lac.
In Savings Bank interest is payable in May and Nov
Bank’s utility bill payment product is Baroda Easy Pay
TDS to be deposited with Government within 7 days
R Return is submitted to RBI Fortnightly
Injuction of Liquidity by RBI Repo
Inter SOL Transaction means Transactions between two branches
on CBS platform
Company’s powers to borrow is restricted by Section 293(1)(d) of Companies Act
ALMAN is used for evaluating Liquidity Risk
Staff can avail Baroda Home Improvement Loan False
Educational Loan Product of our Bank Baroda Education Loan
Limits for withdrawing Cash at ATM Rs.15000.00 per withdrawal.
Maximum 4 transactions per day.
Limit for using Debit Card for using at POS Rs.25,000.00 per transactions.
Maximum 4 transactions per day
SOL Transaction means SOL Transaction mean transaction
pertaining to a Service outlet i.e.
branch which is on CBS
CIBIL stands for Credit Information Bureau of India
Ltd.
The product of Reverse Mortgage in our bank is Baroda Ashray
known as
The Maximum period of extraordinary leave on 12 months
loss of pay can be sanctioned during the entire
service under Bipartite Settlement
Two types of Guarantees (a) Financial Guarantee and (b) Bid
Bonds
Two sources available to Indian Corporate to raise ECB, FCCB, Trade Credit, ADRs,
resources from overseas markets GDRs
Software used for processing text document MS Word or Lotus Word Pro
Gold coin sold by bank have purity level of 24 karat 999.9 pure
Punishment prescribed under Section 138 of (a) Twice the amount of cheque (b)
Negotiable Instrument Act Imprisonment upto 2 years and/or
both
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B S Bisht
Lucknow
Interest payable on CRR maintained by the Bank Zero
is
Bank Rate 6% ( 30.06.2010)
CRR 6% (30.06.2010)
Reverse Repo 4%(30.06.2010)
TDS on interest payable on NRO deposit 30% plus education cess 0.90%
However, countries where we have
agreement on Avoidance of Double
Taxation(ADT), TDS ranges from
10% to 20%.
Margin on Property mortgaged in Baroda Traders 40% on the value of immovable
Loan A/c property
Quarterly Average Balance required to be Rs. 500.00 in rural and semi urban
maintained in Savings Bank A/c areas and Rs.1000.00 in Urban and
Metro areas
Quarterly Average Balance in Current A/c Rs.1000.00 in rural and semi urban
(General) areas and Rs.10,000.00 in Urban
and Metro areas.
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B S Bisht
Lucknow
To Ensure Customer Service – seek answers to questions like:-
• Who are our customers in terms of income levels, balance maintained

etc.?
• Who are our profitable customers?
• Who are our aggrieved customers?
• How quickly do we redress the complaints?
• Which products our customers want more than the others?
• Which services are delivered efficiently & which are not?
• Can we serve the customers in a more cost-effective manner?
• Are all our customers aware about alternate delivery channels?
• Do our customers have problems in accessing our delivery channels?
• Do we offer good ambience to our customers?
• Do we have effective channels to communicate important changes, new
products, pricing etc. to our customers?
• Do we seek new contacts through our existing customers?
• Do we cross sell loan / third party products to existing customers?
• Do we know our potential customers?
• Do we have action plan and timelines for adding new customers?
Strategies for Resource Mobilization:
 Focus area should be CASA deposits. Consistent growth in CASA will

continue should be the hallmark of our deposit growth strategy.
 Branch specific strategies to be chalked out to ensure growth in CASA.
Rural and Semi-urban branches should provide special focus for Savings
Bank Deposits. Metro and Urban branches to concentrate on Current and
Savings Bank Deposits.
 Branches in Residential areas should take challenging targets for
canvassing Savings Bank deposits due to their locational advantage.
Similarly market area branches to be guided to canvass higher current
account deposits.
 As a principal strategy Corporates to be approached for Salary accounts
with a bouquet of services such as home loans, e-banking, anywhere
banking etc.
 Branches have been provided with the list of current account holders
having balances of Rs 2.50 lacs and above. These customers should be
contacted at regular intervals not only to ensure increase in such
deposits but to mobilize additional business through upselling and cross
selling and also generating non-fund based business.
 Accounts having balances of Rs 5 lacs and above in Savings Bank should
be personally monitored by the Branch Managers.
 Branches, supplemented by marketing teams, to adopt sales and
marketing as a regular activity for client acquisition.
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B S Bisht
Lucknow
 New client focus in marketing to be on HNIs, holding potential of large
balances.
 Alternate delivery channels like ATMs, Debit Cards, Mobile Banking, SMS
Banking etc. should be popularized. Debit Cards, ATM cards and facility
of Baroda Connect should invariably be provided to all active Savings
Bank customers.
 Specialised NRI branches and branches having NRE Cells should be given
higher targets to canvass NRI deposits in keeping with our strong
foothold abroad.
 Campaigns for Savings Bank Accounts and Current Accounts should be
organized on regular basis.
 Holding regular customer-meets will help branches in redressing the
grievances of the customers as well as help in making close contacts with
the existing and potential customers.
 Branches to seek referrals for new clients from existing good customers.
Visits to be constantly followed up by phone/letter/e-mail/further visits.
 Customer satisfaction survey to be carried out.
 Regular customer meets every month in which different customers be
called each time.
Strategies for SME Banking:
 At present Bank is having 35 SME Loan factories, which should be re-

invigorated to increase SME advances. The sanctions accorded by the SMELF
should be disbursed at the earliest.
 Separate targets should be allocated to SMELF for fund based and non-fund
based advances.
 Cluster approach for financing under specific scheme should be given boost
in Gujarat, Rajasthan, Greater Mumbai and Southern Zone.
 Bank has signed -5- MOUs with various reputed organizations and companies
to increase SME advances. Opportunities arising from such alliances should
be explored fully.
 Bank has already announced relief measures to be considered on a case to
case basis such as reduction in margin money, allowing drawing against
domestic receivables, extending moratorium and sanctioning additional limit
for WCDL etc. This will provide necessary boost to the SME segment.
 Good cooperation and collaboration between SMELFs and concerned
branches to ensure best delivery to customers.
Strategies for Rural & Agri Banking:
 Launching campaigns for production and investment credit.

 Formulating Area Specific Schemes. During the year 2008-09, Bank
introduced scheme for financing farmers of sugar cane for Uttar Pradesh,
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B S Bisht
Lucknow
Northern Zone and Maharastra and Goa Zone. More such schemes to be
launched during the year.
 Exploring the possibilities of tie-ups with Agro Processing Units for financing
farmers.
 Organising Conclaves/ Workshops of field functionaries to sensitize them for
achieving better growth in agriculture advances.
 Organising Mega Credit Camps/ Credit Camps to give desired boost to the
growth of advances.
 Conducting special training programmes to upgrade the credit skills of the
officers.
 Exploring the possibility of opening special agriculture-thrust branches.
 Taking benefit of Agriculture Rural Debt Relief scheme. It has to be
exploited properly to increase our agriculture lending.
Strategies for Retail Credit
 Line functionaries should familiarize themselves with the new product

basket and aggressively canvass retail business.
 Bank has entered into a tie up with Maruti Suzuki India Ltd., Mahindra &
Mahindra, Tata Motors and Hyundai Motors India Ltd. at corporate level for
boosting the sale of Car Loan portfolio. Opportunities arising from such tie
up should be explored fully.
 There is a huge un-satiated demand for home loans. The easy liquidity and
supportive policy prescriptions have created a conducive environment for
increasing the home loan portfolio. What is required is a planned strategy to
tap the business potential. HNIs, higher income earning employees of PSUs
& Corporate Firms should be targeted.
 Retail Loan festival campaigns should be launched to increase the Retail
Loan portfolio.
 Retail Loan factories to form dedicated teams specialising in home loans.
Strategies for increasing Non Interest Income
 CFS and Mid-Corporate branches need to focus on LC/BG commission,

 Market area branches should focus on income from remittances.
 Officers to be deputed to large corporates / PSEs with a solitary aim of
canvassing LC / BG business and giving them specific targets.
 CFS and other large branches must aim to get at least our proportionate
share of non-fund based business (in the consortium/ multiple banking) –
vis-à-vis sanctioned limits and utilization.
 Concessions in charges to be regulated / conservatively given.
 Existing charges to be reviewed as these NFB facilities also attract Capital
adequacy norms.
 Ensure maximum recovery in PWO Accounts
 We should have a focused approach for increasing Turnover in Govt.
Business. Timely remittance of funds collected under Govt. Business in order
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B S Bisht
Lucknow
to avoid penalty. Popularize e-payment facility. It provides excellent
opportunities for canvassing high net worth tax assesses. Tapping pension
accounts.
 Need to concentrate on Profits fro Forex Transaction
 Income from sale of third party products and Gold coins is another
important area where innovative strategies need to be tried out.
 We cannot afford to lose income through revenue leakages. Ensure that
human negligence does not get the better of Bank’s legitimate revenue.
Strategies for Wealth Management Business:
 Sales team of IRDA/AMFI certified staff to be deployed in a strategic

manner at some target branches.
 To collaborate with Asset Management Companies for mutual fund
products to enhance product offerings.
 Bank to launch its own e-trading platform for offering 3-in-1
(Savings/demat/trading) account during the year (through BOB capital).
 To endeavour to become clearing and settlement banker for NSE and
MCX.
Strategies for NPA Management:-
 Identified Recovery Champions should be given challenging targets for

recovery. They should make continuous follow up with the borrowers to
canvass compromise proposals.
 Special drive should be launched for Recovery of NPAs. Recovery camps
should be organized to give boost to the recovery drive.
 Lok Adalats should be periodically convened to quickly settle the cases
and recover the due amount.
 Wherever notice has been issued under SARFAESI Act, all-out efforts
should be made to take possession of the assets.
 Branches having NPAs of below Rs 5 lacs, should be converted into ‘Zero
NPA’ branches.
 Sale of assets on individual and portfolio basis should be taken up on
priority basis.
 Canvass maximum compromise proposals under Bank’s OTS scheme.
 Targets of recovery in Prudential Write off (PWO) should be allotted to
identified Recovery champions at branch level to recover as much as
possible in view of huge sum of money lying outstanding in these
accounts.
 Restructuring of accounts in eligible cases to be undertaken on case to
case basis.
Customer Service Orientation:-
 Be easily accessible to customers at all levels.
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B S Bisht
Lucknow
 Manager and other key functionaries to regularly interact with
customers.
 In all medium & bigger branches a floor manager to regularly monitor
and help smooth flow of transactions and guide the customers.
 Zero tolerance for ill behaviour with customers.
 Front-end staff to be pleasant, smiling and proactive.
Steps initiated by Bank towards Harnessing Human Capital:-
Bank has taken a series of HR initiatives like a record number of promotions, extending
pecuniary benefits, proper placements and postings, employee empowerment through
internal and external trainings, strong succession planning, lateral recruitment of talent
from market and improved communication across the organization. In addition to the
above, Bank has taken forward the technology-based Business Transformation Process by
operationalising many more projects which will bring convenience not only to the
customers but also improve productivity of employees of the Bank. The Management has
been constantly working towards creating a congenial working environment in the Bank
to enhance operational efficiency and employee productivity.
How to increase Savings Bank Portfolio:
• Quality Savings Bank Accounts

• Tell the customer about our more than 1950 CBS Branches
• Customer should be made aware of our various other delivery channels such as e
banking, On line payment of indirect taxes and e- payment services, RTGS,
NEFT, Debit Cards, SMS Alerts and large number of ATMs create competive
advantage and increase our customer base
• Mobilize quality SB Accounts
• Corporate Salary Accounts
• Popularize ‘Baroda Bachat Mitra’ which enables OD against Time Deposit in
Savings Bank A/c
• Targets – Big and Mid companies, Corporate Salary Accounts, Teacher, Doctors,
Business persons, Big farmers
• Incentives – Free Accident insurance cover up to Rs. 1 lac for one year, Free
Debit Card, Free E banking
• Demonstrate our dedication and devotion to organization.
• Take this challenge and make camapaign splendid success
• Each and every operating unity is to be involved.
How to increase Current Deposits:
• 15% of current accounts constitute 90% current deposit of the bank

• Customer eligible for Baroda Premium Current Account Privilege and Baroda
Premium Current Account be encouraged for opting for these premium products
• Relationship manager to be single point contact
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B S Bisht
Lucknow
• Welcome letter to be sent
• Brochures of our various products to be given to them
• Total business relationship i.e. accounts of all associates, family and group
• Must be registered under ‘Baroda Connect’
• High value customers – most friendly and personalized services – feel at home
Values and benefits of having Banking relationship with Bank of Baroda:
Roll out of CBS covering all the branches.
A good ATM network
‘Baroda Connect’ – Transaction enabled internet banking facility
Baroda Connect e –tax Service – online payment of indirect taxes(excise duty and service
tax)
‘Baroda easy Pay’ – e-payment service
RTGS, NEFT for transfer off funds
A large number of ‘Retail Asset and Liability Products’ to cater various lifestyle needs of
individuals
Free debit card facility
Liberalized Remittance Scheme

The Reserve Bank of India had announced a Liberalized Remittance Scheme (the
Scheme) in February 2004 as a step towards further simplification and liberalization of
the foreign exchange facilities available to resident individuals. As per the Scheme,
resident individuals may remit up to USD 200,000 per financial year for any permitted
capital and current account transactions. The facility under the Scheme is in addition to
those already available for private travel, business travel, studies, medical treatment, etc
as described in Schedule III of Foreign Exchange Management (Current Account
Transactions) Rules, 2000. The Scheme can be also be used for these purposes. However,
gift and donation remittances cannot be made separately and have to be made under the
Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD
200,000 per financial year under the Scheme.
A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt
securities, promissory notes, etc under this Scheme. Further, the resident can invest in
such securities out of the bank account opened abroad under the Scheme.
Qualities of a Branch Manager:-
• Dare to Dream
• Never lose your zest and curiosity
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B S Bisht
Lucknow
• Always strive for excellence
• Build self confidence
• Learn to work in teams
• Learn to Plan
• Learn to Share
• Take care of yourself
• Never accommodate indiscipline
• Perseverance
• Never let success go to your head
Reverse Mortgage
It is a loan that allows you to convert your existing home ownership into cash flows,
which you can use for meeting your living expenses. Unlike a mortgage, which is
generally used to secure finances for the purchase of a property belonging to somebody
else, the ‘reverse mortgage’ converts a self-owned property into finance.
A large number of elderly people in developed countries like USA use this product to
fund their post- retirement living expenses. In a mortgage, you pay monthly installment
in order to attain ownership of a house. The reverse mortgage is exactly the opposite,
wherein you sell the ownership of your home (to say a bank) and in exchange get a
monthly income. Normally, the loan is paid off when the homeowner dies ( or sells the
property).
Baroda Ashray-A new Reverse Mortgage Product for Senior Citizen

To tide over the problem of regular cash flow stream for supplementing pension/other
income for addressing financial needs of the Senior Citizens, who need financial support
in their old age to lead remaining life respectfully, the bank has decided to launch ‘Baroda
Ashray’. Special features of the product are:-
• Besides monthly annuity payments, provision is also being made for lump sum
payments to meet medical and other exigencies. 20% of eligible amount is
earmarked for this purpose.
• Advance against self acquired residential property.
• Property is being used as permanent residence.
• Borrower will not be required to service the loan during their lifetime
• Loan will become due for payment (i) At the death of last surviving spouse(ii)
Borrower leaves the housing property permanently.
• Loan to be repaid through the sale of mortgaged property.
• The legal heir of the borrower will be given first option to settle the loan account.
• Surplus amount, after adjusting dues, will be passed on to the legal heir.
• Fixed or Floating rate option.
• With the change in rate of interest/change in value of the property, the annuity
payable will be recomputed.
• Loan tenure 20 years but initially it would be granted for 15 years.
• Maximum Amount Rs.1 crore
• Age of building not to exceed 40 years.
• The property to be valued by approved valuer.
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B S Bisht
Lucknow
‘HRnes’
Implementation of HRnes is an important milestone in the realm of Human Resource
Management in the Bank. It would provide a lot of ease and immense benefits to
employees as well as to decision-making authorities in various HR processes
HRnes covers the entire gamut of human resources management function in the bank
currently being performed and also includes many new sub functions. The system
comprises four broad modules encompassing different functions.:
• Oracle Core HR module, covering all current HR processes in the bank
• Fluous Payroll module – covering payroll, payments of various benefits, perks,
welfare schemes, terminal benefits, etc
• Oracle Learning Management Module which includes training administration & e
learning
• Employee self-service module
Benefits to employee are – viewing personal details, salary, leave, LFC Block, etc,
Modifying personal details, seeking permission required for various purposes like
obtaining NOC, intimating bank on various issues, submitting application on line,
view/print pay slip, viewing monthly pay details, submission of investment details, on
line request for leave, loan, claims
Benefits to bank are- Standardization of information parameters, single data base for
integrated decision making, Global and integrated view of HR, Uniform application of
rules across the organization, easy generation of MIS, cost effective HR services
increasing efficiency, On line monitoring HR related activities, Harnessing the power of
workflow to speed up processes, providing platform for initiating employee-centric
initiatives, leveraging skills of the work force, transparency in HR practiced, tracking
establishment expenses
OPEC (Organization of the Petroleum Exporting Countries)
It is an association of Oil Exporting Countries formed at Baghdad on 10.09.1960. The

members are Iran, Kuwait, Iraq, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, UAE,
Algeria, Nigeria, Ecuador, Gabon and Angola(joined in 2007). OPEC objective is to co-
ordinate and unify petroleum policies among Member Countries, in order to secure fair
and stable prices for petroleum producers; an efficient, economic and regular supply of
petroleum to consuming nations and a fair return on capital to those investing in the
industry.
Special Economic Zone (SEZ)- In order to enable hassle free manufacturing and trading
activities for export purpose, Special Economic Zones have been set up. The main
advantages which accrue to the Units in this Zone are that they are not subjected to any
predetermined value additions, Export Obligations, input-output/wastage norms. The
Government of India has declared the SEZs as foreign territory for the purpose of duties
and taxes. Goods supplied to the SEZs from the domestic tariff area (DTA) will be
treated as deemed export and goods bought from SEZ to DTA will be treated as import
goods. Certain tax incentives are also given to the units in SEZ area
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B S Bisht
Lucknow
BRIC Countries
The term refers to Brazil, Russia, India and China which economists feel will be world
economy’s building blocks. The economies of BRIC countries are fast developing and
according to the thesis, these countries are likely to overtake the current rich countries by
2050. These countries account for 15% of the USD60.7 trillion global economy. The
leaders of BRICK countries are seeking to use their economic clout to get a bigger say in
how the world’s financial system is run.
The Greek Tragedy
The Greek tragedy has opened our eyes to many things. Not only was the
fiscal deficit of Greece high but that there were attempts to manipulate the
numbers to hide the reality. It took a long time before this could be
uncovered. It is now estimated that the budget deficit of Greece is in the
range of 13.5% of GDP. The stock of debt is equivalent to 115% of GDP.
Greece has reached a critical point where it cannot meet its repayment
obligations without outside help. The eurozone and IMF have put together
an ambitious package to help Greece. It is not known at this stage how this
will be implemented. The package of support will also require Greece to put
through a series of austerity measures. Unfortunately, there is a strong
resistance to such measures.
The one lesson from Greek episode for all countries is the need to maintain
fiscal prudence.
RBI’s Clean Note Policy
• To discontinue stapling of currency notes so that the currency notes are not
damaged.
• Not to write anything on currency notes
• To remit all soiled/non- issuable notes to RBI for taking out of the same from
circulation
• To hold currency packets by paper/polymer bands
• To issue only issuable notes/fit for circulation to customers
• Ashoka pillar series notes are not be issued but remitted to RBI in soiled not
remittance
HR Audit
Personal Audit Mechanism to ensure that policy rules, regulations are properly complied
with and consequently to enable the authorities to improve effectiveness of administration
of HR Function.
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B S Bisht
Lucknow
Zonal Inspection Centres will carry out Audit of HR Function in branches in semi
urban/Rural Centres along with regular inspection as per Audit Schedule
HRM Department of Regional Office will audit HR Function in Metro/Urban centres

once in six months.
360 degree appraisal

360 degree feedback is an employee performance management process that provides an
employee with feedback with his or her workplace performance, as seen from the diverse
perspectives of co-workers and customers. While traditional performance appraisal is
typically a top-down process only (supervisors evaluating subordinates), 360 degree
appraisal may also include upward feedback(subordinate evaluating supervisors), peer
evaluations, and feedback from additional supervisors, internal customers, or external
clients.
Baroda Advantage Current Account

A customer having Current Account in CBS Branch will enjoy many advantages by
way of technological platform. Basic Current Account in CBS Branches has been
renamed as Baroda Advantage Current Account. Quarterly average balance required
is Rs.5000/-.
• Once Free Monthly statement
• Balance Certificate free once a year
• First time free cheque book of 50 leaves
• Folio charges – Nil for account with average credit balance of Rs.50000.00
• Signature Verification free once in three months
• Rebate 10% in locker Rent if paid in advance for three years
• Multicity cheque facility
• Roaming facility – deposit withdrawal, DD, Transfer from any Branch
• Internet Banking Facility
• On line payment of indirect taxes
• 50% in processing charges in retail loans
• 50% concession on remittance through RTGS for 6 months.
• Waiver of Demat maintenance charges for 12 months.
Baroda Advantage Savings Bank Account – CBS enabled Savings Bank Account
• Multicity cheque book facility
• Roaming facility – deposit, cash withdrawal, transfer of funds, DD, BC. Account
enquiries.
• Internet Banking – 24x7 on line banking anywhere, summarized view of all
accounts, on line transfer of funds, inquiries on line, cheque status on line,
nomination on line, cheque book request, payment of utility bills, communication
with relationship manager, internet alert message like password expiry, pending
payments, unread mail.
• Selling Points – Save time and energy- Get Account details – Free accident
insurance upto Rs. 1 lacs for one year to first named person.
• 50% rebate on Demat Charges –Immediate credit of outstation cheque up to
Rs.15000.00
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B S Bisht
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Super Savings Bank Account
• Min Balance: Metro Rs 25000.00, Urban Rs.15000.00
• Customer enjoys various benefits.
• Free auto sweep exceeding double the minimum balance in multiple of
Rs.10000.00.
• Reverse sweep multiple of Rs.1000.00
• Free DD/MT/TT/Collection of cheque
• Complementary Paras BOBCARD
• Personal Accident Insurance Rs.250000.00
• Immediate Credit of cheque up to Rs.25000.00
• Quarterly interest in Savings Bank Account
• Priority in allotment of Locker
• Free ATM Card
• 25% discount on depository services
• Interest on delayed collection (beyond 14 days at FD Rate). For abnormal delay
2% above applicable FD rate,
• Free standing instructions.
• Unlimited cheque book facility.
• Welcome Kit
• Nomination facility
• If no minimum balance, service charge Rs.150 pm to be levied.
Strategies to increase CASA:-

• Branches should focus on mobilization of CASA deposits.
• Marketing efforts must be stepped up.
• Service Quality must improve at the operational level
• Internet Banking and e-channels must be fully leveraged to increase CASA
• It should be at the top of the agenda of Branch Manager.
• Staff should be sensitized and given individual targets.
• Sales service culture be built up in the branch.
• Award/incentive for staff/customers
• Campaign/road show on an on going basis.
• Showcasing our tailor made products specially designed and customized such as
Subh, Super Savings, Premium/Privilege current account and aggressively market
these products.
• Preparing comparative chart with other peer banks’ products highlighting our
USPs
Baroda Premium Current Account(BPCA) and Baroda Premium Current Account

Privilege(BPCAP)
BPCA- Quarterly Minimum Average Balance Rs.75000.00
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B S Bisht
Lucknow
BPCAP- Quarterly Minimum Average Balance Rs.250000.00
Benefits BPCA BPCAP
Monthly statements Two times in a month Two times in a month
Any Branch Banking Yes Yes
Complementary credit Two Two
card
Free cheque Book Yes Yes
Free Balance Certificate Free any time during year Free anytime during year
Signature verification Free any time during year Free anytime during year
Rebate on Locker Rent 20% if paid in advance for 20% if paid in advance for
3 years 3 years
Commission on 50% rebate Free
DD/MT/BC
Outstation cheque 50% charges Free
collection
Folio Charges Free Free
Immediate Credit of Rs 50000.00 Rs.150000.00
outstation cheque
Discount on D Mat 25% 25%
Charges
Processing Charges for Free Free
car loan
Auto sweep facility Rs.25000.00 & multiple Rs.25000.00 & multiple
thereof (deposit 15 to 45 thereof(deposit 15 to 45
days) days)
Inter Sol Charges Free Free
Baroda Salary Advantage Savings Bank Account

Special salary account with added benefits. It is a Savings Bank account with an in
built feature of OD facility to salaried persons. Product is available in CBS Branches
and BIBAS Branches in different Metros and Urban Cities.
• Overdraft upto Rs. 100000/-

• Interest on Credit Balance
• Free cheque Book on Routine requirement
• No Minimum Balance required.
• No ceiling on deposit amount. No ceiling of Balance amount
• Minimum take home salary of Rs.5000/- is required.
• Max OD upto 90% of average salary of last three months.
• Third Party guarantee is to be obtained.
Alternate Delivery channels
• Banking business is no longer confined to limitations of space and time. Business

factors like globalization and regulations along with technological development
like emergence of internet and e commerce have changed conventional style.
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B S Bisht
Lucknow
• Present day customer prefers to carry banking transactions any time, anywhere
and through any device, not necessarily by visiting branch.
• This has led to emergence of alternate channels for delivery of banking services
like ATMs, internet banking, phone banking, mobile banking, call centre.
• In addition to providing convenience of Anywhere Any Time banking to
customers, they also offer cost reduction in terms of cost of transactions, to the
banks in long run.
• The channels are:- ATMs, Internet Banking, Mobile Banking, Debit Cards,
Point of Sales, Tele Banking, Omnibob
Baroda e-trading
Our Bank during in the month of January 2007, launched ‘Baroda e-trading which is
facility to trade in shares for our customers as a part of Bank’s Wealth Management
initiatives.
Under this product, Bank has tied with M/s India Infoline Limited – a brokerage house of
repute, to offer Trading/Broking facility for our customers.
The pre-requisites for offering this facility to customers are:-
A deposit account i.e. Savings/Current A/c which can be linked for flow/transfer of funds
A demat account
A Broking account – which is opened with M/s India Infoline Ltd. Who depute their
relationship managers for completing account opening/KYC compliance.
Allowing TOD in CA Account

• Only in rare occasions to meet temporary and unforeseen contingencies.
• Only in Current account
• No TOD in first year of operation
• Look at the conduct of account
• No TOD at Rural Area
• Maximum TOD upto 25% of average credit balance during last 6 months.
• TOD once in a month.
• TOD 5 times in a year
• No TOD in anticipation of regular limit
• Avoid TOD simultaneously in group accounts.
Strategies to improve quality of Retail Loan Portfolio:-
• To canvass new business through reference from existing customers.

• To carry our pre–sanction and post–sanction inspection scrupulously
• Advocate’s and valuer’s report to be cross verified /vetted/scrutinized from other
independent sources.
• High value/Big ticket customers to be targeted.
• Canvass group borrowers of reputed Corporates/Institutions
• Staff to be involved in Business Development
• To conduct due diligence of borrower and property in a proper manner.
• All accounts to be regularly followed up for recovery.
• Date to be fed in ASCROM correctly.
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• IT Returns of businessmen/self-employed persons to be got verified through
empanelled Chartered Accountants.
• Identity of guarantors to be verified by visiting their Residence/Offices
• CIBIL to be accessed to verify indebtedness of borrower and guarantor.
Right to information Act 2005

Enacted by Govt. of India came into effect from Oct 13, 2005. This act gives the citizens
access to information under control of public authorities to promote transparency and
accountability in these organizations. The act also provides for appointment of a Chief
Public Information Officer to deal with requests for information.
Any citizen, along with payment of prescribed fee, can request for information to the
public body by making an application in writing, including by electronic means. The
public authority is bound to dispose off the request within 30 days.
The Act, under Sections 8 and 9, provides for certain categories of information to be
exempt from disclosure.
Door Step Banking

• Rendering Banking Services at the door step of the customer.
• Select Banking services can be made available
• Customer can have cash, get demand draft and instrument picked up from
office/home
• Banks can either deploy their employees or hire agents to extend the service
Cash Flow and Funds Flow Statements
Cash Flow Funds Flow

Implies inward and outward movement of Implies movement of Liquid Assets or
cash Working Capital
Cash Flow Statement is akin to Cash Funds Flow Statement is a statement of
Receipt and Payment Summary and, change in working capital. It shows
therefore, begins with opening cash in sources and uses of funds during the year.
hand and ends with closing cash in hand.
Cash flow statement tells about the ability Funds flow statement tells about funding
of the borrower to generate cash and cash capacity of the borrower and diagnoses
equivalent and the timing and certainty of diversion of short term sources to long
its generation term uses
Farmers’ Club
Farmers’ Club is a grassroots level informal forum. Such clubs are organized by rural
and semi urban branches of banks with the support and financial assistance of NABARD
for the mutual benefit of farmers and banks
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• The branches to actively participate in the formation of Farmers’ Club in their
area of operation with the assistance of NABARD. These farmers’ clubs will play
a catalystic role in business development and help the branches.
• To coordinate with banks to ensure credit support among its members and forge
better bank borrower relationship.
• Arrange interface with subject matter specialists in the various fields of
agriculture and allied activities
• Liaison with corporate input suppliers to purchase bulk inputs on behalf of
members
• Organize/facilitate joint activities like value addition, processing, collective farm
produce marketing, etc for benefits of members
• Undertake socio-economic developmental activities like community works,
education, health environment and natural health resources management.
• To spread the message of ‘development through credit’ among villagers
• To create awareness among rural people about Bank’s products.
• To assist bank in mobilization of rural savings and in recovery of loans through
propagation of repayment ethics.
• To provide link between the rural people on one hand and Bank/other
development agencies on the other in overall development of the villages
• 1788 Farmers’ Clubs have been formed and nurtured by our branches
LAPS
It is centralized web-enabled solution to automate the lending process for both corporate
and retail lending with a end to end solution. It enables standard financial analysis,
customer rating/credit scoring and electronic communication of loan processing. It
facilitates overall efficiency of lending process – speed, accuracy, appraisal, assessment
and credit rating. Standard terms and conditions and security documents are generated. It
also facilitates NPA management and helps in viewing RBI/ECGC default check lists.
ASCROM
It is a software used by bank for Assets Classification and Monitoring of Credit Portfolio.
The software can generate data required for monitoring of accounts, assets classification,
assessing capital requirement under Basel II. It is a backbone of MIS to manage the
credit portfolio. It reflects critical amount due to avoid slippage of loan assets, helps in
timely intervention, control of credit portfolio and generates data useful for the audit and
inspection.
ALMAN
A software for compilation of data for Assets and Liabilities Management. The data
comprise of classification of assets and liabilities into ten prescribed time buckets based
on residual maturity to arrive at the inflows, outflows and gaps in fund flow pattern in
different time buckets. It shows maturity pattern and determines the gap in each time
bucket to plan for liquidity management. The data provides a tool for Asset Liability
Management in Bank enabling determination of interest rates, capital planning and is an
enabler to align the bank’s policies with markets.
RecAid Package
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Package developed by IT department to optimize the reconciliation process and reduce
the time taken for reconciliation. Rec Aid Package displays various errors in the data
and allows correction and generates output in the format required by Regional Offices or
IBO. The package handles reconciliation of IBTA, HODD, HOTTR, FEXTA.
CLORETS
The package is used by the branches/administrative offices for compilation of closing
return Nos 1 to 13 and 21. It provides facility to compile date for the branch/region/Zone
and bank as a whole individually as well in consolidated form.
Holder in due Course

• Section 9 of Negotiable Instrument Act 1881 talks about the important features of
Holder in due course
• He must be a holder(i.e. in possession of the instrument and be the payee or
endorsee).
• Possession of the instrument before due date
• Possession for consideration
• The possession should have been obtained in the ordinary course and under
suspicion less circumstances.
Holder for Value

• Not defined in law
• A person who is the bearer, payee or endorsee of the instrument.
• The person has obtained a negotiable instrument for consideration
Repo and Reverse Repo

Repo means Repurchase Agreement or Ready forward transaction. A holder of security
sells them to an investor with an agreement to repurchase at a predetermined rate and
time. It is an instrument used by RBI for injection of liquidity in the financial system.
Reverse Repo is a mirror image of Repo. Here securities are acquired with a
simultaneous commitment to resell. It is an instrument used by RBI for absorption of
liquididty from the financial system.
Heads Repo Reverse Repo

Funds RBI to Banks Banks to RBI
Securities Banks to RBI. Transfer of RBI to Bank through SGL
securities through SGL accounts of respective
Account of respective banks banks
with an undertaking to buy
back after 1 to 14 days
Interest 5.50.% Banks to RBI 4% RBI to Banks
Purpose To provide liquidity to To absorb liquidity from
Banks market. To control inflation
Period 1-14 days No specific period
Availability Banks can freely borrow Subject to ceiling on Bid
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subject to availability to Basis
excess securities over SLR
limit
Working Capital and Net Working Capital
Funds requirement for day-to-day operations other than investment in ‘Fixed Assets’ and
‘Non-Current Assets’ is treated as ‘Working Capital’. Excess of current assets over
current liabilities including bank finance is treated as ‘Net Working Capital’, which is
also treated as borrower’s contribution (i.e. margin) for working capital.
Current Liabilities and Contingent Liability
Current Liabilities – Liabilities to be settled in less than a year. These include trade
creditors and Debts due within a year. eg. Sundry Creditors, Working Capital loan.
Contingent Liability - A liability which is contingent upon the happening or not

happening of a specified event, i.e. a deferred payment guarantee issued by bank gives
rise to a contingent liability. If the customer on whose behalf the guarantee was issued,
fails to make payment of instalment amount on due dates, the bank will be called upon to
pay the amount under its guarantee obligations.
RAM and ROM
RAM (Random Access Memory)– RAM is temporary memory and is erased when we
turn off our computer. The more RAM we have, the less frequently the computer has to
access instructions and data from the more slowly accessed hard disk form of storage.
Memory should be distinguished from storage, or the physical medium that holds the
much larger amounts of data that won’t fit into RAM and may not be immediately needed
there.
ROM - It is an Acronym for Read only memory. It contains the bare minimum of
instructions needed to start computer. These are used to keep special programs
and data, such as the BIOS, that need to be in our computer all the time. ROM
is built in computer memory containing data that normally can only be read,
not written to. ROM contains the programming that allows our computer to be
‘booted up’ or regenerated each time we turn it on.
Unlike a computer’s RAM, the data in ROM is not lost when the computer is turn off.
Virus:
A computer virus is nothing more than a computer program which is able to replicate
and attach itself to programs or files infecting the host without is knowledge.
Moreover, a computer virus can spread from one host to another like human viruses.
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The spreading is a result of sharing infected files or downloading files from un-trusted
sources. Most of the viruses attach to executable files and their malicious operation
begins when you run or open the executable file. In other words, a virus does not
infect your computer unless you execute the infected program. Viruses may cause
damage to the system by infecting the files, deleting the files, formatting the hard
disk, corrupting software programs or even hardware failure etc.
Worm:
Computer worm is a self-replicating computer program. It uses a network to send

copies of itself other nodes (computers on the network) and it may do so without any
user intervention. Unlike a virus, it does not need to attach itself to an existing
program. Worms almost always cause at least some harm to the network, if only by
consuming bandwidth, whereas viruses almost always corrupt or devour files on a
targeted computer.
Trojan Horse:
The Trojan horse, also known a Trojan, in the context of computing and software,
describes a class of computer threats (malware) that appears to perform a desirable
function but in fact performs undisclosed malicious functions that allow unauthorized
access to the ghost machine, giving them the ability to save their files on the user’s
computer or even watch screen and control the computer.
Spyware
Spyware is a computer software that is installed surreptitiously on a personal

computer for collecting information about a user, their computer or browsing habits
without the user’s informed consent, spying on the user’s documents stored in hard
disk, stealing the user’s passwords and other sensitive information etc.Spy were gets
installed into the system without the user’s knowledge from downloaded software,
CDs etc. Spyware is not a virus. A virus damages the computer’s functioning and
proliferates, while spyware gathers information.
Phishing:.
Phishing is the criminally fraudulent process of attempting to acquire sensitive

personal and financial information such as user names, passwords and credit card
details by masquerading as a trustworthy entity in an electronic communication.
Communications purporting to be from trustworthy organizations like banks, credit
card companies are commonly used to lure the unsuspecting, customers. Phishing is
typically carried out by e-mail or instant messaging, and it often directs users to enter
details at a fake website whose whose look and feel are almost identical to the
legitimate site.
Typically, the phisher sends an e-mail that appears to come from a legitimate
business- a bank or credit card company-requesting “verification” of information and
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warning of some dire consequence if it is not provided. The e- mail usually contains a
link to a fraudulent web page whose look and feel is almost identical to the legitimate
site with company logos and content and has a form requesting sensitive information.
It would ask the user to provide certain confident information like internet banking
login ID, login passward, transaction passward, credit card number credit card number
etc, failing which his account would be doomed. There would be a sense of urgency
and panic in the mail.
Phishing involves 4 major activities by phisher- hosting of phishing websites, sending

phishing mails to customers, collecting sensitive information like user names,
passwords etc. of the customers who have fallen prey to the phising mails, and
carrying out fraudulent transactions in the accounts of affected customers using the
credentials obtained phising site.
RBI exposure norms for individual and group *
Maximum singleMaximum group

Type of exposure borrower exposureborrower exposure ceiling
ceilings for infrastructure
Other than
infrastructure projects 15% of capital fund 40% of capital fund
Infrastructure projects 20% of capital fund 50% of capital fund
*With approval of Board bank may consider enhancement of exposure to a borrower up

to a further 5% of capital fund.
Substantial Exposure Cap

It is sum total of exposures assumed in respect of those single borrowers enjoying credit
facilities in excess of threshold limit. The aggregate SEL( substantial exposure limit) shall
be 500% of capital fund as per previous year Balance Sheet. For the purpose of
aggregating single borrower exposure for SEL, the thresholds will 5% of Capital Fund.
Bank may exceed 5% upto 15% but shall not exceed the overall SEL of 500% so as to
meet SEL.
Slippage Prevention Task Force

For prevention of slippage of quality in advance accounts, banks has constituted a
Slippage Prevention Task Force(SPTF). The SPTF team members are expected to
perform the following major tasks as per existing guidelines:
• Maintain database of potential sick accounts of Rs. 1 crore ands above.
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• Addressing disturbing features in each of these accounts and work out strategy to
overcome problems in coordination with the Branch heads.
• Visit of critical branches once in 3 months for spot study of key features like
submission of Stock/ Book Debt statements, adequate DP, valuation of fixed
assets, review of accounts, creation of charges, document verification, adverse
comments of Inspecting Officer/ Auditors etc. and suggest corrective action/
measures.
• Continuous review of progress etc.
Credit Default Swaps(CDS)
A credit default swap(CDS) is essentially a financial instrument that allows a bank or

financial institution to insure a loan or a debt investment it has made by paying periodic
fees to another institution called protection seller which is willing to take the risk. In case
the borrower to whom the bank has given out the loan default, then the protection seller
pays the bank. Through this process the risk on the books of the bank or the financial
institution is transferred to the books of the protection seller willing to take the risk
The CDS is the cornerstone of the credit derivatives market. The vast majority of credit
derivatives take the form of CDS, which is a contractual agreement to transfer the default
risk of one or more reference entities from one party to the other. One party, the
protection buyer, pays a periodic fee to the other party, the protection seller, during the
term of CDS. If the reference entity defaults, declares bankruptcy, or other specified
credit event occurs, the protection seller is obliged to compensate the protection buyer for
the loss by means of specified settlement procedure. The reference entity is not a party to
contract, and it is not necessary for the buyer or seller to obtain the reference entity’s
consent to enter into CDS.
Sub- prime Mortgage Crisis
Sub- prime mortgages are residential loans that do not conform to the criteria for ‘prime’
mortgages, and so have a lower expected probability of full repayment. Apart from the
borrower’s credit record, the assessment regarding sub prime lending also takes into
account debt service-to-income(DTI) ratio (more than 55%) of the borrower and the
mortgage loan-to-value(LTV) ratio (more than 85%). The recent problem of sub-prime
lending in the US is mainly associated with housing market. The first sign of trouble was
high volume of ‘early payment default’(EPDs) in which the borrower misses one or two
of the first three monthly payments, which has been followed by rising delinquency rates.
Because of higher risk default, sub-prime borrowers are charged higher interest rates than
prime borrowers. As regards the lenders, they suffered huge losses and were left with no
option to make up their losses. Most lenders bundled and securitized the sub-prime
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mortgages and sold them in the credit market world wide. A number of banks were
attracted by high rate of interest and purchased these securities and the derivative
instruments without really assessing the actual risks that were involved.
No frill account:-
It is an account with basic features and is devoid of additional benefits or frills and is
intended for a commoner or low income group customer who does not need accounts with
loaded features. No Frill Accounts are designed to propagate Financial Inclusion.
• Accounts with either nil or very low balance.

• Nil/Low charges that would make such accounts accessible to vast section of
population.
• Nature and number of transactions are restricted.
• Publicity of such accounts in web site of bank.
• Ban to obtain only photograph of account holder and self certification address.
• Outstanding balance limited to Rs,50000/-
Total turnover in a year not to exceed Rs.1/- lacs.
• In case balance/turnover exceeds the stipulated limit banks would be required to
convert them into normal accounts and follow normal KYC procedure.
Happy Hour Banking:
• To encourage customers to avail certain services during lean business hours of the
Branch
• Provides customers incentives, gifts as well as concessions in service charges, etc.
• Time – 5PM to 8PM (at 24 hour branch) and 6 PM to 8 PM (at 8AM to 8 PM)
Branches
NEFT
National Electronic Fund Transfer(NEFT) is an Inter-Bank Electronic Funds Transfer

Product. This a secure and trusted electronic funds transfer product and the credit has to
be passed on to the beneficiary on the same day on the receipt of the message. NEFT is a
multi-lateral net settlement system. All the transactions of the bank are pooled at one
location and are forwarded to RBI NEFT cell at Mumbai during the various settlement
cycles(presently 6). These payments are sorted out Bank-wise and netted and single
debit/credit entry is passed on to the participating bank. Along with the debit/credit
advices, individual credit particulars are sent to the beneficiary bank and it is the
responsibility of the each bank to route the transactions to their respective branches.
Rapid Funds2India
It is easy and hassle free instant remittance of funds from branches in UAE, Oman and
UK to CBS Branches in India and to RTGS enabled branches of other banks. The
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customer will deposit local currency with these overseas branches and remittance will be
effected in rupees to CBS Branches of our Bank/RTGS enabled branches of other Banks
under this scheme.
Scheme of Establishing Agri clinics and Agri Business Centres(ACABCs) by

Agriculture Graduates
Agri clinics are envisaged to provide expert services and advise to farmers on cropping
practices, technology dissemination, crop protection from pests, diseases, market trends,
clinical service for animal health, etc which would enhance productivity of crop/animal.
Agri business Centres which provide input supply, farm equipment on hire and other
services to farmers.
It has been decided by Government of India to launch a subsidy based Credit linked
Scheme for establishment of ACABCs. The scheme is open to agriculture graduates in
the subject allied to agriculture like horticulture, animal husbandry, forestry, dairy,
veterinary, poultry farming and pisciculture. The subsidy would be admissible only in
respect of agriculture graduates trained under the ACABC scheme on or after 1.04.2004.
Subsidy- Each unit will be provided with two types of subsidies under the scheme.
i) Capital Subsidy
a) Credit linked capital subsidy @ 25% of the capital cost of the project funded
through bank loan would be eligible. This subsidy would be 33.33% in respect of
candidates belong to SC, ST, Women and other disadvantaged sections and those
from North-Eastern and Hill Stages.
b) The ceiling of project cost for individual projects will be Rs.10.00 lakh. The
ceiling of project cost for group projects would be Rs.10.00 lakh per trained
graduates, subject to an overall ceiling of Rs.50.00 lakh. In case of groups having
five persons, of which one is non-agriculture graduate, the ceiling of such group
projects would also be Rs.50.00 lakh.
c) In case of loans up to Rs.5.00 lakh, no margin money is required as per present
norms. The margin money to be contributed by the general category entrepreneur
will be as per prevailing norms.
d) However, concessions would be made in respect of SCs/STs, women and
beneficiaries of North-Eastern States, Hill areas. In such cases, a maximum of
50% of the margin money prescribed by banks could be given by NABARD to
meet the shortfall in borrower’s contribution, if the bank is satisfied that the
borrower is unable to meet the margin money requirements. Such assistance to
banks by NABARD will be without any interest. The banks may, however, levy a
service charge up to 2% per annum from the borrowers.
e) The term loan would be composite in nature and bank would extend loan as per
the project cost, which would be inclusive of subsidy amount eligible, as capital
subsidy is back-ended but exclusive of margin money as stipulated.
ii) Interest Subsidy
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Interest Subsidy on the Bank loan portion will be provided to banks on annual basis
for crediting to the account of the Agripreneurs. For this purpose, financial year
(April-March) will be reckoned for calculation of interest. Interest subsidy will be
released to the banks on the balance outstanding in account against principal amount
of loan, net of capital subsidy released. The same will be claimed after completion of
one year, for the first year and after completion of two years, for the second year.
Reschedulement:
• Retaining existing repayment period

• Not to exceed exposure
• No change in nature and quantum of existing credit facilities
• No fresh credit facility is sanctioned
• Standard, Sub standard and doubtful accounts can be rescheduled
• No rescheduling of willful defaulter account
• One time reschedulement not exceeding 6 six months is not considered
restructuring.
Rephasement:
• Rescheduling with enhancing repayment period.

• Retail loan rephasement by Regional Authority provided period should not exceed
60 years of age of borrower in salary class and 65 years in other cases.
• Maximum 6 months without sacrifice and additional funding
• Rephasement means reschedulement with extended period of repayment
Restructuring:
• Changing repayment period, Changing outstanding exposure, Changing nature,

quantum of facilities, Sanctioning additional facility
• Additional requirement after critically analyzing funds flow position
• ‘Special investigative audit’ to ensure that there is no diversion of funds.
• It may also involve refund of penal interest, reduction in rate of interest, funding
of unpaid interest, reschedulement of instalments, fresh additional working
capital/term loan
• No restructuring of willful defaulter
Ever-greening
It refers to a strategy or accounting devices to prevent or postponement of classification
of standard account to be likely to be slipped into NPA without proper viability
study/future cash flow. It is adopted with an intention to avoid slippage
Ever-Greening Restructuring/Rescheduling
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It is done repeatedly to avoid slippage of It is done once in potentially viable
standard account into NPA category standard account with an intention to
rehabilitate.
No viability study and future cash flow is Proper viability study and future cash
ascertained before considering for flow is ascertained before considering for
restructuring/rescheduling/rephrasing rehabilitation
This is not permissible by RBI and It is permissible as per RBI guidelines for
benefits drawn under prudential norms one time and benefits under prudential
for assets classification, income norms for assets classification, income
recognition and provisioning are recognition and provisioning are available
unauthorized
Privileges to Senior Citizens:

• LABOD 1.25% above deposit rate as against 1.50% for others
• ATM Card free of charge
• Free remittance facility by debiting account
• Free collection outstation cheque upto Rs. 5000/-
• At par collection of pension bills/cheques
• No queue facility
• Additional interest @0.50% on Term deposit
Debit Card and Credit Card:-
Debit Card Credit Card

Payment is made against available Payment is made against credit limit i.e.
balance in the account and therefore it is a sort of credit extended. Therefore,
having an account is must it is not necessary to have an account.
All account holders under Savings Bank Eligibility is based on Income
and Current Account are eligible profile/credit worthiness of the individual
Usually is valid for 5 years Usually valid for 3 years
Free of charges where the bank desires Annual Subscription is applicable
sto popularize alternative channels
Assignment and Set off:-
Assignment Set Off

Assignment is transfer of ‘right to recover
Set off is a legal right which entitles a
the debts’ of another. This is usually debtor to take into account the sum
done by way of written agreement signed immediately owning to him by a creditor
between the Assignor(the owner of debt) when determining the net sum due to the
and the Assignee(to whom the debt is creditor. Bank has right to set off credit
transferred) balance in an account against debit
balance in another account(which is kept
The debtor is notified about the transfer in the same name or right)
of debt by way of assignment and
thereafter payment is made by debtor to
the assignee in discharge of the debt.
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The most common example of
Assignment in banking is the assignment
of Life Insurance Policy in favor of Bank
Baroda Connect
It is a brand name of Bank’s internet Banking (e- banking) services launched in

September 2006. This facility is available to customers of all CBS Branches in India and
is new alternate delivery channel offered by the Bank. The customer may avail the
benefits of anytime, anywhere banking from CBS Branches across the country.
Services available to Retail Customers:-

• Balance enquiry in Operative account, Deposit accounts and Loan accounts.
• Stop payments of cheques
• Tax Deduction Enquiry
• Booking Train Ticket
• Account summary – summary of all operative, deposit and loan accounts
• Fund transfer to Self/linked account and Third party fund transfer.
• Request for cheque book, fixed deposit renewal, Switch Mailing address, account
opening for CBS and e banking.
• RTGS/NEFT facility
• Profile – customer can change his profile and change his password.
• Activity history – Customer can get details of all the activities carried out by bank.
• Modeling – Customer can model deposit/loan schemes of the bank and know
about likely maturity value, if he invests or likely EMI if he takes loan, etc.
Services available for Corporate Customers-
• All facilities mentioned under Retail Customers
• Approvals – For corporate customers, there can be involvement of multiple users
for transfer of funds/payment of bills, etc and Baroda connect allows multiple
users to log in and initiate/approve the transactions, as per powers delegated by
the corporate to their users.
• Trade Finance queries relating to – Import/Export, Inland Trade, Bank
Guarantees, Forward Contract.
Benefits to Customers –
• Anytime funds Transfer to any CBS Branch including to Third Party.
• Account Details – past transactions – summary of his accounts.
• Single Window – can operate all accounts using Single User Id
• On line enquiry- any query of customer will be answered.
• History Access – Click on Activity History Option and get details of past
activities
• My Request – Can request services through Internet Banking
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• Security – Secured by 128 bit SSL to protect transactions/communication with
Bank
• Convenient Banking – Bill Payment
Benefits to Bank-
• Cost effective – cost mere Re 1 as against Rs. 30 in Branch operations and Rs 16
in ATM
• Saves Time – This Time can be utilized in other profitable activities.
• At par Technology – Will be able to provide various services in line with our
competitors
• Customer Satisfaction – The hassle-free services supported by technology
Strategy for promoting Internet Banking –

• Team Approach – educate entire staff
• Targeting Customers –
• Service Delivery – availability of forms, proper instructions
• Promoting internet banking – simulate the customer who is computer savvy
• Explain the customer two things – Why and How
CTR(Cash Transaction Report)

An important part of Anti-money Laundering Guidelines issued by RBI. RBI has
prescribed reporting formats and periodicity for Cash Transaction Reports. CTR is to be
filed in respect of the following:-
• Cash transaction of value of more than Rs. 10 lacs or series of integrally
connected transactions aggregate of which in a month exceeds Rs.10 lacs are
reported in CTR
• Individual Cash Transaction below Rs.50000.00 have been excluded from the
purview of reporting.
• Report all cash transaction where (i) forged or counterfit currency note or bank
note were used as genuine and (ii) where forgery of valuable security had taken
place.
• In terms of the act Financial Intelligence Unit India (FIU-IND) was set up in the
Ministry of Finance to collect, compile, collate and analyse the cash and
suspicious transaction reported by Banks and FIs
• Cash Transaction Report(CTR) for each month should be submitted to FIU-IND
by 15th of succeeding month.
STR(Suspicious Transaction Report).
Suspicious Transactions means Transaction which:-

• Give rise to a reasonable ground of suspicion that it may involve the proceeds of
crime, or
• Appears to be made in circumstances of unusual or unjustified complexity, or
• Appears to have no economic rationale or bona fide purpose, or
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• Give rise to a reasonable ground of suspicion that it may involve financing of the
activities relating to terrorism
• Suspicious Transaction Report(STR) should be submitted to FIU-IND within 7
days of arriving a conclusion that any transaction or series of transactions,
whether cash or non cash, is of suspicious nature.
• Banks not to put any restrictions on operation in the account where STR has been
made
Universal Teller
Under this scheme the cheques upto Rs 40000.00 can be directly handled by the cashier
for payment. The customer can directly go to him for payment. Besides the Teller can
issue drafts upto a certain amount under single signature. The job of balance enquiry
and updatation of passbook is also handled by the Teller.
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Lok Adalat:
It is a loan recovery redressal mechanism where the banks organize a camp for recovery
in one place under the aegis of DRT. A spot settlement of recovery is made after hearing
the case of bank and borrower and the underlying securities. It is not mandatory for either
parties to accept the verdict but many recovery cases are settled to the satisfaction of both
the parties. It is the version of a small court set up to settle the recovery disputes of
borrowers. It is a cheap method of enforcing recovery.
Liquidity Risk:
Risk of loss due to potential inability of a bank to meet its repayment obligation in a
timely and cost effective manner. This may arise out of s mismatch in tenor of its
deposits(liabilities) and loans(assets) leading to a situation that it does not have enough of
ready cash to honor its commitments towards its depositors. Liquidity Risk may also
deprive a bank from taking benefit of some available opportunity of investment and
thereby make money, leading to a lost opportunity.
The price of converting an illiquid asset into a liquid asset in the given market
environment is the quantum of liquidity risk (VAR). When an asset cannot be converted
into cash when needed runs the bank into a liquidity risk. Scarcity of funds in the market
is also one of the factors of liquidity risk.
Interest Rate Risk

Risk of loss arising out of change in market interest rate, which may adversely affect
valuations of bank’s portfolio of assets or its earnings. Change in bench mark interest
rate impacts bank’s own interest rate which affects future earnings, besides change in
valuations of existing assets
Credit Linked capital subsidy under technology up gradation fund scheme for
textile units (CLCS-TUFS)
• Launched by textile commissioner Ministry of textile for SSI and Jute Industry.
• Option to SSI textile industry either to avail one time 12% capital siubsidy or 5%
interest reimbursement under TUFS.
• Segment covered :; Cotton ginning and pressing, textile industry covering – silk
reeling and twisting, Wool Scouring and combing, Synthetic filament yarn text
rising, crimping, twisting, Spinning, Viscose filament yarn and viscose staple
fibre, Weaving knitting, Garments / made up manufacturing, Processing of fibres,
yarns, fabrics garments and made ups.
• Type of units.
• New and existing units with and without expansion.
• Existing units can modernize and expand with state of the art technology.
• New unit must set up entire facility with appropriate technology.
• A unit can undertake more than one activity in an integral manner.
• Second hand imported continuous spinning yarn machine of five year vintage for
production of viscose filament is eligible.
• Margin : 20%.
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Financial Inclusion(FI)
Financial Inclusion (FI) is delivery of banking services at an affordable cost to the vast
sections of disadvantaged and low income groups. As banking services are in the nature
of public service, provision of banking and payment services to the entire population
without discrimination should be prime objection of the public policy.
The financially excluded sections largely comprise marginal farmers, landless labourers,
oral lessees, self employed and unorganized sector enterprises, urban slum dwellers,
migrants, ethnic minorities and socially excluded groups, senior citizens and women.
Scope for FI- (i) Through driven intervention by way of statutory enactments (ii)
Through voluntary efforts by the banking community for evolving various strategies to
bring within the ambit of the banking sector the large strata of society who do not enjoy
the benefits of banking facilities.
Need for FI- (i) To promote thrift among the disadvantaged and low income group(ii)To
relieve them from clutches of money lenders (iii) To help the people in remote dwellings
to take advantage of retail banking (iv) To improve their standard of living(v) To
improve earning capacity of banks (vi) To expand area of operation of banks.(vii)To
enhance bank’s business by providing other retail banking facilities.
RBI has advised banks to take following steps towards financial inclusion:-
a. To make available basic banking ‘no-frills’ account with low or nil minimum
balances as well as charges to expand the outreach of such accounts to vast
sections of the population
b. To make available all printed material used by retail customers in the concerned
regional language.
c. KYC procedure for opening accounts have been simplified for those persons with
balances not exceeding Rs.50000.00 and credits in the accounts not exceeding
Rs.100000.00 in a year. This simplified procedure allows introduction by a
customer on whom full KYC drill has been followed.
Introduction of General purpose Credit Card (GCC) facility up to Rs.25000.00 at rural
and semi urban branches. The limits are sanctioned without insistence on security or
purpose.
d. A simplified mechanism for one time settlement of overdue loans up to
Rs.25000.00 has been suggested for adoption to banks who have been specifically
advised that borrowers with loans settled under the one time settlement scheme
will be eligible to re access the formal financial system for fresh credit.
Benefits of FI to Society
• Provides roadmap for sustainable development for the financially excluded
persons of the society, improvement in human development indicators and enable
people to live a life of dignity.
• Inculcates the habit of savings in the community
• Overall economic growth of the district/village
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• Trade and commerce will flourish
• GDP of country will rise
• Standard of living will rise
Benefits of FI to Banks
• Wider customer base
• More scope of Business growth
• Low cost deposit will increase
• More number of people may come forward for loans
KHOJ:
Talent identification program initiated in July 2005 to identify competent, willing and
enterprising staff to take up challenging assignments in the specialized fields of IT,
Marketing, Branch operations, forex, Treasury and so on. They will work as change
champions driving bank’s business transformation efforts. They are selected through a
rigorous process of written test provided they meet basic minimum requirements of the
bank. It is intended to harness the internal potentiality of employees in meeting the
challenging goals of the bank.
CRAR(Capital to Risk Weighted Assets Ratio)

It is the ratio of capital to risk weighted assets expressed in percentage terms. It is the
ratio of capital to total risk weighted assets. It can be expressed as equal to CAR=(Capital
funds/Risk weighted assets ) x 100. It reflects the strength of the capital visa vis the risk
weighted assets. It shows the risk absorbing capacity of the bank. The minimum CAR is
fixed by RBI at 9 per cent though basel norms have suggested 8 per cent.
NIM and NII

Net interest margin is the spread between the cost of resources and yield on resources
expressed in percentage. The bank aims for maintaining a NIM in the range of not less
than 3 per cent. The higher the NIM, the better is the policy of managing the interest rates
in the bank. NIM experiences pressure in times of volatility in interest rates.
Net interest income is the quantum of interest available after paying all interest
commitments. It is usually expressed in absolute amount.
RTGS (Real time gross settlement)
The acronym “RTGS” stands for Real Time Gross Settlement. RTGS system is a
funds transfer mechanism where transfer of money takes place from one bank to
another on a “real time” and on “gross” basis. This is the fastest possible money
transfer system through the banking channel. Settlement in “real time” means
payment transaction is not subjected to any waiting period. The transactions are
settled as soon as they are processed. “Gross settlement” means the transaction is
settled on one to one basis without bunching with any other transaction.
Considering that money transfer takes place in the books of the Reserve Bank of
India, the payment is taken as final and irrevocable. Minimum amount for RTGS is
Rs.100000.00
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NEFT
National Electronic Funds Transfer (NEFT) NEFT system is a nationwide funds
transfer system to facilitate transfer of funds from any Bank branch to any other
Bank branch. The remitter fills in the NEFT application form giving the particulars
of beneficiary. The remitting branch prepares structured financial messaging
solution (SFMS) message and sends it to its service centre for NEFT. The
service centre forwards the same to the local RBI (National Clearing Cell,
Mumbai) to be included for the next available settlement. Presently NEFT is
settled in 11 hourly settlement starting from 9 am to 7 pm on all week days and 5
hourly settlement from 9 am to 1 pm on Saturdays. The receiving bank processes
the remittance messages received from RBI and effect the credit to the
beneficiaries accoun’s.
Difference between RTGS and NEFT
SL. No. RTGS NEFT

1 Min amount to be remitted is Rs. There is no minimum and
1 lac. No. Max Amount maximum amount
2 Only Bank’s customers can Even walk in customers can
remit the money remit upto Rs. 50,000.00 by
cash
3 Payment instructions are Payment instructions are
processed on continuous or real processed on batch settlement
time basis basis. There are 11 hourly
settlements starting from 9 am to
7 pm on all week days and 5
hourly settlements from 9 am to
1 pm on Saturdays
4 Transfer of funds is instant Funds can be credited by next
day
5 Charges – Rs. 1/- lacs to Rs.5/- Upto Rs. 1/- lacs Rs.5/-
lacs Rs. 25/- Above Rs. 1/- lacs Rs.25/-
Above Rs. 25/- lacs Rs.50/-
Benefits of RTGS/NEFT to Bank:-

• Reduces Workload of DD/MT/TT
• Risk of frauds prevalent in case of DDs is reduced.
• Reconciliation is easier.
• Funds can be transferred to other banks easily
Benefits of RTGS/NEFT to Customers:-

• Secured transfer of funds across the banks
• No courier or postal charges
• Charges lesser than DDs
• The funds are credited to the beneficiary account on the same day or latest by next
working day.
Baroda Gramin Paramarsh Kendra(BGPK)

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• A centre of Knowledge Sharing, Problem solving and Credit Counselling for the
Rural Community
• Initiative Taken during Centry Year Celebration
• To fill knowledge gap in financial literacy, better farming practices, technology
adoption, diversification of opportunities, market linked prices, value addition
services offered by various institutions, women empowerment, employment
opportunities for youth.
• With a view to assist the rural community, bank has conceptualized BGPK.
• Dedicated team which would build the confidence of the rural people
• Areas covered – Financial education and financial inclusion, information sharing
and problem solving on technical issues, credit counseling, synergy and liaison
with other organization and development agencies
• 52 BGPK as on 31.03.2010
EASIEST(Electronic Accounting System in Excise and Service Tax)
It is an online Module. There are 5 menu items:- (1) Data Entry (2) Security Module (3)
Focal Point (4) Reports and (5) Log Out
Indirect tax collections are entered on line by branches for remittances to concerned
authorities. Bank branches can collect indirect taxes and can remit funds to the Central
Board for Excise Commission. The information is submitted electronically to National
Securities and Depository Limited (NSDL) where the data is pooled on indirect tax
collections.
“No-frills” Bank Accounts
The Reserve Bank has advised all banks to introduce a basic banking ‘no-frills’
account which could be accessible to vast sections of the population. The “no-frills’
accounts could either be with ‘nil’ or very low minimum balances/charges. The nature
and number of transactions in such accounts could be restricted, but should be made
known to the customer in advance in a transparent manner. Banks have been advised to
give wide publicity to the facility of such a ‘no-frills’ account, including through their
web sites, indicating the facilities and charges in a transparent manner.
Banks have been further advised to report to the Reserve Bank on a quarterly basis,
the number of such deposit accounts opened by them.
Wealth Management Services:-
Wealth Management is an advanced investment advisory discipline that incorporates

financial planning and specialist financial services. The key objectives are to provide
high net worth individuals and families with tailored retail banking services, estate
planning, legal resources, taxation advice and investment management, with the goal of
sustaining and growing long term wealth.
With the increasing house hold income, wealth management is emerging as a high
potential business opportunity. Wealth management is a new line of business which has
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been given importance in our ‘Project Parivartan’ and it is estimated that during 2008-09
income of Rs.100 crore will be raised through this business.
Steps taken by bank to improve earnings from Wealth Management:-

• Tie up with India Infoline Ltd. for offering on line trading platform ‘Baroda e
Trading’ for equity and derivative trading
• Launching Wealth Management Services through a special and dedicated ‘Gold
Lounge’
• Tie up with third party organizations.
• Insurance – India First Life Insurance, National Insurance Company Ltd.
• Mutual Fund – UTI Mutual Fund, Birla Sunlife Mutual Fund, Reliance Mutual
Fund, Sundaram BNP Paribas AMC Ltd, Franklin Templeton Investments.
• e-Broking – India Infoline
• Lunching we4alth management services in UAE with Reliance Mutual Fund
City Back Office (CBO)
After implementation of CBS, Service branches are designated as City Back Office
The primary function of CBOs are centdralized operations of Inward and Outward
Clearing, p;ayment of DDs, Bankers Cheques, etdc. The CBOs are required to handle
ECS also.
For smooth functioning of CBOs, following should be ensured by the branches:-
Signatures of all accounts are scanned.

Account operating instructions and change therein are entered in the system.
Cheque books issued are entered in the system
Sanctioned limits in accounts are timely renewed.
ECS Mandates given by customers are updated with new account numbers in CBS.
Wilful defaulters:-
A willful default would be deemed to have occurred if any of the following events are
noted.
(i) The unit has defaulted in meeting its payment/repayment obligation to the
lender even when it has the capacity to honour the said obligation.
(ii) The unit has defaulted in meeting its payment/repayment obligations to the
lender and has not utilized the finance from the lender for specific purpose for
which the finance was availed of but has diverted the funds for other purposes.
(iii) The unit has defaulted in meeting its payment/repayment obligations to the
lender and has siphoned off the funds so that the funds have not been utilized
for the specific purpose for which the finance was availed of nor are the funds
available with the unit in the form of other assets.
(iv) The unit has defaulted in meeting its payment/repayment obligation to the
lender and has also disposed of or removed the moveable fixed assets or
immovable property given by it for the purpose of securing a term loan
without the knowledge of the bank/lender.
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No additional facility should be granted to listed willful defaulters. Furtheer,
entrepreneurs/promoters of companies who have been identified for siphoning/diversion
of funds, misrepresentation, falsification of accounts and fraudulent transactions should
be debarred from institutional finance for floating new ventures for a period of five years
from the date the name of the willful defaulter is published in the RBI’s willful
defaulters’ list.
Inter sol transaction:

Under CBS environment, when branch A is doing transaction in respect of customer of
branch B, the transaction is done through intersol ID. The intersol ID is identity of the
branch. Every branch at the time of going for CBS is allotted a SOL ID which captures all
the transactions of that particular branch. Every CBS branch can access any SOL ID in
the network and can undertake banking transactions as if done in that branch.
CRM
Country risk management (CRM) is meant to ensure that we do not take undue exposure
on any country and run the risk of their inability to meet the international payment
obligations. Based on the politico-economic features, each country is rated by an
international rating agency taking into various other factors of convertibility of currency,
economic growth, forex reserves and so on. The Central bank of every country fixes the
prudential exposure limit on different countries. Banks will fix their own internal
exposure limit within their own central bank limits and fixes the limits of exposure. There
is possibility that a country will default on its obligations to foreigners and/or on foreign
liabilities of its banking system for lack of foreign exchange reserves.Under CRM we
fix:-
(i) Counter party limit for any type of inter bank exposure
(ii) Exposure on other counter parties (borrowers) which will be reckoned for
country exposure.
(iii) Country exposure
Before taking any exposure under CRM we get the limits earmarked with SITB.
Firm debts and private debts:

Debts raised usually by the firms to meet their business needs are known as firm debts
whereas the debts raised to meet the personal needs of the proprietors, directors owners,
partners are usually known as private debts. In order to keep the identity of balance sheet
of firms its essential to distinguish between these two types of debts.
Rule in Claytons case;

The rule was laid down in Devayaney Vs Nobel. It is applicable in case of accounts such
as cash credit and overdraft where customer deposits and withdraws money frequently.
As per this rule, the order in which the credit entry will set off the debit entry in the
chronological order. This means that the first item in debit side will be the item to be
discharged or reduced by a subsequent item on the credit side. It is commonly used in the
case of loan accounts with multiple credit and debit entries to decide as to which will off
set which entry. The first come debit will be adjusted with the first credit.
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Bancassurance:
Bancassurance is nothing but an alliance between a bank and an insurance provider. It is
a kind of service that fulfils the need of banking as well as insurance. It stands for
distribution of life/non life insurance products through the bank’s various outlets as
agents of the insurance companies for earning non-interest income. It is meant to use the
synergy of our wider presence for selling the insurance products to our own customers
who are also the consumers of the insurance companies. As a further step bank has got
into JV/strategic alliances with the insurance companies to increase the sale of insurance
products.
Advantages of Bancassurance are:- (i) utilization of existing banking network(ii) saving

of various costs of insurance company. (iii)instant reach to rural area(iv) availability of
large readily available customer base.(v) product development due to better customer
relations(vi)banks increase their revenue (vii) banks expand their portfolio(viii) an answer
to changing needs of consumers.
Cost income ratio and overhead efficiency ratio;

The cost income ratio reflects the actual index of how much is spent out of earnings. The
leaner the percentage, the better is the efficiency of the bank. We have to aim at less cost
and more income so that the profitability goes up. In an environment when spreads are
thinning, new income resources have to be tapped to get favourable ratio. A good control
on expenses, making better earnings will be the most ideal.
Overhead efficiency ratio indicates the proportion of overheads to income. This important
ratio speaks of pace of overheads in the form of salary, rent, electricity, and all items of
expenditure other than interest expenditure.
YTM
The yield to maturity (YTM) and the interest rates are inversely related. The higher the
interest rates the lower the YTM. The YTM indicates the present maturity value of an
instrument at today’s interest rate. The YTM equates the present value of future interest
payments and principal redemption when negotiated at to-day’s price of bond.
Factoring:
The factoring is a process of discounting trade bills with recourse. It is a service beyond
giving simple finance against the bills. It entails a host of services. It is a financial
arrangement in which the receivables are created out of sale of goods or services are sold
to an agency (Know as factor) is called factoring. The factor performs the functions such
as purchase of receivables, maintaining the sales of receivable ledgers, submitting sale
accounts to the creditors, collection of debts on the due date and providing consultancy
services to the customer in respect of marketing, finance and production.
Channel financing:
With the onset of popularity of brand names of extending chain show rooms of say Bata,
Raymonds, Bajaj, Arrow, Phillips, Sony and so on there is a potential scope to extend
finance to all these retail outlets with an arrangement with their corporate office for
certain terms of finance. We may approach the head office of such a large chain of retail
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show rooms and negotiate for finer terms of finance and can advise all branches to
approach them for providing our services. In this way one set of negotiation can work for
business at many centers. While banks get economies of scale in business, the outlets will
get easy finance without each agency working differently. This is commonly referred as
channel financing.
Assets Reconstruction Company

In India the enactment of SARFAESI Act 2002 enabled lending agencies to foreclose and
sell underplaying assets without court intervention.
The SARFAESI Act permits an ARC to commence operations with a minimum net
owned funds of Rs. Two crores. ARC is required capital adequacy ration of 15%.
ARC can acquire financial assets by way of simple agreement from the banks/FIs subject
to some terms and conditions or by issuance of bonds and debentures to the originating
Banks/FIs. All rights of lender vest in ARC after acquiring the assets and become party
to all the contracts/deeds/agreement, etc. An ARC can undertake (i) enforcement of
security interest (ii) takeover or change of management of the borrower (iii) undertake
sale or lease of the borrowers' business and (iv) enter into settlements and reschedule the
debt
Three ARCs viz Assets Reconstruction Co (India) Ltd, Assets Care Enterprise Ltd and
ASERC (India) have been registered. ACE Ltd and ASERC Ltd are yet to start their
operations. ARCIL has bought assets worth Rs.9631 crore from the Banks and FIs at
price of Rs.2089 crores.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security

Interest Act 2002
The act empowers secured creditors to enforce any security interest created in its favour
without any intervention of court or tribunal
Section 13 provides that a bank/FI can enforce its security without the intervention of the
court or tribunal. It also provides issuance of notices to the borrower under Sec 13(2) for
making demand of contractual dues in NPA account payable within 60 days from the date
of notice. Such notice must be served on the borrower and also by pasting on the secured
assets in a conspicuous place. The word borrower includes guarantor.
In response to the notice the notice the borrower may send his representation or
objections which are to be replied within a week from the date of its receipt.
In case the borrower fails to make the payment of dues demanded in the noticed, the
secured creditor shall be entitled to exercise all or any of the following rights under
Section 13(4). The rights are:-
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• Take possession of the secured assets of the borrower including the right to
transfer by way of lease, assignment or sale in realizing the secured assets.
• To take over the management of the business of the borrower including the right
to transfer by way of lease, assignment or sale in realizing the secured assets.
• Require at any time by way of notice in writing to any person who has acquired
any of the secured assets from the borrower and from whom any money is due or
may become due to the borrower to pay, the secured creditor so much of the
money as is sufficient to pay the secured debt.
On the expiry of 60 days the secured creditor shall exercise any one or all of the above
rights. The secured creditor on the day fix take the possession of the secured assets. After
taking possession a public notice of such possession is given in 2 newspapers i.e. one
being English and the other vernacular. In case the borrower causes hurdle while taking
possession, the secured creditor may take police protection or alternatively apply to the
Chief Metropolitan Magistrate for taking possession under Sec 14 of the Act.
After taking possession, the secured creditor shall take steps for sale of the Secured
Assets. The secured creditor shall sell the property by following the Security
Interest(Enforcement) rule 2002 by holding public auction or by inviting tenders or by
obtaining quotations from persons dealing with similar Secured Assets or otherwise
interested in buying such assets. In the notice for sale the secured creditor must give
details like Reserve price, description of property, time and place of auction and specific
earnest money deposited and other conditions of sale. There should be gap of 30 clear
days between the date of notice of sale and the actual sale.
A borrower may appeal against the action of secured creditor under Sec 17 of the act to
DRT.
The following are not covered by the Act.
• Pledge of moveable and lien on any goods and security.

• Aircraft.
• Vessels
• Hire purchase/lease, etc.
• Any Security interest not exceeding Rs. 1 lacs.
• Agriculture land
This act has helped banks/FIs in effecting substantial recoveries by way of sale of secured
assets or the borrowers have offered compromises for settlement of dues of the secured
creditors.
Credit Information Bureau (India) Limited – (CIBIL)
Credit Information Bureau (I) Ltd was set-up in January 2001 as a joint venture between
SBI, HDFC, Transunion International Inc and Dun & Bradstreet Information Services
India P. Ltd. CIBIL is established with a primary purpose of information sharing between
Banks and Financial Institutions for curbing the undesired growth of NPA.
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Banks are required to provide periodical information to CIBIL in the prescribed format.
The operating units shall take necessary steps to quickly and regularly furnish The
information in the prescribed format for use and benefit of all the concerned.
CIBIL helps in compilation of credit information, accessible to member banks which acts
to improve quality of credit proposals, better credit management and Credit dissemination
Banks, FIs, SFCs, NBFCs, Housing Finance Companies and Credit Card Companies are
members of CIBIL
Valuation of investments
In order to make the valuation of the bank's investment portfolio reflective of the purpose,
commercial banks are required to classify the entire investment portfolio w.e.f.
September,2000 under three categories viz. Held to Maturity (HTM), Available for Sale
(AFS) and Held for Trading (HFT). Investments under AFS are to be marked to market
at the year end or at more frequent intervals. Investments under HFT category are to be
marked to market monthly or at more frequent intervals
Securitization :
It is the process by which assets are sold to a bankruptcy remote special purpose vehicle
(SPV) in return for an immediate cash payment. The cash flows from underlying pool of
assets is used to service the securities issued by SPV.
Two stages process :
1) There is a sale of single asset or pooling and sale of pool of assets to a bankruptcy
remote SPV.
2) Repackaging and selling the security interest representing claims on incoming

cash flows from the assets to the third party investors by issuance of tradable debt
securities.
Banks can sell assets to SPV only on cash basis and the sale consideration should be
received not later than the transfer of assets to SPV. Any loss arising on account of sale
should be accounted for the period during which the sale is effected. Any profit /
premium arising on account of sale should be amortized over the life of the securities
issued or to be issued by the SPV.
Please remember 6Ps – Pooling –selection of pool of loan assets, Purchasing – by SPV,
Packaging- into tradable securities, Pricing- of securities, Placement – Securities
offered by SPV. Issued to investors, Post servicing-and administrating of pooled cash
flows.
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Basel II Capital Accord
Limitations of Basel I Accord
Same risk weighing for commercial and consumer loans

Ignores differential Asset quality
Does not recognize any risk other than credit risk
Ignores benefits of portfolio diversification
Ignores portfolio theory. An asset’s risk depends not only on its own variability but also
its covariance with other assets in portfolio
Accord I Accord II
Focuses on single risk measure More emphasis on bank’s own internal
methodologies –
Supervisory review and market discipline
One size fits all Flexibility –
Incentive for better risk management
Broad brush structure More risk sensitivity
While Basel I framework confined to the prescription of only minimum capital

requirements for banks, the Basel II framework expands this approach not only to capture
certain additional risks in the minimum capital ratio but also includes two additional
areas, namely, the Supervisory Review Process and Market Discipline through increased
disclosure requirements for banks. Thus Basel II framework rests on the following three
mutually reinforcing pillars:-
Pillar I – Minimum Capital requirement
The first pillar proposes to replace the existing ‘one size fits all’ framework for
assessment of capital with variety of options. It will motivate banks to improve
continuously their risk management capabilities so as to make use of more risk sensitive
options and thus produce more capital requirement.
Pillar II – Supervisory review Process
It contains evaluation procedure through which supervisors ensure that each bank has
sound internal processes in place to access to its adequacy of capital and set targets for
capital that in commensurate with the bank’s specific risk profile and control
environment.
Third Pillar – Market Discipline
The has dev eloped a set of disclosure requirement which will allow market participants
to access key pieces of information on the scope of applications, capital, risk exposure,
risk assessment process and level of capital adequacy of the institution.
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Quantitative disclosure that provide general summary of Bank’s risk management
objective and policies may be published on annual basis. Tier I total capital adequacy
ratio and their components must be disclosed on quarterly basis.,
Pillar II lays down the following four key principles :-
Principle I Banks should have process of assessing their overall capital adequacy in
relation to their risk profile and a strategy for maintaining their capital levels.
Principle II Supervisor should review and evaluate the banks’ internal capital adequacy
assessments and strategies, as well as their ability to monitor and ensure their compliance
with the regulatory capita ratios. Supervisors should take appropriate supervisory action
if they are not satisfied with the result of this process.
Principle III Supervisors should expect banks to operate above minimum regulatory
capital ratios and should have the ability to require banks to hold capital excess of
minimum – buffer for uncertainties.
Principle IV Supervisors should seek to intervene at an early stage to prevent capital

from falling the minimum level required to support the risk characteristic of a particular
bank
Pillar II requires banks to implement an internal process, called the Internal Capital
Adequacy Assessment Process (ICAAP) for assessing their capital adequacy in relation
to their risk profiles as well as a strategy for maintaining their capital levels
Action points initiated by our Bank to ensure compliance of Pillar II

• The Bank has finalized Policy on Internal Capital Adequacy Assessment
Process(ICAAP)
• With a view to strengthen its Capital Adequacy Assessment Processes, a modified
version of ASCROM has been implemented to populate additional Basel II related
data
• We are getting our Corporate Advance accounts of Rs. 10 crore and above rated
by one of four Approved Credit Rating Agencies e.g. ICRA, CRISIL, CARE,
FITCH.
• Unavailed sanctioned limits of loans are factored for computation of capital
requirements.
• Introduction of Tracking of Operational Risk Loss Data
• The scope of MIS date has been broadened to cover BASED II reqauirements
w.e.f. 30.06.08
• Adoption of Risk Based Internal Audit
• Setting up Risk Management Architecture
• Strengthening of Management Information System(MIS) and Information
Technology
• Addressing HRD issues
• Setting up of Compliance Unit
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CAPITAL ADEQUACY NORMS
Introduction
Narasimham Committee: In December, 1991, the ‘Committee on

Financial System also known as “Narasimham Committee”, following the
international practice, recommended introduction of “Capital Adequacy”
norms in Indian banks.
Accordingly the RBI issued guidelines on Capital Adequacy for banks in India
and made it applicable from the year ending 31.3.1993.
It is an international practice that the banks must maintain adequate

capital commensurate to their risk weighted assets. (Reason : Adequate
capital helps banks to absorb losses and thus prevents bank failures.)
As per BIS Standard (i.e. Standard prescribed by the Bank for International
Settlement), internationally all banks are required to maintain capital to
the extent of 8% or more of their Total Risk Weighted Assets.
Meaning of Capital Adequacy
Capital Adequacy means a bank must have a minimum level of capital

proportionate to its total risk adjusted value of its assets as prescribed by
the central bank of the country. Capital Adequacy is also known as CAPITAL
to RISK WEIGHTED ASSET RATIO or in short CRAR. Therefore, it is the ratio
(in percentage terms) of Capital to Total Value of Risk Adjusted Assets as
given below.
Capital
CRAR = Capital Adequacy = --------------------------------------- X 100
Total value of Risk Adjusted Asset
Prescribed level of Capital Adequacy : (9%)
For the year ending 31.3.2000 and onwards, banks in India are required
by RBI to maintain minimum capital adequacy/CRAR at 9%. This guideline is
applicable to all scheduled commercial banks except Regional Rural Banks.
Computation of CRAR
For computing CRAR one has to find out the (a) Total Value of Risk
Adjusted Asset and (b) the total capital by strictly following the
guidelines prescribed by RBI.
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For calculating the total of Risk Adjusted Assets, RBI has given the
following guidelines.
Calculation of Risk Adjusted Value of Assets
Risk adjusted value of asset is calculated by multiplying the value of asset

(as appears in balance sheet) with the risk-weight assigned to it. For
example, if the bank has an investment of Rs. 100 crores in Government
bonds and risk weight for such asset is 2.5%, the risk adjusted value will be
Rs. 2.5 crores .
Notional conversion of off-balance sheet items to fund based facility and

calculation of their risk adjusted value.
All off-balance sheet items like letter of credit, letter of guarantee, etc. are
to be first converted notionally into fund-based facility by multiplying them
with the prescribed Credit Conversion Factor. The Credit conversion factor
may be 20%, 50% or 100% depending upon the type of off-balance sheet
item.
Definition of Capital Fund (Both for Basle I & Basle II)
1. Capital Fund
Capital Fund for the purpose of capital adequacy as per Basic Accord
consists of three types of capitals namely Tier I, Tier II and Tier III. The
tier III capital is not applicable to India as the RBI has yet not permitted
banks for such capital.
2. Tier I Capital
The Tier I capital is also called the Core Capital. It includes Paid up
equity Capital, Reserves [excluding Revaluation Reserve], Innovative
Perpetual Debt Instruments and Perpetual Non cumulative Preference
Shares. [Note : The amount of intangible assets like carried forward
accumulated losses and also the current year loss, deficit in NPA
provision, etc. will be set off to reach at the Tier I capital.].
3. Tier II Capital
The total Tier II capital of a bank will be restricted to 100% of the Tier I
capital net of intangible assets like goodwill accumulated losses.
Tier II capital is also called the supplementary capital.
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It consist of (i) Revaluation Reserve, (ii) General Provision, General Loan –
loss reserves, (iii) Hybrid Capital Instruments and (iv) Subordinated Debts.
i. Hybrid Capital Instruments :
These are instruments which have the characteristics of debt and equity.
Examples are Innovative Perpetual Debt Instruments [IPDI], Perpetual
Non cumulative Preference Shares [PNPS], etc. They are included upto
15% of the issue in Tier I capital and the balance is allowed to be included
in Tier II capital.
From January 2006 banks have also been permitted by RBI to issue other
hybrid instruments namely Redeemable Cumulative Preference Share
Capital instruments and also the Redeemable debt capital instruments
which will be reckoned to be included in tier II capital.
ii. Subordinated Debts
Total subordinated debt which can be included in the Tier II capital is

restricted to 50% of the tier I capital after deductions of intangible assets.
These are unsecured debts with a fixed maturity subordinate to the

claim on the bank by all other creditors and are not redeemable before
maturity at the initiative of the holder without the prior permission of the
RBI.
The subordinate debt instruments with an initial maturity of less than 5

years cannot be included in Tier II capital. Similarly such debt
instruments with unexpired maturity of less than 1 year cannot be included
in Tier II capital.
4. Restriction on raising tier II capital :
a) The total amount of Tier II capital cannot be more than the total
amount of the Tier I capital.
b) For the purpose of including in Tier II capital the amount of
Subordinated debt should not exceed 50% of the Tier I capital.
c) Bonds issued with an initial maturity period of less than five
years cannot be classified under tier II capital.
d) A bank can invest maximum up to 10% of its capital in the Tier II
capital of other banks.
5. Tier III capital :
As per the Basle Accord, the Central Bank of the respective country, may
prescribe tier II capital for the sold purpose of meeting a proportion of the
capital requirements for market risks. This Capital will consist of short-
term subordinated debt. In India, the Reserve Bank has not yet prescribed
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maintenance of any Tier III capital and therefore it is not applicable to
India.
External Credit Rating under Basel-II Capital Adequacy guidelines
Under Standardized Approach of Credit Risk computation underBasel-II

guidelines, the exposure to Corporates, Public Sector Entities (PSEs) and
Primary Dealers attracts risk weights as per their status of external credit
rating. CRISIL,ICRA, CARE and FITCH (India) are the only RBI approved External
Credit Assessment Institutions (ECAI), whose rating can be considered for
deciding risk weights against the Exposure as under
RATIN AA AA A BBB BELO UNRATE

G A W D
BBB
RISK 20 30 50 100 150% 100%
WEIGH % % % %
T
The entire Credit portfolio (both fund based & Non-fund based) will be
segmented into the following 11 categories for the purpose of assigning the risk
weightage.
S.N Category Types of credit included Risk Wgt%

1 Sovereign (domestic) Exposure to Central Govt/ 0%
state Govt and also exposure
to RBI,DICGCI,CGTSI
Sovereign (Foreign) Exposure to foreign Govts 0% to 150%
2 Public Sector Entities Rating will be same as 20% to 150%
corporate
3 MDBs,BIS,IMF Exposure to multilateral 20%
development banks, BIS,IMF
4 Banks (Scheduled) All claims on Scheduled banks 20%
complying with minimum CRAR
All claims on Scheduled banks 50% to 625%
not complying with minimum
CRAR
Banks ( Non-Scheduled) All claims on Non- Scheduled 100%
banks complying with
minimum CRAR
All claims on Non- Scheduled 150% to 625%
banks not complying with
minimum CRAR
Foreign Banks As per rating of those Banks 20% to 150%
5 Corporate borrower Rating will vary depending on 20% to 150%
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the rating assigned by the
approved rating
Unrated Corporate 100%
6 Regulatory retail Loans upto 5 Crore and 75%
Portfolio turnover not exceeding Rs.50
crore which satisfy laid down
criteria specified by RBI
excluding loans under
categories given below in
7,8,9,10.
7 Residential Property In case of loans upto Rs 30 lac 50%
With LTV of not more
than 75% In case of loans Above Rs 30 75%
lac
Residential Property 100%

With LTV more than
75%
8 Commercial Real Estate Commercial Premises 100%
9 Specified categories Venture Capital 150%
Consumer credit 125%
Capital market Exposure 125%
Staff loans 20%

10 Non-Performing loans Unsecured portion of NPA 50% to 150%
11 Other Assets All other assets not coming 100%
under any of the above
category
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Three approaches for Credit and Operational Risk under Basel II
Credit Risk
1. Standardized Approach(SA)
2. Foundation Internal Rating Based Approach(FIRB)
3. Advanced Internal Rating Based Approach(AIRB)
Operational Risk
1. Basic Indicator Approach(BIA)
2. Standardized Approach(SA)
3. Advanced Measurement Approach(AMA)
Basic Indicator Approach for Operational Risk
Capital required for Operational Risk =Average of (Gross income x Alpha) for last three
years, excluding years of negative or zero gross income. (Alpha =15%)
Gross income =Net Profit
(+) Provisions and write off made during the year.
(+) Operating expenses
(+) Loss on sale of HTM investments.
(-) Reversals made during the year in respect of provisions and write offs made during
the previous year
(-) Income recognized from disposal of items of movable and immovable property.
(-) Profit on sale of HTM investments
(-) Income from Legal settlements in favour of the bank.
(-) Extraordinary/irregular item of income.
(-) Income from insurance activities.
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Something to know on Basel II Terms
Available for Sale • The securities available for sale are those securities
where the intention of the bank is neither to trade nor
to hold till maturity. These securities are valued at
the fair value which determined by reference to the
best available source of current market quotations or
other data relative to current value.
Balance Sheet • A balance sheet is a financial statement of the assets
and liabilities of a trading concern, recorded at a
particular point in time.
Basel Capital Accord • The Basel Capital Accord is an Agreement concluded
among country representative in 1988 to develop
standardized risk-based capital requirements for
banks across countries. The Accord was replaced
with a new capital adequacy framework ( Basel-II )
published in June 2004.
Basel – II is based on three mutually reinforcing
pillars that allow banks and supervisors to evaluate
property the various risks that banks face. These
three pillars are:
• Minimum capital requirements, which seek to refine
the present measurement framework.
• Supervisory review of an institution’s capital
adequacy and internal assessment process:
• Market discipline through effective disclosure to
encourage safe and sound banking practices.
Basel Committee on • The Basel Committee is a committee of bank

Banking Supervision supervisors consisting of members from each of the
G10 countries. The Committee is a forum for
discussion on the handling of specific supervisory
problems. It coordinates the sharing of supervisory
responsibilities among national authorities in respect
of bank’s foreign establishments with the aim of
ensuring effective supervision of banks’ activities
worldwide.
Basic Indicator • An operational risk measurement technique permitted
Approach under Basel-II. The approach sets a charge for
operational risk as a fixed percentage (“alpha factor”)
of a single indicator. The indicator serves as a proxy
for the bank’s risk exposure.
Basis Risk • The risk that the interest rate of different assets,
liabilities and off-balance sheet items may change in
different magnitude is termed as basis risk.
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Capital • Capital refers to the funds ( e.g., money, loans,
equity, etc.) which are available to carry on a
business, make an investment, and generate future
revenue. Capital also refers to physical assets which
can be used to generate future returns.
Capital adequacy • A measure of the adequacy of an entity’s capital
resources in relation to its current liabilities and also
in relation to the risks associated with its assets.
An appropriate level of capital adequacy ensures that
the entity has sufficient capital to support its
activities and that its net worth is sufficient to absorb
adverse changes in the value of its assets without
becoming insolvent. For example, under BIS (Bank
for International Settlements) rules, banks are
required to maintain a certain level of capital against
their risk-adjusted assets.
Capital reserves • That portion of a company’s profits not paid out as
dividends to shareholders. They are also known as
undistributable reserves.
Convertible Bond • A bond giving the investor the option to convert the
bond into equity at a fixed conversion price or as per
a pre-determined pricing formula.
Core Capital • Tier I capital is generally referred to as Core Capital.
Credit risk • Risk that a party to a contractual agreement or
transaction will be unable to meet their obligation or
will default on commitments. Credit risk can be
associated with almost any transaction or instrument
such as swaps, repos, CDs, foreign exchange
transactions, etc.
Specific types of credit risk include sovereign risk,
country risk, legal or force majeure risk, marginal
risk and settlement risk..
Debentures • Bonds issued by a company bearing a fixed rate of
interest usually payable half yearly on specific dates
and principal amount repayable on a particular date
on redemption of the debentures.
Derivative • A derivative instrument derives much of its value
from an underlying product. Examples of derivatives
include futures, options, forwards and swaps. For
example, a forward contract can be derived from the
spot currency market and the spot markets for
borrowing and lending. In the past, derivative
instruments tended to be restricted only to those
products which could be derived from spot markets.
However, today the term seems to be used for any
product that can be derived from any other.
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Forward Contract • A forward contract is an agreement between two
parties to buy or sell an agreed amount of a
commodity or financial instrument at an agreed price,
for delivery on an agreed future date. In contrast to a
futures contract, a forward contract is not transferable
or exchange tradable, its terms are not standardized
and no margin is exchanged. The buyer of the
forward contract is said to be long the contract and
the seller is said to be short the contract.
Hedging • Taking action to eliminate or reduce exposure to risk.
Held for Trading • Securities where the intention is to trade by taking
advantage of short-term price / interest rate
movements.
Hybrid debt capital • In this category, fall a number of capital instruments,
instruments which combine certain characteristics of equity and
certain characteristics of debt. Each has a particular
feature, which can be considered to affect its quality
as capital. Where these instruments have close
similarities to equity, in particular when they are able
to support losses on an ongoing basis without
triggering liquidation, they may be included in Tier II
capital
Interest rate risk • Risk that the financial value of assets or liabilities
(or inflows/outflows) will be altered because of
fluctuations in interest rates. For example, the risk
that future investment may have to be made at lower
rates and future borrowings at higher rates.
Long Position • A long position refer to a position where gains rise
from a rise in the value of the underlying
Market risk • Risk of loss arising from movements in market prices
or rates away from the rates or prices set out in a
transaction or agreement.
Net Interest Margin • Net interest margin is the net interest income divided
by average interest earning assets.
Net NPA • Net NPA = Gross NPA- )balance in interest Suspense
account + DICGC/ECGC claims received and held
pending adjustment + Part payment received and kept
in suspense account + Total provisions held)’
Nostro accounts • Foreign currency settlement accounts that a bank
maintains with its overseas correspondent banks.
These accounts are assets of the domestic bank.
Off-Balance Sheet • Off-Balance sheet exposures refer to the business

exposures activities of a bank that generally do not involve
booking assets (loans) and taking deposits. Off-
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balance sheet activities normally generate fees, but
produce liabilities or assets that are deferred or
contingent and thus, do not appear on the institution’s
balance sheet until or unless they become actual
asset5s or liabilities.
Open position • It is net difference between the amounts payable and
amounts receivable in a particular instrument or
commodity. It results from the existence of a net long
or net short position in the particular instrument or
commodity.
Option • An option is a contract which grants the buyer the
right, but not the obligation, to buy (call option) or
sell (put option) an asset, commodity, currency or
financial instrument at an agreed rate (exercise price)
on or before an agree date (expiry or settlement date).
The buyer pays the seller an amount called the
premium in exchange for this right. This premium is
the price of the option.
Risk • The possibility of an outcome not occurring as
expected. It can be measured and is not the same as
uncertainty, which is not measurable. In financial
loss. It can be classified as credit risk, market risk
and operational risk.
Risk Weights • Basel II sets out a risk-weighting schedule for
measuring the credit risk of obligors. The risk
weights are linked to ratings given to sovereigns,
financial institutions and corporations by external
credit rating agencies.
Securitisation • The process whereby similar debt instruments/ assets
are pooled together and repackaged into marketable
into marketable securities which can be sold to
investor. The process of loan securitization is used by
banks to move their assets off the balance sheet in
order to improve their capital asset ratios.
Short position • A short position refers to a position where gains arise
from a decline in the value of the underlying. It also
refers to the sale of a security in which the seller does
not have a long position.
Specific risk • Within the framework of the BIS proposals on
market risk, specific risk refers to the risk associated
with a specific security, issuer or company, as
apposed to the risk associated with a market or
market sector (general risk).
Subordinated debt • Refers to the status of the debt. In the event of the
bankruptcy or liquidation of the debtor, subordinated
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debt only has a secondary claim on repayments, after
other debt has been repaid.
Tier one (or Tier I) • A term used to refer to one the components of
capital regulatory capital. It consists mainly of share capital
and disclosed reserves (minus goodwill, if any), Tier
I items are deemed to be of the highest quality
because they are fully available to cover losses. The
other categories of capital defined in Basel II are Tier
II (or supplementary) capital and Tier II (or
additional supplementary) capital.
Tier two (or Tier II • Refers to one of components of regulatory capital.

Capital Also known as supplementary capital, it consists of
certain reserves and certain types of subordinated
debt. Tier II items qualify as regulatory capital to the
extent that they can be used to absorb losses arising
from a bank’s activities. Tier II capital loss
absorption capacity is lower than that of Tier I
capital.
Value at risk (VAR) • It is a method for calculating and controlling
exposure to market risk. VAR is a single number
(currency amount) which estimates the maximum
expected loss of a portfolio over a given time horizon
(the holding period) and at a given confidence level.
Venture capital Fund • A fund with the purpose of investing in start-up
businesses that is perceived to have excellent growth
prospects but does not have access to capital markets.
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KYC
As per guidelines on 'Know your Customer (KYC) banks are required to carry out due
diligence of customers before opening any deposit account. This is a measure taken to
combat money laundering and financing of terrorism in the country. Banks are required to
follow customer identification procedure for opening of accounts and monitoring
transactions of suspicious nature for the purpose of reporting to appropriate authority.
KYC procedure enables banks to know/understand their customers and their financial
dealings better which in turn help them manage their risk prudently
Banks have been directed to limit the application of KYC procedure to existing accounts
where:-
o Credit or debit summations for the financial year ended March 31,2003 is
more than Rs.10 lacs
o Unusual transactions are suspected
o All existing accounts of trusts, companies, firms, religious, charitable
organizations and other institutions
Where accounts are opened through mandate or Power of Attorney.
Banks are required to issue TCs/DDs/MTs/TTs for Rs50000.00 and above only by
debit to the customer’s account or against cheques and not against cash. Further the
applicants are required to furnish PAN on application for Rs.50000.00 and above.
Banks are required to frame their KYC policies incorporating the following four key
elements:-
Customer Acceptance Policy

Customer Identification Procedure
Monitoring of Transactions
Risk Management.
Customer Identification Procedure

Features to be verified and documents that may be obtained from customers
Features Documents
Accounts of individuals
- Legal name and any other (i) Passport (ii) PAN card (iii) Voter’s
names used Identity Card (iv) Driving license
(v) Identity card (subject to the bank’s
satisfaction) (vi) Letter from a recognized
public authority or public servant verifying
the identity and residence of the customer
to the satisfaction of bank
(i) Telephone bill (ii) Bank account
- Correct permanent address statement (iii) Letter from any recognized
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public authority
(iv) Electricity bill (v) Ration card
(vi) Letter from employer (subject to
satisfaction of the bank)
( any one document which provides
customer information to the satisfaction of
the bank will suffice )
Accounts of companies
- Name of the company (i) Certificate of incorporation and
- Principal place of business Memorandum & Articles of Association
- Mailing address of the (ii) Resolution of the Board of Directors to
company open an account and identification of those
- Telephone/Fax Number who have authority to operate the account
(iii) Power of Attorney granted to its
managers, officers or employees to transact
business on its behalf (iv) Copy of PAN
allotment letter (v) Copy of the telephone
bill
Accounts of partnership firms
- Legal name (i) Registration certificate, if registered
- Address (ii) Partnership deed (iii) Power of
- Names of all partners and Attorney granted to a partner or an
their addresses employee of the firm to transact business
- Telephone numbers of the on its behalf (iv) Any officially valid
firm and partners document identifying the partners and the
persons holding the Power of Attorney and
their addresses (v) Telephone bill in the
name of firm/partners
Accounts of trusts & foundations

- Names of trustees, settlers, (i) Certificate of registration, if registered
beneficiaries and signatories (ii) Power of Attorney granted to transact
business on its behalf (iii) Any officially
- Names and addresses of the valid document to identify the trustees,
founder, the settlors, beneficiaries and those holding
managers/directors and the Power of Attorney, founders/managers/
beneficiaries directors and their addresses
- Telephone/fax numbers (iv) Resolution of the managing body of the
foundation/association
(v) Telephone bill
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CORPORATE GOVERNANCE
A corporation is a congregation of various stakeholders, namely, customers, employees,

vendor partners, government and society. A corporation should be fair and transparent to
its stakeholders and society. This has become imperative in today’s globalized business
world where corporations need to access global pools of capital, need to attract and retain
the best human capital from the various parts of the world, need to partner with vendors
on mega collaborations and need to live in harmony with the community. Unless a
corporation embraces and demonstrates ethical conduct, it will not be able to succeed.
‘Corporate Governance’ encompasses commitment to values and to ethical business

conduct to maximize shareholder values on a sustainable basis, while ensuring fairness to
all stakeholders including customers, employees, and investors, vendors, Government and
society at large. Corporate Governance is the system by which companies are directed
and managed. It influences how the objectives of the company are set and achieved, how
risk is monitored and assessed and how performance is optimized. Sound Corporate
Governance is, therefore, critical to enhance and retain investors’ trust.
It is a code of corporate conduct which ensures that corporate body is managed in the best
interest of all stakeholders
It is concerned with Right action in business
 Fairness
 Responsibility
 Accountability
 Transparency - disclosure (Full of RAT- please remember )
In the financial system corporate governance assumes importance in order to determine

the health of the system and its ability to survive economic shocks
Under corporate governance banks articulate corporate values, code of conduct and
standards of appropriate behavior, etc and have systems and controls to ensure
compliance with them. The board and top management meet at specified intervals for
timely exchange of information on the bank's financial condition and management
practices
Corporate Governance(CG) is about ensuring that business performs well through the
adoption of fair and ethical principle and that investors receive a reasonable returns
CG is not just profit making but behaving responsibly, promoting healthy competition
and preventing Net Worth erosion. Its main aim is to establish balance between economic
and social goals and between individual and commercial goals
Good Corporate Governance
Well defined vision/mission statement- Vision means objective

Mission means required performance to attain goals
Shareholder values
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Relevant committees of board with their role clearly defined
Standard for good banking practice – Transparency and fair relation with customer,
Comprehensive Risk Management, compliance with relevant statues and laws
Effective system of internal control monitoring
We should not strive for CG but CG should be part of our stride.
Basel Committee on CG
• Responsibility and accountability should be clearly defined

• Competent and independent directors on Board
• Board should be capable of exercising independent judgment – free from fear and
favor
• Appropriate supervision by Senior Management
• Role of Internal and External auditors vital
• The incentive/remuneration should be within the scope of general business policy
• The shareholders/stakeholders should receive sufficient information to judge the
performance of Bank
• Other agencies like Government regulatory authorities and auditors to promote
CG
• Role of supervisor is very important in CG
• A safer and sound banking system through better risk management is the
principal objective of New Basel Capital Accord
• CG provides the structure through which the objectives of company are set and
means of attaining these objectives and monitoring performance are determined
• Internal checks and balances are the key to effective CG
Micro Credit
• Micro Credit has been defined as the provision of thrift, credit and other financial
services and products of very small amount to the poor in rural, semi urban and
urban areas for enabling them to raise their living standards.
• Banks may formulate their own model/s for extending micro credit. They may
choose suitable branches/areas where micro credit programmes can be
implemented.
• Banks to deal with micro credit organizations having proper credentials, track
record, system of monitoring accounts and records with regular audit in place and
manpower for close supervision and follow up.
• Banks may prescribe their own lending norms in view of ground realities. They
may stipulate their own terms and conditions. The intention is to provide
maximum flexibility in regard to micro lending keeping in view relevant local
conditions and the need for provision of finance to the poor. Such credit not only
cover consumption and production loans but will also cover other needs such as
housing and shelter improvement.
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• Micro credit should also form an integral part of the bank’s composite credit plan
and should be reviewed at the highest level on quarterly basis.
• A simple system requiring minimum procedure and documentation is pre
condition for augumenting flow micro credit. Banks should strive to remove all
operational irritants.
• The loan applications, forms, procedure and documents should be made simple
which would help in providing prompt and hassle free micro credit
SHG(Self Help Group)
• Self Help Groups are the small groups of people of low economic and social
status, helping each other to solve their problems, promote small savings among
members and provide loans to members from the common pooled fund.
• Group should be in existence for at least six months.The group should have
actively promoted the savings habit. The group should be formal(registered) or
informal (unregistered). If size of Group exceeds 20, it should be registered.
Membership of the group could be between 10 to 25
• The Group should have regular meetings weekly/fortnightly/monthly.
• Savings of the group can be lent to members after 2-3 months of the formation of
the group. Terms and condition of the loan will be decided by the members.
• SHG can be sanctioned loan by Bank upto 10 times of the corpus fund of SHG
with a maximum of Rs.3 lacs
• The advance given by Banks to the groups are treated as advance to ‘weaker
sections’ under the priority sector.
• Steps involved for formation SHG are – Forming – Stroming – Norming –

Performing.
CDR
Objective
Corporate Debt Restructuring (CDR) mechanism is aimed as an early-remedy for
potential sick accounts to prevent slippage of asset quality. The framework enables
corporate, who are affected by certain internal or external factors, to minimize the losses
to the creditors and other stakeholders through an orderly and coordinated restructuring
programme
The objective of CDR is to ensure timely and transparent mechanism for restructuring the
corporate debts of viable entities facing problems, outside purview of BIFR/DRT/other
legal proceedings, for the benefit of all concerned.
Three tier structure:-

CDR is a non-statutory mechanism consisting three tier viz:-
• CDR Standing forum and its core group
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• CDR Empowered Group
• CDR Cell
CDR Core Group is carved out of the CDR Standing Forum to assist the Standing Forum
in convening the meetings and taking decisions relating to policy, on behalf of Standing
Forum.
CDR Standing Forum and the CDR Empowered Group are assisted by a CDR Cell in all
their functions. The CDR Cell makes the initial scrutiny of the proposals received from
borrowers/lenders, by calling for proposed rehabilitation plan and other information and
puts up the matter before the CDR Empowered Group, etc. within the ambit of guidelines.
Eligibility:-
• Multiple banking/syndication/consortium
• O/s exposure Rs. 10 crore and above with Banks/FIs
• Should not be willful defaulter
• No fraud
• Standard and Sub-Standard Accounts – If the accounts is classified as ‘Standard or
Sub-Standard by 90% of the lenders in their books, the same could be treated as
Standard or Sub-Standard to become eligible for CDR
• Doubtful Accounts – Consent by minimum of 75% of the creditors (by value) and
60% creditors (by number) for such restructuring is required.
• Suit filed cases – Consent by minimum of 75% of the creditors (by value) and
60% creditors (by number) for such restructuring is required.
• BIFR cases can also be considered on case – to – case basis after obtaining
approval of BFIR before implementation of CDR package
Reference to CDR could bed triggered by (i) any or more or the secured creditors who
have minimum 20% share in either working capital or term finance or (ii) by the
concerned corporate, if supported by a bank or financial institution having stake as in (i)
above.
Legal Basis of CDR
 CDR is a not statutory mechanism. it is a voluntary system based on Debtor

Creditor Agreement (DCA) and Inter Creditor Agreement (ICA)
 DCA & ICA shall provide legal basis to CDR mechanism
 The debtors shall have to accede to DCA, either at the time of original loan
documentation or at the time of reference to CDR Cell.
 ICA would be legally binding agreement amongst the Creditors whereby creditors
would commit themselves to abide by the various elements of CDR system
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 If 75% of creditors by value and 60% by number agree to a restructuring package
of an existing debt the same would be binding on remaining creditors.
Revised Guidelines on Corporate Debt Restructuring

Based on the recommendations made by the Special Group constituted in September 2004
to review the corporate debt restructuring (CDR) scheme and also the feedback received
on the revised draft guidelines circulated amongst banks for comments, the scheme has
been modified as below:
(a) The coverage of the scheme has been extended to include entities with outstanding
exposure of Rs.10 crore or more.
(b) With a view to making, decision making more equitable, the support of 60 per cent of
creditors by number in addition to the support of 75 per cent of creditors by value, is
required.
(c) The core group to be given the discretion in dealing with willful defaulters in cases,
other than those involving frauds or diversion of funds with malafide intentions.
(d) Restoration of asset classification prevailing on the date of reference to the CDR Cell
to be linked to implementation of the CDR package within four months from the date of
approval of the package.
(e) Regulatory concession in asset classification and provisioning to be restricted to the
first restructuring where the package also has to meet norms relating to turn-around
period and minimum sacrifice and funds infusion by promoters.
(f) Convergence in the methodology for computation of economic sacrifice among banks
and financial institutions (FIs).
(g) Reserve Bank’s role limited to providing broad guidelines for CDR mechanism.
(h) Disclosures in the balance sheet to be enhanced for providing greater transparency.
(i) Additional finance requirement by both term lenders and working capital lenders, to be
shared on pro-rata basis.
(j) One time settlement to be allowed as a part of the CDR mechanism to make the exit
option more flexible.
(k) Non-SLR instruments acquired while funding interest or in lieu of outstanding
principal to be subjected to regulatory treatment and valuation.
Stand Still Clause
 Under this clause both Debtors and Creditor shall agree to a legally binding ‘stand
still’ whereby both the parties commit themselves not to taking recourse to any other
legal action during the stand still period. However, stand still clause will not cover
criminal action. During the ‘stand still’ clause outstanding Forward Contracts,
derivative products, etc can be crystallized provided borrower is agreeable.
 The borrower will also agree that during the ‘Stand still’ period the documents
will stand extended for the purpose of limitation.
 The Debtor will not approach any other authority for relief
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 Director of borrowing company will not resign from Board of Directors.
 During pendency usual assets classification norms would continue to apply. The
process of reclassification of asset should not stop merely because the case is
referred to CDR Cell. If restructuring under CDR system takes place, the asset
classification status should be restored to the position which existed when reference to
cell was made.
Consumer Protection Act 1986
Amended in 2002 as under:-
Jurisdiction of District Consumer Forum to entertain complaints where value of goods

and services claimed is upto Rs.20 lacs
Limit of State Consumer Dispute Commission’s pecuniary limit upto Rs.100 lacs
National Consumer Dispute Commission- if value is over Rs.100 lacs
Prescribed fee will be payable on every complaint. Earlier there was no fee
Complaints should preferably be decided within 3 months by District Forum

District/State/National Forum can pass interim order/exparte orders
Appeal against District Forum can be entertained only if 50% amount awarded or
Rs.25000.00 which ever is less is deposited.
In caase of Appeal against State Commission minimum amount to be deposited is -

Rs.35000.00
In case of Appeal against National Commission minimum amount to be deposited is –
Rs.50000.00
Legal heirs can continue as complainant in the event of death of the complainant
Legal heirs cannot file complaint
‘Complaint’ also includes complaint of unfair trade practice or restrictive trade practice
against service provider and charging price for the goods in excess of price
fixed/displayed on the goods/produces
Failure to disclose final results of some schemes of gifts and prizes to allure consumers
will now amount to unfair trade practice.
U/s 2(1)(d)(ii) a person availing services for commercial purposes will not be consumer.
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The Banking Ombudsman Scheme, 2006
The Banking Ombudsman Scheme, 2006 enables resolution of complaints of bank

customers relating to certain services rendered by banks.
The Scheme has come into force from January1, 2006.
The Banking Ombudsman is person appointed by the Reserve Bank of India to redress
customer complaints against certain deficiency in banking services.
The Banking Ombudsman is a quasi-judicial authority. It has power to summon both the
parties – bank and its customer, to facilitate resolution of complaint through mediation.
As on date, 15 Banking Ombudsmen have been appointed with their offices located
mostly in the state capitals. The addresses of the Banking Ombudsmen offices have been
provided in the RBI website.
All scheduled commercial banks, regional rural banks and scheduled primary co-
operative banks are covered under the scheme.
The extent and scope of the new scheme is wider than the scheme of 2002. The new
scheme also provides for online submission of complaints. The new scheme provides for
the institution of an ‘appellate authority’ for providing scope for appeal against an award
passed by the Ombudsman both by the bank as well as the complainant.
The Banking Ombudsman can receive and consider any complaint relating to the
following deficiency in banking services :
• Non-payment or inordinate delay in the payment or collection of cheques, drafts,

bills, etc; non-acceptance, without sufficient cause, of small denomination notes
tendered for any purpose, and for charging of commission for this service;
• Non –acceptance , without sufficient cause, of coins tendered and for charging of
commission for this service;
• Non-payment or delay in payment of inward remittances; failure to issue or delay

in issue of drafts, pay orders or bankers’ cheques; non-adherence to prescribed
working hours; failure to honour guarantee or letter of credit commitments;
• Failure to provide or delay in providing a banking facility (other than loans and
advances) promised in writing by a bank or its direct selling agents;
• Delays, non-credit of proceeds to parties’ accounts, non payment of deposit or

non-observance of the Reserve Bank directives, if any, applicable to rate of
interest on deposits in any savings, current or other account maintained with a
bank;
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• Delay in receipt of export proceeds, handling of export bills, collection of bills etc.
for exporters provided the said complaints pertain to the bank’s operations in
India;
• Refusal to open deposit accounts without any valid reason for refusal;
• Levying of charges without adequate prior notice to the customer;
• Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank

on ATM / debit card operations or credit card operations;
• Non-disbursement or delay in disbursement of pension to the extent the grievance

can be attributed to the action on the part of the bank concerned;
• Refusal of accept or delay in accepting payment towards, taxes, as required by

Reserve Bank / Government; Forced closure of deposit accounts without due
notice or without sufficient reason; Refusal to close or delay in closing the
accounts;
• Non-adherence to the fair practice code as adopted by the bank; and any other
matter relating to the violation of the directives issued by the RBI in relation to
banking or other services.
Conditions:-
 Bank has rejected the complaint. No reply within 2 months.

 A period of 1 year has not elapsed after bank had rejected the representation.
 It is not subject matter already settled by Ombudsman.
 It is not pending with any court.
 If complaint is not settled by agreement within a period of one month from the date of
receipt of the complaint, Banking Ombudsman may pass Award after affording the
parties reasonable opportunity to present their case
May award compensation not exceeding 10 lacs.
Bank may file review application before Reviewing Authority within one month from the
date of receiving of award.
BANKING CODE & STANDARD BOARD OF INDIA(BCSBI)
It is an independent and autonomous watch dog to monitor and to ensure that the Banking
Codes and Standards adopted by the Banks are adhered to in true spirit while delivering
their services. Our Bank is member of BCSBI. Its objectives are :-
• To develop voluntary comprehensive codes and standards for banks
• To function as an independent and autonomous watch dog and ensure that banking
codes adopted by banks are adhered to.
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• The code applies to Savings deposits and current accounts, card products and
services, loans and overdrafts and payment services including foreign exchange.
• BCSBI provisions ensure that common man and consumer of financial services
from banking industry is in no way at a disadvantages position and really gets
what he has been promised
• The code sets minimum standards of banking practices for banks to follow when
they deal with individual customers
• The code contains details of the information a bank would give before a person
becomes its customer and also details of information aperson would get after he
becomes a customer.
• It also sets standards as to what should be published in the web site of banks as a
disclosure and what should be the information to be shared
• To review reports received from member banks from time to time and issues
with concerned banks for rectifications.
Negotiable instrument Act- Recent Amendments

5 new sections (Section 142 to 147) have been added in 2002
Section 138 applies to cheque and other instruments like DD/PO/BC which can be treated
as cheque by holder in due course.
Definition of cheque widened to include electronic image of a truncated cheque and

cheque in electronic form.
Right of Banker who received payment on electronic image of a truncated cheque to

retain the truncated cheques.
Certification of text of print out of electronic image of truncated cheque by paying banker
as a proof of payment
Doubling the imprisonment term from one year to two years
Doubling penalty for the offence up to twice the amount of instrument
Doubling the period of time to issue demand notice from 15 to 30 days.
Cognizance can now be taken even if the complaint is made after expiry of the stipulated
period of one month provided the complainant satisfies the court that he had the sufficient
cause for not making the complaint within such period.
Immunity from prosecution for nominee directors who are nominated by virtue of holding
any office or employment in Central Government or State Government
Compounding of offence under N I Act.
Empowering the Magistrate to condone delay in filing complaint
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Bank’s memo denoting that the cheque has been dishonored shall be presumed to be the
fact of dishonor. Requirement of Branch witness as drawee bank can be dispensed with.
The summons can be served by speed post or by authorized courier service and if not
accepted will be treated as duly served.
Offences shall be tried by Ist class Judicial Magistrate or Metropolitan Magistrate.
Trial to be concluded as expeditiously as possible and effort to be made to conclude

within 6 months.
Offences under act made compoundable.
In case of conviction in a summary trial, the magistrate has been empowered to pass a
sentence not exceeding one year imprisonment and fine not exceeding Rs.5000.00
ALM
ALM is a dynamic and comprehensive framework for measuring, maintaining and

managing market risk of a bank. It is management of structure of Balance Sheet in such a
way that earnings from interest is maximized within the overall risk preference(present
and future) of the institution. The risk managed are:-
Liquidity Risk, Treasury Risk, Funding and Capital Planning, Profit planning, Growth
projection.
It is a tool that enables Bank Management to take business decisions in a more informed
framework with an eye one the risk that bank is expected to.
It is an integrated approach to financial management, requiring simultaneous decisions,

about the type of amount of financial assets and liabilities – both mix and volume – with
the expectations of the financial market in which they operate.
ALCO
CMD heads ALCO. The member includes ED, GMs Treasury, Credit, Credit Approval,
Risk Management, Insp. and Audit, P S, Retail Banking, Project, CTO, Head of Treasury
Branch, Chief Economist and Economist (Risk Management)
ALCO is responsible for ensuring adherence to the limit set by the Board as well as for
deciding the business strategy of the Ban
The role of ALCO is :-
 Product pricing for deposits and advances

 Deciding on desired maturity profile
 Deciding mix of incremental Assets and Liabilities
 Articulating interest rate view of Bank and deciding on further business strategy
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 Reviewing and articulating funding policy
 Deciding on the transfer pricing policy of the Bank
ALM TOOLS
Liquidity Gap Report
It is prepared on the residual maturity of all Assets and Liabilities. If inflow is less than
outflow, then there will be liquidity problem. Such mismatch should be within tolerance
limit. Liquidity Risk is managed by matching assets and liabilities by their residual
maturity.
Two types of gap reports are:-
(a) Structured Liquidity Gap Report
Are gaps based on existing assets and liabilities and gaps in the time bucket are arrived
based on maturity of the assets and liabilities.
(b) Dynamic Liquidity Gap
Banking business is dynamic (on going) and liabilities and assets positions keep on
changing. When new assets and liabilities derived from commercial projection cumulate
with existing assets and liabilities, the gap profile changes completely. This new gap
statement is dynamic liquidity gap statement.
(c) Rate sensitivity gap report
It is prepared based on repricing i.e. when the interest rate on Assets and liabilities get
reset (revision in fixiation of interest) A positive gap means more assets gets repriced
than liabilities and is good under increasing rate scenario. The reverse is desirable under
declining rate scenario
The interest rate risk is managed by :-

Changing rate by different basis points
Changing rate at different reference rate
Changing composition of Assets and Liabilities
(d) Duration gap analysis

It is weighted average maturity of fixed income security. Maturity weighted with net
present value at market rate of discount. Different Assets and liabilities are having
varying duration and, therefore, this can give better estimate of risk.
Modified duration is tool used to assess the changes in interest on income
Simulation model are used to guage the effect of market interest rate variations on
reported earnings/economic value over different time zones. It is series of ‘what if’
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analysis of the impact of rate changes, taking into account different Balance Sheet
structures.
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PRESENT BANKING SCENARIO
Indian Banking – towards Global Best Practices
Indian Financial Sector has witnessed unprecedented growth in the last decade and we
believe the next 10 years will be as exciting. The industry has seen numerous innovations
and several Indian Banks have successfully leveraged technology at globally efficient
levels. However, the market is going to see increasing competition from global financial
players and non-banking attackers. The market will see increasing segmentation and
rising focus on customer service.
Delivering superior customer experience

The low level of customer loyalty in India across banking products like credit cards and
housing loans is becoming a big cause of concern for leading players. Further,
intensifying levels of competition is resulting in significant customer churn and rising
costs which continue to rapidly erode overall profitability. To effectively address these
challenges, it becomes critical to first understand basic customer behavior, needs and
preferences. How do players in the Indian banking sector compare globally on customer
experience? What can the banking industry do better to give customers a superior
experience.
Driving operational and IT effectiveness.

In to-day’s challenging economic environment with burgeoning cost pressures, players
are increasingly recognizing the importance of achieving operational excellence and cost
efficiency. Undoubtedly, in order to accomplish this effectively, it is critical to build
strong capabilities in IT and operations processes. How effectively and efficiently are we
utilizing our IT resources? What major IT management levers should banks focus on?
How should banks prioritize their portfolio of IT initiatives?
Building a high performing organization

CEOs and their top management teams are increasingly finding that many of the big
strategic and operational questions on their plate involve leadership, talent and the
broader organization. In today’s unprecedented talent crunch, the financial services
industry is grappling with developing the leadership and talent. What should players do to
ensure that it has the organizational alignment against key priorities? How do
organizations build execution capability? How can organization create capacity that is
critical to sustained success?
Managing capital and risk

Capital efficiency is a core imperative for the banking sector and will increasingly come
into focus given numerous growth opportunities which will drive need for capital. Most
banks are in need of capital for growth. Banks which are unable to raise capital due to
either performance issues or regulatory issues, will not be able to participate in the growth
opportunities. Further with volatile markets and high employee turnover, it gets critical to
effectively contain credit risk, market risk and operational risks. In addition, cost of
compliance oversight in today’s environment are very high. Banks need to tap the high
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growth opportunities while ensuring capital efficiency, ensuring compliance and
managing risk. Basel II will help the high performing banks on this front to manage
capital better, while the weaker banks will face increased pressure. Is Indian banking
sector is ready for this? What steps do individual banks need to take on capital
management, compliance and risk?
Prevention of Money Laundering Act 2002
Money laundering defined as cleansing of dirty money obtained from legitimate or

illegitimate activities with the objective of hiding its source and rendering it in legally
usable form. The process of money laundering is also an illegal activity involving
financial jugglery and the Prevention of Money Laundering Act 2002 seeks to combat
money laundering in India
The objectives of the act are:-
To prevent, combat and control money laundering

To confiscate and seize the property obtained from the laundered money
To deal with any other issue concerned with money laundering in India
Prevent
Combat
Control
Confiscate
Connected
Legal aspects of Bank Frauds headed by Dr N L Mitra
Banks to prepare Best Practice Code for its officers and staff to provide rule based
procedure system in customer related matters and application of discretionary
power.
 Adequate in house training system for internalizing the Best Practice Code and all the
directives of the instructions and the regulations.
 Issue suitable instructions to all branches/controlling officer reiterating the need for
strict adherence to the laid down system and procedures.
 Legal compliance Certification process to be enforced for all transactions exceeding a
value limit for each desk especially from each management category staff for making
them accountable.
 Legal compliance and due diligence audit every year
 In case exercise of discretionary power an explanation is required to be given
indicating the circumstances warranting the exercise of discretionary power and
whether all due diligence has been taken or not.
 Build data of management and staff exercising discretionary power recording all the
reasons for such exercise and consequences. A close monitoring of such exercise
discretionary power is required.
 Incentive and promotion system to have co-relation with data on exercise of
discretionary power and the rationality and appropriateness of such decisions.
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 Concurrent/Internal/Statutory Auditors to report simultaneously to Chairman and
Managing Director of the Bank and RBI about any thing susceptible to be fraud or
fraudulent activity or any foul play in any of the transactions.
 In fraud cases department action to be initiated simultaneously with criminal action
without waiting for outcome of the latter.
‘Fair Practice Code on Lenders Liability’

On the basis of the recommendations of Working group on Lender Liability Laws
constituted by Govt. of India to study legislative proposals suitable for Indian conditions,
the guidelines have been prepared in consultation with select banks and FIs for framing
‘Fair Practice Code’ with the approval of Bank Boards.
The fair practices code applies to the following :-

• Application for loans and their processing.
• Loan appraisal and terms/conditions.
• Disbursement of loans including changes in terms and conditions
• Post disbursement supervision.
• Other general provisions.
The guidelines, interalia, provide the following:-
 Loan application form should be comprehensive to include information about rate

of interest and manner of charging process fees, other charges, penal interest rates,
prepayment option and any other matter which affects the interest of the borrower so
that a meaningful comparison with that of other Banks can be made informed and
decision can be taken by the borrower
 Devise a system of giving acknowledgement for receipt of loan application.
 If all requirements are complied with by the borrowers, Bank should give
acknowledgement of the application and state specific time period from the date of
acknowledgement within which a decision on the loan request will be conveyed to the
borrower.
 Acknowledgement should sate the amount of the process fee paid or to be paid
and extent to which such fee ;shall be refunded in the event of rejection of any
application for loan.
 Lender should ensure that there is a proper assessment of the credit requirement of
the borrower. The credit limit which may be sanctioned should be mutually settled.
 Terms and conditions and other caveats should be reduced in writing duly
witnessed and certified by the authorized sanctioning authority.
 Lender should ensure timely disbursement of loan sanctioned.
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Secured / Unsecured Advances
As per RBI guidelines ‘Unsecured Advances’ are defined as an exposure where the
realisable value of the security, as assessed by the Bank / Approved Valuers / RBI’s
Inspecting officers, is not more than 10 percent, ab-initio, of the outstanding funded &
non funded exposures (including underwriting and similar commitments) ‘Security’ will
mean tangible security properly charged to the bank and will not include intangible
securities like guarantees, comfort letters etc. RBI has since withdrawn ceiling on
maximum exposure by way of unsecured guarantees and advances. However, as a
prudent policy bank has decided to restrict as under: -
“ The domestic outstanding unsecured guarantee plus the total of domestic outstanding
unsecured advances in terms of definition of unsecured exposure of RBI as stated above
should not exceed 30 percent total domestic outstanding advances. “
Activity Clearance List
Diamond industry exposure

 Leasing/hire purchase/non banking financial companies exposure
 Real estate exposure
 Capital market exposure
 Financing of film making
 Bridge loans to corporates.
Major products under Farm Sector
Baroda Kisan Credit Card

 Financing farmers for purchase of agricultural land
 Financing for setting up of agri clinics and agri business centers by
agricultural graduates.
 Capital investment subsidy scheme for constructions/expansion/modernization
of cold storages and onion godowns
 Form water management scheme for increasing crop production in eastern
states
 Financing farmers in agri export zones under contract farming
 Advances against pledge of gold ornaments/jewellery
 Providing production credit to tenant farmers and share croppers
 Financing to high-tech agri products; under co-financing arrangement with
NABARD
 Akshay Mzahila Arthik Sahay Yojana
7-S Mecensy model to make management's search for excellence in the bank
 Structure- responsibilities are assigned at each level
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 Systems- checks and counter checks on different serv ice delivery
mechanisms. Administering accountability in the organization.
 Style- should create an amiable climate in the branch where staff feels
encouraged and invited to share their perceptions on vigilance
 Staff- posting right people at right places having regard to their antecedents
and their personal profile
 Skills- should arrange for imparting right kind of training
 Strategy- strategic plan with due deliberations with staff
 Shared value- cultivate appreciation towards proactive vigilance and make it a

shared value/belief of the Branch
BKCC
Objectives
 Providing adequate and timely credit.

 Comprehensive credit requirement.
 Single window.
 Flexible and simplified procedure.
 Short term credit needs.
 Consumption needs of farmers.
 Meeting expenses for farm maintenance/non farm activity/long term investment credit
needs.
Eligibility.
 Agriculturist with good track record of repayment who are eligible for sanction of
credit limit of Rs.1000 and above.
 Period of dealing with Branch immaterial. Fresh applicants with good reputation.
 Registered share croppers and tenant farmers who are cultivating crops for a period
not less than 5 years.
 Individual tenant farmers/share croppers cultivating land on oral lease basis who are
resident of the village at least for a period of three years continuously and cultivating
land for a period not less than 3 years can be given BKCC limit upto Rs.10,000.00 in
general and in exceptional cases not exceeding Rs.25,000.00
Production Line of credit
 Extending production loans for raising various crops based on scale of finance
 Other short term requirements like maintenance of tractor/farm implements, allied
activities like dairy, poultry, annual repairs, fuel, cost of feed. etc to the extent of
15% of the crop production expenses.
 Working capital for allied activities and non farm sector activities.
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 Finance against storage receipt/produce marketing loans(against his own farm
produce only) subject to a maximum of Rs.10 lacs per farmer..
Investment Line of Credit
 Extending credit facility for horticulture crop.

 Development of land/irrigation.
 Purchase of tractor.
 Farm maintenance and equipment.
 Farm structure buildings.
 Draught animals/carts.
 Miltch cattles.
 Transport vehicles.
 Pre/post harvesting processing equipment.
 Practicing modern hi tech agriculture need-based project
 Plantation activities.
 Extending facilities for setting up units of allied activities like dairy, poultry, fisheries,
piggery, sericulture, etc to supplement farm income/activities and also to ensure
optimum utilization of available resources.
 Extending loans for off-farm activities/need of the farmers like personal loan
including purchase of consumer durables, housing subject to a maximum of Rs. 1 lacs
 Loans for redemption of loan availed by farmers from non-institutional lenders.
Consumption needs:-BKCC also includes the limit for family maintenance. Those
borrowers who are new or enjoying facility with us since last 3 years are eligible for 15%
of scale of finance. Those who are enjoying the limit more than 3/5 years are eligible for
25%/35% of scale of finance subject to maximum Rs.50000 provided our experience is
satisfactory.
Branches may consider total finance up to Rs.10 lacs under the revised scheme.
However, total line of credit beyond Rsl 10 lacs may be considered in deserving cases
with the prior approval of Regional Office.
Bank is offering 0.25%/0.50% rebate on Rate of Interest for satisfactory relationship of

more than 3/5 years
Card is valid for 5 years. In our bank we have three types of cards i.e. Green, Silver and
Gold
What is core Banking?
From business perspective Core Banking relates to the basic business of a Bank or
financial institution. That, in a nutshell, is taking deposits (liabilities) from
customers and lending (assets) to customers. While doing so, ensure that
profits are generated for the bank/financial institution.
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From technology perspective, Core Banking is the short name for a Core Banking System
that a bank has to deploy in order to perform its Core Banking Business. In short,
implementing a system that will help the bank take deposits and lend to customers in a
profitable manner.
Why it is called Core Banking?
The reason for calling it Core Banking is the fact that a Core Banking system, after
deployment, is the heart or the core of the bank/financial institution. All entities that form
part of the eco-system of the bank/financial institution interact with it. These entities
are:-
 Bank employees – head office, regional offices, branches, etc.

 Bank Management – executives/managers at respective locations, head office,
regional offices, branches, etc.
 Bank customers –personal banking, corporate banking, international banking, etc.
 Bank auditors – internal and external auditors who need to verify systems and
procedures.
 Bank regulators – mandatory reporting to central bank and other financial bodies
 Bank shareholders – providing the desired return to shareholders from banking
operations.
For a bank/financial institution, the Core Banking system must address the core business
of deposits and loans, and at the same time, address the work place needs of all the above
entities at their respective locations.
Ingredients that constitute Core Banking
General Ledger-
The absolute Core of the Core Banking system is the General Ledger system. Every
single financial activity that happens at any location within the entire bank/financial
institution has to be reflected in the GL System. Those who have implemented Core
Banking system, the concerned entities in the bank know the financial condition of the
Bank at the beginning of each business day. If one is looking at the financial statements
of the whole bank, the GL system must provide the financial statements for the region..
Each morning, all these entities, at the their respective workplaces, see these financial
statements reflecting the condition as of close of business yesterday. All bank staff, who
are authorized to view statements at their respective rollup level can see this information
from the GL system at their own workplace terminal in the branch, the Region, the Zone
and the Head Office.
Customer information System:-
Throughout the world, the customer is identified as the customer of the Bank.
Accordingly, in the Customer Information system, a customer is identified uniquely by
his/her CIS number and all information related to that customer is stored along with this
unique number. All this is stored in a centralized CIS system, allowing the customer to
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visit any branch to do business with the bank. Any authorized branch staff in any branch
in the country can view the customer’s total accounts with the bank. Bank can also know
how valuable a particular is.
Deposit system
Around the world, banks do not open a new deposit account for a customer directly in the
deposit system. When the customer wants to open a new deposit account, the branch staff
first go to the CIS screen, verify the customer details and then from CIS jump to the
deposit system and open the account. This way, the existing CIS date of the customer
remains intact and the CIS information shows that this customer has now increased his
relationship with the bank.
All financial transactions done in the deposit system are automatically sent to the bank
institution’s general ledger system and they update the appropriate debits and credits in
the subsidiary ledgers in the GL. These can be within branch, inter branch or branch to
other offices.
Loan System
Depending on predefined parameters setup in the loan system by the bank management,
all loan payments are tracked daily and potential NPAs are reported. This gives bank staff
adequate advance information to take corrective action before the missed payments
actually turn into a classified NPA
With authorized access, any staff working in any branch around the country should be
able to retrieve the customer loan information on his terminal and help the customer do a
financial transaction. These financial transactions are automatically sent to the bank’s
General Ledger and they update the appropriate credits and debits in the subsidiary
ledgers in the GL
Management Information System
This enables everybody in the bank to obtain the relevant information from the system in
order to carry out their business effectively.
MIS, in simple terms, takes information from the GL, CIS, Deposit, Loan Systems and
presents them to the bank employees in a way that helps them understand what is going
on in the bank. MIS typically provides for bank staff to see the information on the user’s
terminal or have the same information printed on paper.
What is the impact of Core Banking on Bank?
The core banking system has to satisfy the requirements of all the entities that form part
of the eco-system of the Bank. The following is the impact on each of these entities.
Bank employees:-
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Using core Banking systems with appropriate access authority, bank staff, managers,
executives can help customers do their financial transactions on their deposit or loan
accounts and also retrieve information related to customers, so as to better serve the needs
of the customers.
Bank management:-
Executives, managers and branch staff can obtain the financial position from Core
Banking System related to their respective sphere of banking operations and thus help
pinpoint potential problems so as to avoid crises
Appropriate managers in the bank can determine branch, product, customer profitability
and ensure that operational steps are taken to maximize profit in each area.
Bank Customer:-
Customers can operate any of their accounts from any branch or preferred delivery
channel and have access to his funds any time 24 hours a day.
Satisfied customers will not only increase their relationship with the bank, but also bring
in more customers.
Bank auditors:-
Core banking systems need to be audited at one central location for proper posting of
transactions, interest calculation and generation of accurate reports for all bank users who
use them. Once audited, they operate the same year on year thus enabling auditors to
focus more on systems and procedures at delivery channels like branches, call centers,
etc.
Bank regulators:-
Core Banking system produce the required reports for regulatory bodies like Central
Bank. Financial statements, assets and liability reports, NPA reports, large currency
transaction reports, etc are all produced by either the deposit, or the loan or combination
of deposit, loan and GL systems. Most of these core banking systems come with flexible
report options to enable bank staff to generate reports as per regulatory guidelines. They
also have the ability to change reporting formats when new guidelines are issued and new
set of reports are required by regulators.
Bank shareholders:-
The key to any core banking system is its ability to provide appropriate managers in the
bank about the performance of the entire bank. Most core banking systems provide the
management with financial statements that show the return on assets and return on equity
figures as frequently as desired by the financial institution.
Trends over time on such date, inform shareholders about how the bank is doing and help
take timely action to accelerate or improve performance.
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What it means to the bank?
Core banking will provide everything you need for doing business, if you know what you
want from it and have the ability to use it and increase business.
It allows you segment your business based on customer needs. It integrates all delivery
channels and allows you to view customer behavior.
It is like e-mail. There has to be e mail culture within the bank they need to be
responded immediately or else no one will use it or develop faith in it and slowly it will
loose its relevance.
It is like buying a Ferrari, many in India have all the money to buy it. But we also need a
driving license, roads, support to run it etc.
It is also like buying an aircraft. To keep it flying, you need a well oiled infrastructure to
be in place. We need a business strategy to make out of it. That is why we preceded IT
strategy with Business Strategy.
Sick Unit
Remains Sub-standard for more than six months i.e. principal or interest in respect of any
of its borrowal account remains overdue for a period exceeding one year
Or
There is erosion in NW due to accumulated cash losses to the extent of 50% of its net
worth during the previous accounting year.
And
The unit has been in commercial production of at least two years.
Under SICA(Sick Industrial Companies (Special Provisions) Act 1985)
An industrial co which is Registered under companies act for not less than 5 years and
which has accumulated losses at the end of any financial year equal to or exceeding its
NW is a sick company.
Potentially sick Indl. Co.
Whose accumulated losses as at the end of any financial year have resulted in erosion of
50% or more of its peak NW during the immediately preceding 4 financial years
Potentially viable sick Industrial Unit
If it would be in a position after implementation a relief package spread over a period not
exceeding seven years from the commencement of package to continue to service its
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repayment obligations as agreed upon without obligations as agreed upon without the
help of concessions after the aforesaid period
Right to recompense:
It is the right of the bank to recover the sacrificed amount in case the company is turned
around and in a position to repay the debts which were sacrificed by the Banks at the time
of rehabilitation. Any request for waiver by borrower should be referred to corporate
center.
Holding out operation:
Allowing withdrawal of funds from cash credit account at least to the extent of their
deposit of sale proceeds during specified period
OSMOS( Off site monitoring and surveillance system by RBI)
• To provide information about healthy of Bank on regular basis to the supervisory

authority
• To build data base for analysis and monitoring of institutions
• On site entails substantial cost.
• Off site useful cost saving and optimum allocation of supervisory resources
• Framework for early warning system (EWS)
• DSB return – source for OSMOS
Money market instruments:
Call money
CDs, CPs
Treasury Bills
Repo
Bankers’ acceptances /commercial bills
CPs
Inter corporate funds
Collateralised borrowing and lending obligations (CBLO) – It is a money market
instrument. It is a variant of LAF, permitted by RBI. It is a mechanism to borrow and
lend funds against securities for maturities 1 day to 1 year. It is tripartite repo transaction
involving CCIL and 3 party. Borrower will be able to repay back even before maturity.
CBLO is issued at discount to face value. Under CBLO securities of borrower will be
held in the constituents’ SGL account opened with CCIL and will not be transferred to
lender.
Methods for containing NPAs

• Regular follow up with borrower.
• Rephasing, Rescheduling and Restructuring the account
• Invoking SARFEASI Act 2002
• Filing immediate Suit/RC before the value of securities erodes.
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• Negotiating and entering into compromise, where other recovery measure may
prove to be futile or entail more expenditure.
• Using recovery agents
• Pursuing legal advocate
• Lok adalat for faster settlement.
NPA Provisioning
Loss Assets – 100% - Realizable value of security is less than 10% of dues and which has
been identified by Bank/external auditor/RBI as loss assets
If the realizable value of the security, as assessed by the bank/approved valuers is less
than 10% of the outstanding in the borrowal accounts, the existence of the security should
be ignored and the asset should be straightaway classified as loss asset. It may be either
written off or fully provided for
Doubtful - (i) for a period of one year - 100% unsecured portion and 20% of secured
portion(ii) above one year and upto 3 years - 100% of secured portion and
30% of unsecured portion(iii) above 3 years- 100% on entire outstanding
(like loss assets).
Sub Standard Assets – 10% of amount outstanding and unsecured exposure additional
10%. It remained NPA for a period less than or equal to 12 months.
In the event the value of security is less than 10% of aggregate funded and non funded
exposure, it will attract 10% more provision on the outstanding funded exposure.
In case of infrastructure projects financed by banks, the date of completion of the project
should be clearly spelt out at the time of financial closure of the project and if the date of
commencement of commercial production extends beyond a period of two years after
the date of completion of the project as originally envisaged, the account should be
treated as substandard
Guidelines for making provision in standard assets :-

Direct advance to agriculture and SME 0.25%
Commercial Real Estate 1%
All other loans 0.40%
These provisions towards Standard Assets need not be netted from gross advances but
shown separately as ‘contingent Provisions against Standard Assets’ under ‘other
Liabilities and Provisions – others’ in Schedule 5 of the Balance Sheet.
Guidelines for making provisions in Restructured Accounts:-

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The amount of sacrifice, if any, in the element of interest, measured in present value
terms, is either to be written off or provision is to be made to the extent of the sacrifice
involved. For the purpose, the future interest due as per the original loan agreement in
respect of an account should be discounted to the present value at a rate appropriate to the
risk category of the borrower and compared with the present value of the dues expected to
be received under the restructuring package, discounted on the same basis.
Up gradation of restructured accounts and impact on provision:-
The substandard accounts which have been subjected to restructuring, etc. whether in
respect of principal instalment or interest amount, by whatever modality, would be
eligible to be upgraded to the standard category only after the specified period i.e. a
period of one year after the date when first payment of interest or of principal, whichever
is earlier, falls due, subject to satisfactory performance during the period.
The amount of provision made earlier, net of the amount provided for the sacrifice in the
interest amount in present value terms as aforesaid, can be reversed after the one year
period.
Credit Guarantee Fund Trust Scheme for Micro and Small Enterprises(CGTMSE)
• Coverage extended to all new and existing Micro and Small Enterprises(both
manufacturing and Service Sector)
• Eligible Loan limit Rs.100 lacs
• Maximum cover not to exceed 75% of amount in default upto Rs. 50 lacs and 50%
of amount in default above Rs. 50 lacs subject to maximum Rs.62.50 lacs
• (a)In case of Loan to Micro Enterprises the cover will be 85% up to Rs.5 lacs
subject to maximum of Rs. 4.25 lacs. Above Rs. 5 lacs upto Rs.50 lacs 75% of
amount in default subject to maximum of Rs.37.50 lacs. Above Rs.50 lacs Rs,
37.50 lacs plus 50% if the amount in default subject to ceiling gof Rs,62.50 lacs
(b) In case of Loan to Women Entrepreneurs located in North East Region 80%
subject to maximum of Rs.40 lacs, . Rs. 40 lacs plus 50% of amount in default
above Rs.50 lacs subject to ceiling of Rs.65 lacs (c) All other category of
borrowers – 75% of amount in default subject to maximum of Rs.37.50 lacs in
case of limit upto Rs.50 lacs. and Rs. 37.50 lacs plus 50% of the amount in default
above Rs.50 lacs subject to ceiling of Rs.62.50 lacs.
• Guarantee Fee – upfront 1.5% of the credit facility sanctioned. For North Eastern
Region it will be 0.75%. To be paid within 30 days from the date of first
disbursement.
• Bank shares one time Annual Guarantee Fee and Annual Service Fee on 50:50
basis on all loans.
• Advances granted for industrial activities under PMRY the entire annual fee is to
be borne by bank from second year onwards
• Annual service fee 0.75% in respect of credit limits above Rs.5 lacs and 0.50% in
respect of credit limits upto Rs.5 lacs. To be paid within 60 days from the date of
closure of year
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• For loans over Rs.50 lacs and up to Rs.100 lacs entire fee should be recovered
from the borrower.
• Loan will be collateral free
• Lock in period 18 months
• In case of claim 75% will be paid within one month. Remaining 25% on
conclusion of recovery proceedings.
• Zero Risk weightage for guaranteed portion of
CRR
6.% of net demand and time liabilities to ensure liquidity and solvency to be kept with
RBI
SLR
25%
Cash in hand
Gold owned by bank
Balance with RBI/SBI
Investment in unencumbered approved government securities.
Bank Rate 6%
Repo Rate5.25%
Reverse Repo Rate 3.75%
Targets
Priority Sector:-
The targets and sub targets under priority sector lending would be linked to Adjusted Net
Bank Credit (i.e. Net Bank Credit plus investments made by banks in non-SLR bonds
held in HTM category) or credit Equivalent amount of Off-Balance Sheet
Exposure(OBE), whichever is higher as on March 31 of the previous year.. For the
purpose of calculation of credit equivalent of off-balance sheet exposures, banks may use
current exposure method. Inter-bank exposures will not be taken into account for the
purpose of priority sector lending targets/sub-tgargets.
Total Priority Sector - 40% of Adjusted net bank credit(ANBC)

Total Agriculture Advance - 18% of ANBC
(Indirect finance to Agriculture not to exceed 4.5% ANBC)
Weaker Section -10% of ANBC to weaker section
DRI – 1% of Advances outstanding in of previous year. Not less than 40% of total
advances granted under DRI scheme should go to scheduled caste/scheduled tribes. At
least two third of DRI advances should be granted through rural and semi urban branches.
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In order to ensure that credit is available to all segments of small enterprises, banks were
advised in July 2007 to ensure that (a) 40% of total advances to small enterprises sector
should go to micro(manufacturing) enterprises having investment in plant & machinery
up to Rs. 5 lacs and micro(service) having investment in equipments up to Rs.2 lacs(b)
20% of total advances to small enterprises sector should go to micro (manufacturing)
enterprises with investment in plant & machinery above Rs. 5 lacs and up to Rs. 25 lacs,
and micro(service) enterprises with investment in equipments above Rs.2 lacs but up to
Rs.10 lacs. Thus 60% of small enterprises advances should go to the micro enterprises.
Operational Risk
It is defined as the risk of direct or indirect loss resulting from inadequate or failed
internal processes, people and system or from external events.
Operational risk covers any risk which is not categorized as market or credit risk or the
risk of loss arising from the various types of human or technical error.
It is also synonymous with settlement or payments risk and business interruption,

administrative and legal risks. An operational problem with a business transaction could
trigger a credit or market risk.
Basel II- As of 2006 bank should be made to carry a capital cushion against losses from
this risk.
The objective is to reduce the expected operational losses that focuses on systematic
removal of operational risks sources and uses a set of key risk indicators to measure and
control risk on continuous basis.
The ultimate objective of operational risk management is to enhance the

Shareholder’s value by being ready for risk based capital allocation.
Six exposures – People, Process, Management, System, Business,

External.
Guidelines for identifying, measuring and controlling Operational Risk:-

Risk can be managed by identifying, measuring, monitoring and controlling the same.
Operational Risk Management is the process of identifying, assessing and controlling risk
arising from operational factors and making decisions that balance risk cost with risk
benefits.
With a view to manage Operational Risk, the Bank has initiated many steps and issued
various guidelines in this regard, from time to time, which are as under:-
• Establishing Operational Risk Management Committee(ORMC). ORMC meets

on a regular basis to review matters relating to operational risk
• Reviewing internal systems and procedures and ensuring their compliance
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• Collecting and analyzing data on operational risk on various different parameters
on a half yearly basis and corrective steps wherever necessary.
• Strengthening Corporate Governance with a view to achieved business excellence,
ensuring reasonable return to the shareholders.
• Adoption of Internal Checks and Balances.
• Increased thrust on Risk Based Internal Audit which is the very crux of Pillar II of
Basel II Accord.
• Setting up Basel II compliance Cell for identifying, measuring, monitoring,
controlling operational Risk.
Our Bank has adopted Basic Indicator Approach for measurement of Operational Risk
Management..
The Bank is collecting a statement for tracking of Operational Risk Loss Data from
Branches, which broadly covers the following:-
• Internal Frauds.
• External Frauds
• Employment practices and workplace safety
• Client product s and Business Practices.
• Damage to Physical Assets.
• Business Disruption and system failures.
• Execution, Delivery and Process management
• Short Recovery – Loss of Income.
• Time Barred and unenforceable documents including defective mortgages.
Country Risk:-
It is possibility that a country will be unable to service or repay its debts to foreign
lenders in a timely manner. The risk manifests itself either in the inability or
unwillingness of the borrower to meet its liability.
Risks are:-
 Transfer Risk – possibility of loss due to restrictions on external remittance.

 Sovereign risk- associated with lending to government of sovereign nation.
 Political risk – arising due to political environment or legislative process of a country
leading government taking over the assets of financial entity and preventing discharge
of its liabilities in a manner that had been agreed to.
 Cross border risk- on account of borrower being a resident of a country other than
country where the cross border assets is booked
 Currency risk- due to exchange rate changes that will alter the expected amount of
principal and return of the lending environment.
RFC (Domestic account)
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Account with bank in India for crediting unspent balances after travel abroad, currency,
T/Cs, DDs received as gift/services rendered to non resident while in India.
Foreign earnings received through banking channel as honorarium. Consultancy, royalty
for any services towards export of goods
Non interest bearing account
No ceiling on balances
Can be used for purposes for which Foreign Exchange can be bought from a bank in
India.
US GAAP
Financial Accounting Standard Board of USA has adopted predictive value approach.
In US GAAP, the philosophy behind annual reporting is to make :-
 ‘Risk Return’ relationship more transparent

 Provide shareholders and depositors with overall professional management expertise
 Give management an opportunity to amplify the financial statements with its own
insights into what has happened to the company and what lies ahead.
With the globalization of Indian economy, there is need to expedite the process of
framing and issuing Standards, aiming to make India corporate sector well respected,
good corporate citizen all over the world, so that they enjoy confidence of investors and
consumers.
According to RBI there is need for bank and other organization to voluntarily accept
internationally accepted accounting practice so that India could attract more capital from
abroad
Prudential write off
Advance account becomes loss assets and 100% provisioning is made or advance account
has become doubtful 3 category and is covered by 90% or more by provisions, interest
suspense, DICGC/ECGC claim received and held in suit filed sundry deposit account.
Decision on PWO is to be taken by Corporate Centre.
Value at Risk
VaR is the maximum loss over a target horizon such that there is a low prescribed
probability that the actual loss will be larger.
The maximum loss which will be suffered in a specified period and at a specified
confidence level from a fall in the price of security (or exchange rate), given historic date
on the price behavior of the security(exchange rate) on assessment of likely future market
movements.
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The concept is applied to calculate the risk content of an individual security, a foreign
exchange position, an equity share or a portfolio of these instruments.
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FORESIGHTS
Financial Strengths:-
Improving quality of Assets
NPA Management
To deliver shareholders’ value
Offerings by banks
To Customers – when field in competition.
More customers centric in order to face competition from alternatives.
We can not take customers granted.
Structural products.
Borrowing clients well informed.
Risk Management:-
Ability to understand risk and take appropriate action – key to success.
Risk takers survive.
Effective risk manager prosper.
Risk averse persons perish
To develop technology based risk management tools.
Mitigating risks.
Reputation risk.
Earnings:-
Shareholder value.
Expand avenues for earning income.
Funds are chennalised for productive purpose.
Interest bearing income need to be expanded.
Structure:-
Consolidation is inevitable process – economies of size.
We do not really figure high in the list of large banks.
In top 200 only one bank of India gets listed.
Center like Taiwan have larger than largest bank in India.
Only the best and largest will survive.
Bank mergers will be rule rather than exception.
Synergies to be leveraged through consolidation.
Institutional Building:-
A function of regulator.
RBI to keep pace with the global changes that are taking place in regulatory sphere and
ensure that they are implemented on timely basis
Issue of corporate governance.
Globalization:-
Follow global norms.
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FDI brings with it the right technology and mindset when would be required to stay
globally competitive.
Foreign capital will take care of enhanced capital adequacy requirement.
Human Resources:-
With changing time different sets of skills would be required to keep up with the
systems.
Building and monitoring customer relationship would occupy central rule.
Specialists in the area of Risk Management, Treasury, IT related services.
To upgrade skill level.
Technology:-
Efficiency driver of banking
Networking of branches will become critical for banking business.
ATM, ATM Sharing, Bills Payment, RTGS
Social Responsibility:-
Primary goal of Government – priority sector credit.
Need to go back to grassroots where the strength of the nation lies.
Reforms – attention on agriculture.
Customer driven and more cost effective.
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Customer Relationship Management (CRM)
It is neither a product nor a service, but a business strategy to learn more and more about
the customers’ behavior and requirement in order to create long term relationship with
them. It is comprehensive strategy and process of acquiring, retaining and partnering
with selective customers to create superior value for the bank and its customers.
It consists:-
CA + CR = ICV
CA – Customer acquisition through counter staff and marketing.
CR- Customer Retention- Data warehousing and analytical tools, customer service, call
service and call center.
ICV- Improved Customer Value – making automation, cross selling & up selling, Date
warehousing and analytical tools
Convert ‘near’ customer into ‘dear’ one.
RISK BASED SUPERVISION
Risk Based Supervision of Banks by RBI
Reserve Bank of India in its monetary and credit policy for the year 2000-2001
announced that it would be moving towards Risk Based Supervision (RBS) in which it
would focus its supervisory attention on the banks in accordance with the risk each bank
poses to itself as well as to the system. The risk profile of the each bank would be
determined by the supervisory off site surveillance, targeted on-site inspections,
structured meetings with the banks, commissioned external audits, specific supervisory
directions and new policy notices. It would be in conjunction with close monitoring
through a Monitor able Action Plan (MAP) followed by enforcement action as warranted.
The salient features of RBS are as below :
 RBI resources will be directed towards areas of greater risk.
 The process will involve continuous monitoring and evaluation of risk profiles of the
banks in relation to business strategy and exposures. It will be done by the
construction of a Risk matrix for each bank.
 The outcome of RBS will be forward looking.

 The extant of onsite inspection will be determined by quality and reliability of the off-
site data and reliability of the risk profile built by the bank.
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 The central plank of RBS is accurate risk profile for each bank. Risk Profile
document will contain various kinds of financial and non-financial risks faced by the
Bank like credit, market, liquidity, operational, legal and reputation risks.
 Quantity of risk associated with a given activity can be assessed by volume of assets
and the off balance-sheet items that the activity represents or portion of revenue
derived from that activity.
 Activities which are new to the Bank also represent high risk to the Bank.
 The risk profile of each bank will be based on various sources of information with
RBI namely CAMELS Rating, OSMOS data, Market Intelligence Reports, Data from
external and internal auditors, information from other domestic and overseas
supervisors, on-site findings, sanctions applied etc.
 Key components of risk profiled document with RBI would be

o CAMELS Ratings with trends
o Narrative description of key risk feature under each CAMELS component
o Summary of key business risks
o Monitor able Action Plan (MAP) and Banks progress on the same.
o SWOT Analysis
o Sensitivity Analysis
 Supervisory cycle will be based on principle - higher the risk shorter the cycle
 RBS will be banks specific and will focus on highest risk areas and investigation in
identified problem areas. Supervisory process will be largely system based rather
than laying emphasis on transactions and asset valuation. The supervisory tools
would be
o greater off-site surveillance
o targeted on-site inspection
o structured meetings with the banks
o commissioned external audits
o specific supervisory directions
o new policy notices
 Supervisory follow up under RBS will be by way of Monitrable Action Plan (MAP)
in which remedial actions will be outlined and would be tied explicitly to the areas of
high risk identified. Key individuals at the bank would be accountable for each of the
action points.
 The enforcement under RBS will be by incentives and disincentives. For banks with
better compliance record, incentive package could be longer supervisory cycle and
lesser supervisory intervention. The banks which fail to show improvement would be
subjected to disincentive package which could include frequent supervisory
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examination and higher supervisory intervention including directions, sanctions,
penalties etc.
 Mandatory and discretionary actions prescribed in Prompt Corrective Action (PCA)

frame-work.
 Enforcement function will be carried through independent enforcement cell.
Bank level preparations required under RBS
To enable RBI achieve its objectives of risk based supervision, it has laid down
following pre-requisites to be complied with by the banks :
1. Setting up of risk management architecture

2. Adoption of Risk focused Internal Audit
3. Strengthening of Management Information System (MIS) and Information
Technology (IT)
4. Addressing HRD issues
5. Setting up of Compliance Unit
Adoption of risk based internal audit is one of the important tools required to be
implemented for achieving RBS objectives of RBI.
RISK BASED AUDIT
Historically, inspection / audit system in the banks has been concentrating on :-
a. transaction testing, accuracy and reliability of accounting records and financial

reports.
b. testing the integrity, reliability and timeliness of control reports
c. review of quality of assets, and
d. adherence to legal and regulatory requirements.
Though, the transaction testing would remain an essential part of the risk based audit, the
transaction testing will be on selective basis and the extent of reliance on individual
transaction would be determined by the significance and materiality of activity. The
extent of transaction testing will also be governed by the consideration of volume and
amount of risk to which bank is exposed. In relation to an activity which is considered to
be high risk activity, the transaction testing could be to the extent of 100%.
Existing Inspection / Audit will continue concurrently with RBIA in the form modified
from time to time to meet with the need of exercising internal control mechanism even
after the coverage of RBIA is substantially expanded. Geographical coverage of branches
of the Bank, predominantly cash based nature of our economy, historical roots of systems
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and procedures and pace of computerization etc. will continue to demand and put pressure
on the Bank for on-site inspections.
The broad guidelines / scope of Risk focused Internal Audit as against the existing
process of inspection based on transaction testing, are given below :
1. It requires widening of scope of internal audit as transaction testing alone cannot keep
pace with rapid changes occurring in financial risk profiles.
2. The Internal Audit will have to capture effectiveness of risk management procedures,
risk assessment methodology, critical evaluation of adequacy and effectiveness of
internal control systems.
3. Audit will have to review and report on the control environment as a whole, the
process by which risks are identified, analyzed and managed, the line of controls over
key processes, reliability and integrity of corporate management function,
safeguarding of assets and compliance with rules and regulations.
4. The internal auditor would not only offer remedies for current trouble areas but also
anticipate problems and play an important role in protecting the Bank from risk
hazards.
5. Risk Based auditing will not only cover assessment of risk at branch level but also
assessment of risk at corporate level and the overall processes in place, to identify,
measure, monitor and control the risks.
6. In order to focus attention on areas of greater risk to the Bank, branch / location /
activity-wise risk assessment would be performed in advance of an on-site risk based
auditing.
Difference between Internal Audit & Risk Based Internal Audit
Internal Audit Risk Based Internal Audit

Transaction based. No risk assessment. Risk based. Level of transaction
100% transaction testing testing depends on risk assessment.
Process identical for each branch/unit. Process differs according to risk
assessment.
Periodicity linked to rating. Periodicity linked to risk assessment.
Backward looking - focus on historical Forward looking - suggestions for risk

accounts, past performance and compliance mitigation.
because of lack of risk focus.
Inadequate optimization of audit resources. Effective optimization of audit

resources.
No direct linkage to supervisory process. Essential for regulatory Risk Based
Supervision.
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Assessment of L/C limit
Indigenous raw material
Monthly consumption (lead time +A weeks cushion) i.e. 1* (2+0.25 months)

*assuming that monthly consumption of material is Rs. 1 lac
Imported raw material:
Monthly consumption( Lead time +A month cushion) i.e 1*(4+1)
Lead time – it takes 2/4 months to deliver after opening L/c
Documents under DA LC limit:

If it is on 2 months DA basis then 2 months should be added to lead time subject to
adjustment of transit period already covered under lead time. Suppose transit period is 15
days.
Indigenous = 1*(2+0.25+1.5) =3.75 lacs
Imported = 1*(4+1+1.5) =6.50 lacs
*assuming that monthly consumption of material is Rs.1 lac
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No exposure of Foreign Exchange!
Do not worry
Just have a reading of the following terms
Foreign Exchange
It is a mechanism by which currency of one country gets converted into the currency of
another country.
Exchange Rate
It is the price of a unit of one currency expressed in terms of another currency.
Spot Rate
In this case settlement and delivery of currencies takes place within two business days
from the transaction date of the deal.
Forward Rate
All exchange rates quoted for the settlement to take place after the spot rate are termed as
Forward Rates.
Cross Rate
It is the price on one foreign currency in terms of another foreign currency. It excludes
the currency of the country where the rate is offered.
GDR (Global Depository Receipts)
Depository receipts (DR) are negotiable securities issued outside India by Depository
Bank, on behalf of Indian Company. The DR represent local rupee denominated equity
shares of Indian company, held as deposit by a custodian bank in India. DR are traded in
stock exchanges. The GDR holder, in fact, does not hold any shares in his name.
Underlying shares/bonds issued by the company are in the name of overseas depository
bank. In fact, the overseas depository bank also does not physically hold the shares. The
shares or bonds are in physical custody of domestic custodian bank in India as agent of
the overseas depository bank.
DR listed in US markets are known as ADR. DRs listed elsewhere are known as ‘GDR’
GDR came into picture after India decided to open up for investment from abroad. These
are traded in overseas market and are free from Indian Capital gains tax. Most of these
issues have been listed in Luxembourg stock exchange. A holder of GDR has a option to
convert it into number of shares or bonds after 45 days from allotment. Till it is
converted, GDR holder does not have any voting right. Once GDRs are converted , the
shares issued are listed on any stock exchange in India.
Foreign Currency Convertible Bonds (FCCB)
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FCCB means a bond issued by Indian Company expressed in Foreign Currency, and
principal and interest in respect of which is payable in foreign currency.
FCCB are like convertible debentures. The bond has a fixed interest rate(coupon rate). It
is convertible into shares at a pre fixed price. Till the conversion interest is payable in
foreign currency. If the holder does not convert the bond, the redemption of bond has also
to be done in foreign currency.
Derivatives.
A derivative is a security whose value depends on the value of other more basic
underlying variables. For example, it can be said that forward contract is a derivative of
spot contract. Forward contract is derived from Spot Contract.
Swaps
The underlying principle in foreign exchange trading is that purchases should be offset by
corresponding sales and vice versa, if a bank decides not to run the exchange rate
fluctuation or indulge in speculation. It is an ideal situation in which a customer purchase
is offset by customer sale. In practice, such a situation may not exist. It is, therefore,
essential for banks to go for cover operations
Nostro Account
Foreign Currency Accounts maintained by us with Bank at overseas centre is Nostro

Accoount. For example USD Account maintained by us with Bank of Baroda New York
is called Nostro Account. This is meant for settlement of foreign currency transactions in
USD. All overseas centers remit their remittances in USD into the nostro account.
Payments will be made in India in home currency or in foreign currency by debiting the
nostro account.
BITTA(Baroda Integrated Transaction Account):

As a part of business transformation project and with a view to consolidating its treasury
automation programme, the bank has embarked on the Global Treasury Project(GTB) to
take care Treasury functions of all territories.
BITTA will be introduced as realization account in CBS Finacle in place of FEXTA. The
FEXTA Schedules P, S, E, and L have been withdrawn from the date of implementation
of GTP. For each BITTA entry passed in the books of branches, a corresponding Cr/Dr
entry will flow from SITB, Mumbai to branch BITTA. With the zeroisation of BITTA in
CBS Finacle, BITTA will be reconciled by the branches daily. BITTA account has to be
Zero before CSOLOP.
SWIFT
Society for worldwide inter bank Financial Telecommunication is a co operative society

created under Belgian law and having its corporate office at Brussels. It operates
computer – guided communication system to rationalize international payment transfers
in a secured system driven environment. Only authorized officials can access and decode
the data/information/message.
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Hedging
It means protection of a foreign exchange exposure either by forward exchange contract
or by borrowing in local currency. The purpose of hedging is to make the net position at a
given date equal to zero.
LIBOR
It is the interest rate at which the prime bank offers to lend foreign currency to other
prime bank in London as on a given date. This rate is fixed at 10.00 a.m. every day
Pre-shipment Credit
It means any loan or advance granted or any other credit provided by bank to an exporter
for financing the purchase, processing, manufacturing or packing of the goods prior to
shipment. Generally a letter of credit opened in favour of the exporter by an overseas
buyer or a confirmed and irrevocable order for the export of goods from India or any
other evidence form basis of granting packing credit.
RBI guidelines for granting packing credit:-

• Period for granting Packing Credit will depend upon the circumstances of
individual case, such as the time required for procuring, manufacturing or
processing and shipping the relative goods/rendering of services.
• As per RBI guidelines banks should charge interest on packing credit upto 270
days at the rate to be decided by the bank within ceiling rate arrived on the basis
on BPLR relevant for the entire tenor of the export credit under the category(not
exceeding Base Rate + 1.50% pa )
• In case where exports do not take place within 360 days from the date of pre
shipment advance, such credits will be treated as ‘ECNOS’(Export Credit Not
Otherwise Specified) and banks may charge interest rate prescribed for ‘ECNOS’
pre-shipment from the very first day of the advance (15% in our Bank ).
• In case where packing credit is not extended beyond the original period of
sanction and exports take place after the expiry of sanction period but within a
period of 360 days from the date of advance, exporter would be eligible for
concessional credit only upto the sanctioned period. For the balance period,
interest rate prescribed for ‘ECNOS’ at pre shipment stage will apply.
• If exports do not materialize at all, banks should charge on relative packing credit
domestic lending rate plus penal rate of interest, if any, to be decided by the banks
on the basis of a transparent policy approved by the Board(17% in our Bank as on
31.08.2009).
• Packing credit may be liquidated out of proceeds bills drawn for the exported
commodities on its purchase, discount, etc, thereby converting pre-shipment credit
into post shipment credit
• Subject to mutual agreement between the exporter and the banker it can also be
repaid/prepaid out of balances in EEFC A/c as also from rupee resources of
exporters to the extent exports have actually taken place
Running Account Facility(in case of Packing Credit)

Packing credit is normally provided on lodgment of LCs or firm export orders. In many
cases, the exporters have to procure raw material, manufacture the export product and
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keep the same ready for shipment in anticipation of receipt of letters of credit/firm
export orders from overseas buyers. Having regard to difficulties being faced by the
exporters in availing of adequate pre-shipment credit in such cases, banks have been
authorized to extend Pre shipment-Credit ‘Running Account’ facility in respect of any
commodity without insisting on prior lodgment of letters of credit/firm export orders
subject to following conditions:-
• To be granted only to those exporters whose track record has been good as also to
EOUs/units in EPZs, SEZs
• Letter of credit/firm export orders should be produced within a reasonable period
of time to be decided by the banks.
• Banks should mark off individual export bills, as when they are received for
negotiation/collection against earliest outstanding pre-shipment credit on First in
First Out (FIFO) basis.
• Concessive credit available in respect of individual pre-shipment credit does not
go beyond the period of sanction or 360 days from the date of advance, whichever
is earlier.
• Packing credit can also be marked-off with proceeds of export documents against
which no packing credit has been drawn by the exporter.
• If exporter is found to be abusing the facility, the facility should be withdrawn
forthwith.
• In cases where exporters have not complied with the terms and conditions, the
advance will attract commercial lending rate ab initio.
• This facility should not be granted to sub-suppliers.
Post-shipment export credit
Post shipment credit means any loan or advance granted or any other credit provided by
bank to an exporter of goods/services from India from the date of extending credit after
shipment of goods/rendering services to the date of realization of export proceeds. It can
be in the form of (a)Export bills purchase/discounted/negotiated (FBP/FBD)(b)Advance
against bills for collection(PSDL)(c)Advance against duty draw back receivable from
Government.
RBI norms in granting Post Shipment Credit:-

• Post shipment credit is to be liquidated by the proceeds of export bills received
from abroad in respect of goods exported/services rendered.
• In case of demand bills, the period advance shall be Normal Transit Period(NTP)
as specified by FEDAI (Normal Transit Period means the average period
normally involved from the date of negotiation/purchase/discount till the
receipt of bill proceeds in the Nostro Account of the Bank concerned, as
prescribed by FEDAI from time to time)
• In case of usance bills, credit can be granted for a maximum duration of 365 days
from the date of shipment inclusive of NTP and grace period, if any.
• A ceiling rate of interest has been prescribed by RBI for rupee export credit linked
to Base Rate of individual banks available to their domestic borrowers. On
demand bills for transit period and Usance bill for period up to 180 days(upto 365
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days in case of Exporters under Gold Card Scheme) interest rate should not
exceed Base Rate + 1.50%
PCFC(Packing Credit in Foreign Currency)
With a view to making credit available to exporters at internationally competitive rates,

banks have been permitted to extend pre-shipment credit in Foreign Currency to exporters
for domestic and imported inputs of exported goods at LIBOR related rates of interest.
• The facility may be extended in one of the convertible currencies viz. USD, GBP,
JPY, EURO, etc.
• Interest is collected at monthly intervals against sale of foreign currency
• Maximum period of credit is 360 days.
• If no export takes place within 360 days, the PCFC will be adjusted at TT Selling
rate of the currency concerned.
• Can be liquidated out of proceeds of export documents on their submission for
discounting/purchase. .
• Up to 180 days rate of interest should not exceed 350 basis points over six months
LIBOR.
• Beyond 180 days to 360 days – Rate of initial period of 180 days prevailing at the
time of extension plus 200 basis points.
Post-shipment in Foreign Currency(PSFC)
PCFC is a pre-shipment credit. Once the shipment is ready the exporter will give the
documents to the Bank and the bill will be purchased by the bank by giving advance in
Foreign Currency. With this amount outstanding PCFC will be adjusted. In case no
PCFC has been given the rupee equivalent will be credited to account of Exporter.
Interest in PSFC will be charged as under:-
• On demand bill for transit period – Not exceeding 350 basis points over six
months LIBOR
• On usance bills upto 6 months from the date of shipment – Not exceeding 350
basis points over six months LIBOR(The interest will be for total period
comprising usance period of export bills, transit period as specified by FEDAI and
grace period where ever applicable)
• Export bills realized after due date but upto date of crystallization – Rate above
plus 200 basis points
• Interest for period other than mentioned above is deregulated and banks are free to
decide interest, keeping in view the BPLR and spread guidelines..
Crystallization of Foreign Currency Export Bill
As per FEDAI guidelines any Foreign Currency overdue purchased bill which is
outstanding beyond 30 days after expiry of Normal Transit Period in case of demand bills
and 30 days after notional due date in case of Usance bill should be converted into Rupee
Liability. Guidelines formulated by our bank are as under:-
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1. To crystallize the overdue export bill on 30th day after expiry of the normal transit
period in case of unpaid demand bills and on 30th day after the notional due date in
case of unpaid usance bills.
2. To crystallize on any day between due date to 30th day if specific request is
received from the exporter.
3. To recover or pass on the exchange difference arising out of crystallization of
export bills from/to the customer as the case may be.
4. Exchange benefit arising out of crystallization should not be credited to the
account of the exporter. Instead it should be adjusted against the respective
outstanding overdue export bills.
Gold Card Scheme for Exporters
The Gold Card Schemed envisages certain additional benefits based on the performance
record of exporters. The Gold Card Holder enjoys simpler and more efficient credit
delivery mechanism in recognition of his good track record. The Gold Card is issued to
creditworthy exporters with good track record. The features are:-
1. All exporters having good track record and credit worthiness with minimum credit
rating of CR1 to CR 6
2. The account should be ‘Standard’ continuously for three years and should not be
in the caution list of ECGC or RBI.
3. Export firms making losses for the past three years or having overdue export bills
in excess of 10% of the current years’ turnover are not eligible.
4. Based on usual appraisal of the credit needs for export appropriate limits will be
sanctioned for a period of three years subject to annual review of the account.
5. A stand by limit of not less than 20% of the assessed limit may be additionally
granted for facilitating urgent credit needs for executing sudden orders.
6. Norms for inventory may be relaxed in case of unanticipated orders taking into
account the size and nature of the export order.
7. Rate of interest - Base Rate plus 0.75% ( for account with credit rating CR 1 to
CR 3) and Base Rate plus 1% (for account with credit rating CR 4 to CR 6) in
case of Rupee Export Credit (In case of Pre Shipment Credit upto 270 days and in
case of Post Shipment upto 365days). .
8. 10% concession is given to card holders in commission and exchange.
9. The card is issued for 3 years and is renewed for a further period of 3 years unless
any adverse/irregularities are noticed, subject to annual review of the account.
10. Preference will be given for grant of PCFC
11. The loan application will be processed within 25 days (fresh application), 15 days
(renewal of limit) and 7 days(sanction of ad hoc)
12. Security norms may be relaxed based on credit worthiness and track record of the
exporter eligible for Gold Card.
13. The premium under Export Credit Insurance Cover for Banks(WT-PC) is to be
borne by Bank
UCPDC
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In its efforts to standardize the rules governing operation of documentary credits, ICC has
modified a standard set of rules known as ‘The Uniform Customs and Practice for
Documentary Credits(UCPDC). These are universally recognized set of rules governing
Letter of Credits. The rules are published in the form of Brochure. The latest publication
is known as ICC600 and adopted with effect July 1, 2007. UCPDC gives the maximum
possible guidance and assistance to all parties. It guides the Buyer as responsible for
stipulating clearly and precisely the documents required and conditions to be complied
with. It stipulates the liabilities of Opening Bank, Advising Bank, Confirming Bank,
Negotiating Bank, etc.
Letter of Credit (L/C)

It is an undertaking issued by a bank, on behalf of the buyer (importer) to the seller
(exporter), to pay for goods and/or services, provided that the seller presents documents
which comply fully with terms and conditions of the documentary credit. Art. 2 UCPDC
defines L/C as:-
Any arrangement, however named or described that is (a) Irrevocable, (b) Definite
undertaking of issuing bank and (c) to honor a complying presentation.
Irrevocable letter of credit

Once issued the terms and conditions cannot be amended without the agreement of all the
parties to the credit
Confirmed letter of credit

The advising bank may be requested to add its confirmation to the credit. The
confirmation constitutes the undertaking of that bank, in addition to that of the issuing
bank, to effect payment, upon presentation at its counters, of conforming documents.
Stand by letter of credit.(International Standby Practices (ISP) 98, ICC Publication)

It performs similar function to a bank guarantee but is issued in a format corresponding to
that of a documentary credit. Its prime function is to provide a financial remedy to the
seller in the event of non/performance by the buyer. These credits are generally used as
substitutes for performance guarantee or for securing repayments of loans. The document
generally called for under such credits is simple statement of claim or proof of delivery of
goods or certificate of non performance. This type of LC is opened mostly by banks in
countries where, by law they are precluded from issuing guarantees and in such cases of
credit is issued as a substitute for performance and other financial guarantees.
Stand by Letter of Credit is governed by International Stand by Practices (ISP 98), ICC
Publication No.98
Transferable letter of credit

Transferable credits are required when the seller is acting as an agent in the export order.
Part or all the rights and obligations of seller under credit are transferred to the actual
supplier of the goods. The credit must be specifically designated a 'Transferable' for any
transfer to take place
Back to Back Letter of Credit:-
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Back to Back Letter of Credit is one which is issued on the backing of or on the basis of
another Letter of Credit. If the beneficiary of a Letter of Credit needs to procure raw
material or finished goods, etc. before effecting dispatch under the LC, he may approach
a bank for issuance of L/C in favour of vendors/suppliers of such raw material/finished
goods. The Letter of Credit thus issued by the Bank in favour of the suppliers as stated is
called Back to Back Letter of Credit.
Capita Account Convertibility

Freedom to convert local financial assets into foreign financial assets and vice versa at
market determined rates of exchange (S S Tarapore 28.02.1997)
Capital Account Transactions

Which alters the assets or liabilities including contingent liability outside India of persons
of resident in India OR assets or liabilities in India of persons resident outside India
Examples are:-
Investment
Foreign Currency Loans
Transfer of immovable property
Guarantees
Export/Import of currency notes
Loan or OD from Non Resident
Loan or OD to Non Resident
Current Account Transactions

Other than capital account transactions
Examples are:-
• Foreign Trade
• Services
• Short term banking facilities
• Credit facilities in ordinary course of business
• Interest on loans
• Net income from investment
• Living expenses
• Foreign Travel
• Medical care
EEFC Account
Recipients can retain 100% of amount in Foreign Currency account with AD
Foreign currency Loan against EEFC Balance - No
No credit facility against the balance
Debits to EEFC Account

Current account transaction
Custom duty
Trade related loans by exporter. .
Loan transaction to be reported to RBI
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RFC-
Returning Indians
Funds free from all restrictions
Loan can be granted against deposits
RFC(Domestic)
Person resident of India
Out of Foreign exchange acquired by him
Non interest bearing current account
Factoring
An arrangement between a factor and his client, which includes at least two of the
following
Finance
Maintenance of account
Collection of Debt
Protection against credit risk
Receivables arising out of sale of goods/services are sold by a firm (client) to the factor
(financial institution) as a result of which the title of goods/services represented by the
said receivable pass on to the factor.
Forfeiting
It is a form of financing of receivables pertaining to international trade. It denotes the
purchase of trade bills/promissory notes by a financial institution without recourse to the
seller
Forfeiting Factoring
Entire value of bill is discounted
Only partial ranging between 75% to
85%
A pure financing arrangement Also includes ledger administration,
collection and so on
Spread over 3 to 5 years Short term financing deal
Charges premium for exchange A factor does not guard against
risk exchange risk
Money laundering
It means conversion or laundering of money, which is illegally obtained so as to make it

appear to originate from legitimate source.
It involves three steps (Remember PLR)
P-Placement
L-Layering - creating carpet layer over illegal money
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R- Regularizing- Money is shown as genuine/legal money
Bilateral Loans:
These loans are given by a single bank to the borrowers. i.e. there are only two
parties involved Bank and borrower, hence the name bilateral. These type of
loans are normally granted to bank’s existing customers and are for a smaller
amounts to the extent that bank is comfortable to take exposure singly on that
borrower. The amount of the loan depends on the individual corporates, their
size, standing, performance and financial position etc. Normally the amount of
such loans is upto US$ 20-30 million. However, it may be larger also in case
Banks are willing to take higher exposure.
Club Deal Loans:
In Club deal loans, normally a small group of banks (three/ four) depending on
the size of the loan) take the exposure on the borrower. Formally, there is no
official arranger in the club deal and the status of all the participating banks is
equal, yet, de facto, such deals are usually originated by one bank, who
assumes role of senior arranger and may negotiate an extra fee for bridging the
information between the borrower and other lenders in the deal. The amount
may range from, say, US$ 30 mn to even as high as , say, US$ 500 mn,
depending on the appetite/ risk taking capacity on the Individual corporate and
also as per the market behaviour to the particular corporate. .
Syndicated Loans:-
In which minimum four to five banks participate, each funding a certain portion of loan.
A syndicate of banks may be formed either before or after loan agreement is signed and
identities of the participants may be changed during the life time of the loan subject to
transfer assignment and participation provisions in loan agreement.
Floating Rate Notes (FRNs) and Fixed Rate Bond (FRB)

Securitized instruments which are aimed at raising resources from Euro markets or US
markets by tapping the investor base. These are market traded instruments and hence
provide easy liquidity. Rating by internal agencies usually determines pricing level.
Foreign Currency Convertible Bonds(FCCB):

Bonds issued by an Indian Company expressed in foreign currency, and interest in respect
of which is payable in foreign currency. These Bonds can be converted in equity.
Export Credit Guarantee Corporation (ECGC)

It is an organization, which assures the banks that, in the event of an exporter failing to
discharge his liabilities to the bank, and thereby making the bank incur a loss, it would
make good the major portion of the bank's loss. The bank is required to be co-insurer to
the extent of remaining loss
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To support and strengthen export promotion drive by providing range of credit risk
insurance
Risk covered by ECGC -Commercial risk
Insolvency
Failure to make payment with in 4 months from due date
Buyer's failure to accept goods
Political risk
Restriction by Govt.
War, civil war, civil disturbances
New import restrictions
Diversion of voyage - payment of additional charges
Loss accruing outside India - payment not covered by General Insurance
Risks not covered: -

Commercial dispute
Causes inherent in the nature of goods
Buyer's failure to obtain exchange authorization
Insolvency/default of collecting bank or any agent of exporter
Exchange rate fluctuation
Failure of exporter to fulfill terms of export contract or negligence on his part.
Export Credit Insurance Cover for Banks(Packing Credit- Whole Turnover & Post
Shipment –Whole Turnover)
Our Bank has taken Customised Whole Turnover Packing Credit Guarantee and Whole
Turnover Post Shipment Guarantee of Export Credit Guarantee Corporation of India Ltd.
The period of Guarantee is 12 months from 1.07.2008
• Different rate of premium is to be paid based on credit rating of the exporter
customer.
• The premium payable ranges from 2.5 paisa per month per Rs.100 to 8 paisa per
month per Rs 100 in case of Pre shipment and 2 paisa per month per Rs. 100 to 7
paisa per month per Rs.100 in case of post shipment depending on the rating of
exporter.
• The premium is payable in advance
• The premium is absorbed by Bank for Gold Card Exporters under ECIB(WT-PC)
• Maximum Liability – Packing Credit Rs.600 crore, Post Shipment Rs.500 crore
per year.
• Percentage of cover – Packing Credit- Losses up to Rs.1599.78 lacs -75%,
Beyond Rs.1599.78 lacs 65%.Post shipment – For Policy Holder -90%, Non
Policy Holder 60%
• In case of Packing Credit granted to Small Scale Exporters (Annual Export
Turnover not exceeding Rs.50 lacs) the cover available will be 90%
• Limits to be advised to ECGC within 30 days from the date of sanction
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• A/c already in default not covered
• Specific Approval List – Requires prior approval of ECGC
• Restricted cover countries (RCC) – prior approval of ECGC
• Accounts which are classified as new are covered to the extent of Discretionary
limit of Rs. 100 lacs. Up to this amount prior approval of ECGC is not required.
For any amount in excess of this limit prior approval of ECGC is required.
Accounts classified as substandard, Bad and doubtful require prior approval of
ECGC is required. The Branch has to seek the approval of ECGC when the
account has slipped from Standard status to Sub standard status or other inferior
status
• Limit sanctioned to be reported to ECGC within 30 days from sanction date
• default report - within one month from the date of recalling advance or within 4
months from due date/extended due date whichever is earlier.
• Payment of premium to be stopped on reporting default.
• Claim to be lodged within 6 months from the date of reporting of default.
External Commercial Borrowing(ECB):

ECB refers to commercial loans, bank loan, buyer’s credit, suppliers credit, securitized
instruments (Floating Rate Note, Fixed Rate Bond) availed from Non Resident Lender
with minimum average maturity 3 years.
Buyer's credit
Financing of importer by a bank situated outside India.. As FEMA buyer’s credit period
should be less than 3 years.(If it is for period of average maturity of 3 years or more, it
will be called ECB(External Commercial Borrowing). As per RBI directives interest rate
on Buyer’s credit is 6 Months LIBOR +200bps.
Supplier's credit
A financing arrangement under which the supplier agrees to accept deferred payment
terms from the buyer and funds itself by discounting or selling the bills of exchange or
promissory notes so created with a bank in its own country.
Merchanting trade
Indian party purchases goods from one country for ultimate sale to party in another
country. The movement of goods takes place from original seller's country directly to
final buyer's country without being routed through India
e.ucp
Necessary rules for presentation of electronic equivalents of paper documents under L/C
Supplement to UCPDC
Project export
Export of engineering gods on deferred payment terms and execution of turnkey projects
and civil construction contracts abroad are referred as project export
Forward Rate Agreement
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It is contract between the buyer and seller where the buyer commits to pay the seller the
contract interest rate on notional sum over the stipulated period. The nature of sum
neither borrower nor lent
Lock borrowing rate
Lock lending rate
Speculation on future level of interest rate
Interest rate swap

A hedge instrument
Helps hedging interest rate
B contracted LIBOR based floating rate . He is concerned about rise in interest rate with
prospect of high LIBOR rate. Wants to go out of risk. Interested in converting into fixed
rate liability. A swap dealer agrees the borrower LIBOR where the borrower can pass on
to its banker and expects borrower to pay him in return a fixed rate on the amount of loan
liability.
Thus the borrower has converted his floating rate liability into fixed rate liability.
FEMA 1999 (w.e.f. 1.06.2000)
The friendly FEMA came into effect from 01.06.2000 replacing the stringent and
draconian FERA of 1973. The object of FERA was to conserve the foreign exchange
resources. The objective of enactment of FEMA, on the other hand, is to facilitate
external trade payments for promoting the orderly development and maintenance of
foreign exchange market in India.
FEMA 1999 (w.e.f.1.07.2000 replacing FERA

the stringent & draconian FERA 1973
To facilitate external trade payment To conserve Forex
development and maintenance of Forex
market in India
Provisions are part of FEMA Through notifications
No arrest only civil consequences The power to arrest
Maximum penalty 3 times Max penalty 5 times
'Mens rea' culpable mental state dropped 'Mens rea'
Options
'Option contract' is a contract under which the buyer has a right but not an obligation to
buy or sell a specific quantity of a given asset at a specified price at or before a particular
date in future. To acquire this right buyer pays premium to seller (option writer). The
potential loss to option seller is unlimited and to the buyer it is limited t premium paid.
Call option
Call option provides the buyer of the option with the right to acquire the underlying
currency at the strike price on the expiry date. For example when a corporate buys a USD
call option at a strike of Rs.51.00, he acquires the right to buy at Rs. 51.00 at the expiry
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and is protected at Rs.51.00 to buy his USD payables even if INR depreciates above Rs.
51.00.
For Option buyer:
If Spot USD/INR>51, the option will be exercised.
If Spot USD/INR<51, the option will not be exercised as USD can be acquired at a better
price from the cash/spot market.
Put option
This option gives right but not obligation to sell the underlying assets
A put option provides the buyer with the right to deliver the underlying currency at a
strike price on the expiry date. For example when a corporate buys a USD option at a
strike price of 52.00 against INR, he acquires a right to sell USD at 52.00 against INR on
expiry even if INR appreciates above 52.00
For option buyer:
If spot USD/INR>52.00 the option will not be exercised as the USD can be sold to
acquire INR at a better price in the Cash/Spot market.
If spot USD/INR<52.00, the option will be exercised.
Risk Management
Banking business inherently involves risks and these risks need to be rigorously managed.
Banks often distinguish expected and unexpected losses. Expected losses are those that
banks know with reasonable certainty will occur and are typically reserved for in some
manner. Unexpected losses are those associated with unforeseen events.
Risk is usually defined as the adverse impact of several distinct sources of uncertainty on
profitability. It is probability of unexpected happening – the probability of suffering loss.
Risk management is the process by which organization identifies, measures, maintains
and control its risk exposure.
Risk management is a continuous process and not one time activity.
Credit Risk:- is inability or unwillingness of a borrower or counter party to fulfill its

contractual obligations in relation to financial transactions or reduction in portfolio value
due to deterioration of credit quality.
Market risk:- is the possibility of a loss to a bank caused by changes in market variables
like interest rate, currency exchange rates, equity and commodity prices.
Operational Risk:- When the loss results from internal or external fraud, inadequate or
failed process/system or external events, it is termed as operational risk
The impact of losses on account of various risks gets reflected in bank’s earnings and
capital. Therefore, capital adequacy ratio gives a measure of risk cover, in terms of
capital, in the event of losses caused due to above said risks.
Implementation of Operational Risk Management
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First of all understand different components of ORM and decide methodology
Developing ORM policy:-
identifying the risk

measuring the risk
mitigating the risk
transferring the risk/financing risk
monitoring the risk
providing capital to cover the risk
ORM Policy to include the following:-
Scope and objective – Areas and the degree of depth and sophistication desired by the
top management for ORM
Risk appetite:- The risk an organization is willing to take given the context of its
corporate goals and its strategic imperatives. Risk appetite is Risk tolerance. At what
level the risk is acceptable to the management What level of risk it is willing to take for
fulfilling the broad objectives of the organization.
Risk Management strategies- an aid the operational staff to decide on the risks and its
level to be taken in the products and processes.
Risk management architecture:- ORM organizational framework and the

responsibilities and the powers of the different committees
Setting risk limits and Targets:-
Establishing methodology:- The system and procedure for identifying, measuring,

mitigating, transferring/financing and monitoring risk.
Risk identification (Risk Mapping):- What can go wrong in the organization?
 Identification of different processes and risk areas

 Identification of risk indicators – signal the presence of risk – used to track
and monitor the indicated risk
 Identification of Risk drivers. Is the cause of risk and risk is the effect of it-
lack of knowledge of the staff
Risk management does not mean risk elimination. This process involves assessment of
the risk and evaluate it based on its criticality.
Pareto principle:- most of the risk comes from a very small number of events. The Pareto
principle suggests that 80% of the risk comes from 20% of the identified loss events.
Critical events are identified by analyzing the following:-
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Impact of the loss event:- The impact of the loss event is the product of the loss and the
time structure of the event. A risk that resides for long in the process or system may
cause devastating or catastrophic loss.
Likelihood of the loss event:- How often the risk manifests or appears resulting in loss
Criticality of the loss event:- The simple measure of an event’s risk is its criticality. It is
the product of the likelihood of occurrence of the event in a particular time period and its
impact on the firm should the event appear in that time period. The most critical events
are those that occur frequently with high impact.
Risk Mitigation:- by establishing control mechanisms, which decreases the likelihood of

occurring of the risk, thereby reducing the criticality of it.
Risk transfer:- Risk transfer can take the form of insurance, hedging, etc.
Risk Financing:- Organization accepts the risk and decides to financing the loss, it
occurs
Risk Monitoring:- To be continuously monitored. Risk monitoring can be done through

Risk MIS e.g. faulty documentation – cases decided against bank – likelihood of the event
–1 – impact of event -4- criticality of risk – control system available ( audit) – Risk
driver (lack of knowledge) – Risk indicator (no faulty documents reported in audit) –
REMARKS
Capital to cover Risks:- Basel –(i) Basic Indicator approach – 15% of average gross
annual income of previous three years(Net interest income plus non interest income) (ii)
Standardized approach – divided into eight business lines (iii) Advanced measurement
approach
Management action:- on following lines:-
High Risks:- either avoid taking high risk, by changing the business process/sub process
which carry risk or exit from such business that carry these risks.
Medium Risks:- Bank is prepared to carry the same
Low Risk:- Do not pose danger by virtue of low impact and least likelihood. Such risks
prove to be uneconomical to be addressed. Hence such risks are allowed to remain in
system
To conclude
 There is no return without Risk – rewards to go to those who take risk
 Risk should be fully understood.
 Seek experience – risk is managed and measured by people
 Know what you do not know.
 Communicate – risk should be discussed openly.
 Diversify – multiple risks will produce more consistent rewards.
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 Show discipline
 Use common sense – it is better to be approximately right, than to be precisely
wrong
 Return is only half the equation – decision should be made only by
considering the risk and return of the possibilities.
Terms which a Banker is supposed to know
Acceptance - Assent of the drawee of a usance bill to pay the amount thereof on the due
date. The assent is indicated by the signature of the drawee on the face or reverse of the
bill. Acceptance should be unconditional. It is preferable to have the date of acceptance
and place of payment indicated by the drawee at the time of his acceptance.
Book Debts - Amounts receivable for sale of goods/ services and appearing as current
asset in the books of the seller. These are also called as trade debts or sundry debtors.
Contingent Liability - A liability which is contingent upon the happening or not

happening of a specified event, i.e. a deferred payment guarantee issued by bank gives
rise to a contingent liability. If the customer on whose behalf the guarantee was issued,
fails to make payment of instalment amount on due dates, the bank will be called upon to
pay the amount under its guarantee obligations.
Demand Bill - A bill of exchange which is payable by the drawee at sight or on

presentation.
Documents of Title to Goods - Documents, the due possession of which gives title to the
goods covered by them i.e. Bill of Lading, Railway Receipt, Delivery Order, Dock
Warrant etc.
D.A Bill/ Usance Bill -A documentary usance bill of exchange, which carries a
stipulation that the documents accompanying the bills are to be delivered to a drawee
against acceptance of the bill.
Trade Bill - Bill of exchange drawn in connection with a genuine trade transaction, i.e.
sale of goods/ services. Bills of exchange not supported by genuine trade transactions are
commonly known as ‘Accommodation Bills’ (or ‘Kites’).
Demand Loan - A loan granted for a period of less than –36- months and carries a
stipulation that the amount is repayable to the creditor by the debtor on demand.
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Term Loan - A loan granted for a period of 3 years and above, which in the normal
course is repayable in agreed instalment(s).
Line of Credit - Agreement entered into with banks for making available to the
borrower credit facilities upto the ceiling of ‘line of credit’ in various forms to suit mutual
convenience, by way of Overdraft, Cash Credit, Loan, Guarantee, Letter of Credit, etc. on
agreed terms and conditions.
Bullet Repayment - Bank loans are normally repayable over a specific time-span by
monthly/ quarterly/ semi-annual/ annual instalments. However, when any such loan is
repayable at maturity by one lump-sum repayment, it is called ‘Bullet Repayment’.
Interest payments will, however, be made as usual.
Balloon Repayment - Usually amount of repayment of each instalment would remain

the same for the entire period of loan. However, often stipulations are made towards
Balloon repayments in which amount of successive instalments are higher than the
previous instalments based on expected cash flow. This is suitable for new projects when
the cash flow improve over a time period.
Roll-over -This refers to the periodical (say one month, three months, six months, etc.)
repricing of credit facilities at agreed spread over the base rate like LIBOR, MIBOR, G-
Sec., etc.
Documentary Bill - A bill of exchange accompanied by documents of title to goods.
Packing Credit - Pre-shipment finance provided to an exporter for purchase,

manufacture or processing of goods meant for export. Packing credit finance is granted
against lodgement of firm export order or Prime Bank’s Irrevocable Letters of Credit.
Wherever feasible, pledge or hypothecation of goods meant for exports is obtained to
secure the packing credit finance.
Letter of Credit - A document issued by the Bank authorising its branch or another
banker to honour seller’s drafts for account of a buyer provided the terms and conditions
of the letter of credit are satisfied.
Revolving Letter of Credit - Letter of Credit issued for a specific amount, which
renews itself for the same amount on retirement of bills over a given period. The amount
of Letter of Credit utilised by negotiation of bills, will become available to the beneficiary
of the credit as soon as the buyer retires the said bills.
Re-instatement Clause - A clause in a Revolving Letter of Credit whereby the Bank

opening the letter of credit stipulates that the amount utilised by negotiation of each bill
gets reinstated only on retirement of the bill by the buyer.
ECGC Guarantee - Guarantee/ Policy issued by Export Credit & Guarantee Corporation
of India (ECGC) to financial institutions including banks covering pre-shipment and post-
shipment credit facilities granted to exporters.
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Guarantees : A “Contract of Guarantee” under the Indian Contract Act is a contract to
perform the promise or discharge the liability of a third person in case of his default.
Guarantees issued by the Bank can be broadly classified into three categories viz.
Financial, Performance and Deferred Payment Guarantees.
Financial Guarantees - Bank Guarantees issued to guarantee the customer’s financial

worth; credit worthiness and his capacity to take up financial risks are classified as
‘Financial Guarantees’. Such guarantees do not require any specific performance on the
party of constituents on whose behalf Bank Guarantee is issued. Following guarantees to
be treated as ‘Financial Guarantees’:- a) Guarantees favoring tax/ customs/ excise/
court authorities in respect of disputed claims, payment of taxes, customs and excise
duties etc.b) Deferred Payment Guarantees.
Performance Guarantees - Guarantees issued on behalf of constituents guaranteeing

their performance of contracts entered into, supply machinery, due discharge of other
contractual obligations undertaken etc. Following guarantees to be classified as
‘Performance Guarantees’:-a)Guarantees issued for performance of any contract by the
constituents.b) Guarantees covering security deposits, earnest money/tender
deposits, advance payment, mobilisation advance, Bid-Bonds etc., covering performance
of underlying contract/ obligation. c)Standby letter of Credit. d)Shipping Guarantees
(Guarantees issued on behalf of constituents to enable them to take delivery of goods
from Shipping Companies in lieu of Bill of Lading) Guarantees for supply of Machinery/
Material). Guarantees for lifting material/ machinery ordered.
Deferred Payment Guarantee - Deferred Payment Guarantees (DPG) is a way of

raising long-term resources by the buyers of fixed assets/ capital goods, securing
guarantees for repayment of principal and interest from their banker to the supplier of
capital goods for supplier’s credit. It is a financial guarantee.
‘Onerous Clause’ in Guarantee - Any provision in the guarantee, which is likely to

give rise to further pecuniary liability on the bank like payment of interest, penalty, other
charges, etc. or any liability which is unlimited.
Working Capital/ Net Working Capital - Funds requirement for day-to-day operations
other than investment in ‘Fixed Assets’ and ‘Non-Current Assets’ is treated as ‘Working
Capital’. Excess of current assets over current liabilities excluding bank finance is
treated as ‘Working Capital Gap’. Excess of current assets over current liabilities
including bank finance is treated as ‘Net Working Capital’, which is also treated as
borrower’s contribution (i.e. margin) for working capital.
Stocks in process - Goods held/required to be held by a manufacturer, for process of

conversion into finished products.
Sub-Limits - A subsidiary limit, which operates within the overall limit for an advance.
Parent Branch - Branch which has the job role of Appraisal of Credit Proposal,
Documentation, Review of Credit facilities etc.
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Parked Branch - Branch where credit facilities are parked by the parent branch after
completing the process of sanction, documentation etc., for borrower’s operational
convenience/other requirements. Advising the Drawing Powers, review of credit
facilities, maintaining enforceable documents etc. is the responsibility of parent branch.
Parked branch is required to apprise the parent branch about the operations in the account
and other details to enable the parent branch to have effective monitoring of the account
and to undertake review exercise from time to time. The requirements of carrying out
inspection of securities may be worked out by the parent branch as per bank’s guidelines
and accordingly the parked branch may be advised from time to time.
Hypothecation - A floating charge on specified movable assets by a borrower in favour

of lender. Possession of and title to the assets hypothecated remains with the borrower
until the lender crystallizes his charge by due process of law.
Mortgage - A charge on specified immovable property created by the borrower in favour

of the lender. Mortgage may be registered or equitable. If the charge is created by a
registered deed (adequately stamped), it is called registered mortgage. If the borrower
deposits with the lender, documents of title to the property at a notified place with the
intention of creating a charge on the property, it is called an equitable mortgage.
Pledge - A charge created on specified movable assets by the borrower in favour of the
lender. Assets pledged remain under the actual or constructive possession of lender
during the pendency of the loan. In the event of default in repayment of loan by the
borrower the lender will have a right to sell the assets pledged (after giving reasonable
notice to the borrower) and appropriate proceeds thereof towards dues.
Surrender Value - The amount, which an insurance company will pay if the policy is
surrendered before its maturity date. Insurance policies will acquire surrender value only
after the expiry of some initial period specified by the insurance company. Surrender
value of the policy is different from paid up value, it may be ascertained from the
insurance company from time to time.
Margin - Percentage difference, which a banker insists on being maintained between

the value of security and amount advanced thereagainst.
Net Means - Difference between the total value of assets (Movable & Immovable)
owned by a person and aggregate amount of his/her liabilities at any given time.
Selective Credit Control (SCC) - Credit restrictions imposed from time to time by
Reserve Bank of India through its directives to Scheduled Commercial Banks over their
advances against the security of certain specified commodities, which are presently buffer
stock of sugar with sugar mills, unreleased stocks of sugar with sugar mills representing
levy sugar and free sale sugar.
Supply Bills - A bill drawn by a contractor or supplier for goods supplied or services
rendered to a Government/ Semi-Government Body or large limited company. Supply
bills are to be accompanied by receipted challans for goods supplied or a certificate for
the services rendered.
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Trust Receipt - At times Securities or payments are received by the Borrower
without repayment of the corresponding debt and held in the capacity as trustees. In the
trust receipt, the borrower declares that he holds the documents/ goods/ payments/
realisation of receivables etc. as trustees for the bank.
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Base Rate
• As per Annual Policy Statement 2009-10 working group under the chairmanship
of Mr Deepak Mohanty was constituted to review present BPLR and suggest
changes.
• BPLR introduced in 2003 fall short of its original objective of bringing
transparency to lending rates
• Base Rate- enhancing transparency in lending rates.
• Base Rate replaced BPLR w.e.f. 1.07.2010
• Banks may determine their actual lending rates on loans and advances with
reference to Base Rate.
• Banks are permitted to change the benchmark and methodology any time during
the initial six months i.e. by end of December 2010
• Actual lending rates charged may be transparent and consistent and be made
available for supervisory review.
• Advance under DRI, LABOD and staff loans are exempted from Base Rate
purview
• Base rate will serve as referenced benchmark rate for floating rate loan products.
• Changes in Base rate shall be applicable in respect of all existing loans linked to
Base Rate.
• No lending below Base Rate
• Review of Base Rate at least once in a quarter with the approval of Board/ALCO
• Banks to exhibit the information on their Base Rate at all branches and also on
their website
• Changes in Base Rate should also be conveyed to General Public from time to
time through appropriate channels.
• Banks to provide information on actual minimum and maximum lending rate to
RBI on quarterly basis.
• Base Rate will be applicable to all new loans, old loans and renewed loans.
• Existing loan on BPLR system may run till their maturity. An opetion for
switching to the borrower be given
• Base rate will be calculated by taking into account Cost of Deposit, Negative carry
on CRR/SLR, unallocated overhead cost and Average return on New Worth.
BCC:BR:102:178 dated 30.06.2010 on Base Rate:-
Our Bank has decided to have base rate at 8% w.e.f. 1.07.2010

All existing facilities based on BPLR system may run with existing interest rate structure
till their maturity/review.
Existing borrowers have the option to switch to the Base Rate system, before
maturity/review.
Branches not to charge any fee on such switch over
All the existing accounts falling due for review on or after Ist July would be priced with
reference to Base Rate at the time of review.
No loan shall be granted at the fixed rate option.
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Loans without reference to Base Rate:- DRI, Loans to bank’s own employees, LABOD,
all agriculture loans upto Rs. 3 lacs for which subvention is available. All other loans
cannot be less than base rate.
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Glossary of terms – International Business
(For candidates appearing for interview for Overseas Postings)
1. Arbitrage Process of taking advantage of the existence of different

prices for the same product (or its substitute) like foreign
exchange, securities etc. at the same time but in different
markets. Different markets can be at different geographic
locations for the same financial assets or different
financial assets in one or more geographical locations.
2. Asset stripping Technique of selling off some assets by borrower when
pressed for repayment.
3. Banker’s A money market instrument, bearing name of a Banker in
Acceptances addition to customer’s name, making it highly secure and
marketable. Acceptance fee is charged by the banks for
accepting the drafts which together with the discount rate
makes the cost of credit through banker’s acceptance to
the borrower.
4. Base Lending Rate Credit facilities sanctioned at the rate of interest based on
some reference rate such as LIBOR, MIBOR, G-Sec., etc.
plus margin or spread on case-to-case bases. The reference
rate is called as Base Lending Rate.
5. Basis point & The interest spread on loans or yield on securities is often
percentage expressed in basis points (100% basis points = 1%).
When expressed in percentage, it is known as percentage
point, i.e. 1% or 2% (100 basis or 200 basis points).
6. Basis Swap This is a swap of floating rate based on one reference rate
(e.g. 3 months LIBOR) for floating rate based on another
reference rate (e.g. US Prime Rate).
7. Best Efforts Basis The offer of buying or selling of securities or currency or
raising of loans on partially underwritten basis is known as
Best Efforts Basis.
8. Bridge Finance/ Interim finance allowed by a bank normally on unsecured

loan basis pending completion of documentation and other
formalities by the borrower, against medium or long term
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finance agreed to by financial institutions and/or banks.
On the borrower completing formalities relating to
documentation etc. as may be required by the principal
lender, the proceeds of the loan will be routed through the
lender of Bridge finance for liquidation of Bridge Loan.
9. Bid/Offer rate Bid rate is the price at which the quoting party is prepared
to purchase a currency/ security or accept a deposit. Offer
rate is the price at which the quoting party is prepared to
sell a currency/ security or offer a deposit.
10. Capital Adequacy The capital (Tier I & Tier II) requirement by a financial
institution/ bank against its risk weighted assets.
11. Charging order An unsecured decree holder is entitled to approach court
for a charging order over properties, if any, owned by the
borrower. However, for sale of such property by the
decree holder, he has to obtain an order for sale from the
court. Thus, such charging order may in practice act as
legal charge.
12. Club Deal An arrangement in which a group of banks decide to lend
a borrower without any syndication arrangement.
Normally, number of banks may vary from three to five or
more and their strategy is to treat such loan assets on ‘take
and hold’ basis.
13. Commercial Paper This refers to short term usance Pronotes negotiable by
endorsement and delivery issued by major Limited
Companies/ Corporations. Such papers are normally
issued/sold at a discount. The issuing company may
request a bank to provide standby facility (also known as
Line of Credit) for meeting the liability of Commercial
Paper on maturity.
14. Cross-Border Lending where it is directed towards a project located in a
Lending different country than that wherefrom lending is made.
15. Currency Swap ‘Swap’ means ‘exchange’. In the context of international
and Interest Rate financial markets, it refers to an exchange of specified
Swap streams of payment over an agreed period of time between
two parties. In currency swaps, streams of payment in two
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different currencies are exchanged. In interest rate swaps,
streams of payment in the same currency but at different
interest rates are exchanged (generally for fixed rates
against floating rates and vice versa). Such swaps
generally extend for longer periods such as upto 3/5 years
than the period traded in the conventional markets.
Interest rate swap is also known as ‘Coupon Swap’.
16. Debt Equity Swap An exchange of outstanding loans/ advances by the lender
into equity of the borrower by conversion of the debt in
part or in full.
17. Debenture charge A document for creating fixed charge over the properties
specifically mentioned, viz. landed properties, plant and
machinery etc. and/or floating charge over other properties
viz. Stock-in-Trade, Book Debts etc. Both ownership and
possession remain with the Charger (Borrower) while only
‘security interest’ is acquired by the Charge (Lender).
Unlike in usual hypothecation arrangement, the Debenture
Holder (Lender) is empowered to appoint a Receiver at his
discretion.
18. Environmental These Concepts long prevalent in United States have since
Audit/ Issue Audit gained momentum in Europe as well. The business
organisations in particular in USA have always to ensure
their due compliance with legislations fixing
responsibilities for avoiding environmental pollution. The
Environmental Auditors examine plants and plant sites
and test products and processes to find out whether they
carry any surprise liabilities. A recent extension of
environment audit is what is presently termed as Issue
Audit, which indicates specific issue areas to be studied
and reported, viz. impact of tropical rain forest, impact on
wet lands etc. Lenders have occasionally been held liable
for damages caused to environment by the borrowers.
19. Equity in Security Immovable property in particular can be charged to
(second or various creditors simultaneously or in succession. Each
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subsequent subsequent creditor is entitled to have security interest
charges) after providing for the share of prior charge-holder(s) over
the duly assessed market value of the property. For
example, a second mortgage will have equity in property
on the surplus, if any, remaining after indebtedness to the
first mortgagee is deducted from the market value. If a
mortgage is created on pari-passu basis, each mortgagee
will have equal rights without any priority or preference of
one over the other.
20. Exit Bonds Sovereign borrowers when pressed for repayment by
lenders, who are not prepared to provide New Money,
often propose to issue Bonds (covering normally certain
portion of the indebtedness in full and final settlement of
the total dues), repayable over an agreed period (generally
long) so as to lessen the foreign debt pressure. These
Bonds are known as Exit Bonds. Interest rates on these
Bonds are below market rates and are exempt from future
debt relief options.
21. FED Bonds Money deposited with the Federal Reserve Bank in the
USA and often used for inter bank overnight borrowings.
These funds are traded in money market. The rate of
interest on such trading is known as Fed Funds Rate,
which is regulated by the FED through open market
operations. Fed Funds lent to other banks are called ‘Fed
Funds Sold’ and Feb Funds borrowed from other banks
‘Fed Funds Purchased’
22. Footings Bottom line of a Balance Sheet (i.e. Total of Assets side
which equals total of Liabilities side) is currently called in
UK as ‘Footings’.
23. Foreclosure In case of mortgagor’s (of real estate) default, the
mortgagee is entitled to approach court praying that
mortgagor be debarred of his right to redeem the property.
This is known as Foreclosure.
24. Forward Rate This is an agreement valid for a specified future period
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Agreement (FRA) between two counter parties in terms of which one party
protects the other from a rise or fall of interest rate during
the period for a specified principal. Under the agreement,
there will be no obligation to borrow or lend the principal
amount and only the difference between the interest on the
principal at the protected rate and the interest at the then
prevailing interest rate is settled.
25. Futures Standardised contracts for buying/selling specified
commodities or products in a Futures Exchange. A
financial future is a commitment to buy/sell a financial
instrument during a specified month or on a specified
future date on a Financial Futures Exchange. A wide
variety of instruments such as Treasury Bonds, foreign
exchange etc. including specifically made up financial
products are traded in the Futures Exchanges. Financial
Futures are used for hedging against currency and interest
rate exposures.
26. Highly leveraged When a high level of credit is extended in a business for
transaction financing buyout, acquisition or recapitalisation of an
existing business. It is known as Highly Leveraged
Transaction. Bankers are discouraged in USA in
particular from participating in such transactions.
27. Issuer-Set Margin In the issuance request for CDs under RUF arrangements,
the issuer specifies the margin-known as Issuer Set
Margin–relative to LIBOR, which is considered to be the
appropriate cost of CDs of particular series.
28. Junk Bonds High yielding but unsecured and therefore high-risk debt
used commonly in buyouts in the USA. Being in bond
form rather than in loan form, these Bonds are easily
tradeable in the secondary markets in the USA unlike in
certain other countries like UK. The credit rating of Junk
Bond issuers is generally low.
29. Legal Charge A document duly registered with the competent authorities
for mortgage of real estate. When, circumstances so
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necessitate, the lender can peaceably take possession of
the property, if it is vacant and sell the property in the
open market. Otherwise the lender will have to obtain
possession order and secure possession of the property and
then sell the same as Mortgagee.
30. Lender Liability Borrower is under an unqualified obligation to repay to the
lender. However, in USA, in some court judgements since
1982, lenders have been made liable to pay large damages
to the borrowers if due to sudden withdrawal of agreed
credit lines without compliance of necessary formalities or
for other similar reasons, the borrowers have suffered
business loss and/or inconvenience.
31. Leveraged Buy- Buy-out of company shares or company assets by
Out financers through a high proportion of debt using the
assets being purchased as leverage.
32. Mezzanine Unsecured loans taken by companies, which rank after
Finance secured debt (i.e. senior debt) but before equity in the
event of company failure is known as Mezzanine Finance.
Because of greater risk for the lender of mezzanine
finance, such loans earn a higher rate of interest. They
also often carry an equity conversion option for the lender
to compensate for the higher risks involved in the
financing. The most risky layer in a company’s finance is
the equity portion, the least risky being senior debt secured
against assets. Mezzanine debt is the subordinated debt
falling between these two layers.
33. Multi Currency Sometimes Euro loan documents provide a Multi
Clause Currency Option Clause permitting the borrower to switch
from one specified currency to another specified currency
on roll over date.
34. New Money Fresh loans and advances required to be made available as
part of a package to facilitate servicing and repayment of
existing loans. This mostly arises in cases of Sovereign
Risk category loans.
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35. Non-Performing Non-payment of interest when accruing due in respect of
Credit availed credit makes such a credit a Non-Performing one
(i.e. credit falls to perform its role of servicing reward of
interest to the Lender).
36. Note Issuance Note Issuance Facility is a legally binding medium term
Facility commitment under which a borrower can issue short term
paper called ‘Notes’ in his own name, but where the
underwriting banks are committed either to purchase any
notes which the borrower is unable to sell or to provide
standby credit. Bank borrowers generally drawn funds
under the facility by means of short term ‘Certificates of
Deposit’. RUF is a variant of the NIF where the
placement and the underwriting functions stand separated.
37. Off Balance Sheet Banks incur certain contingent liabilities as an integral part
Exposure of their business, which are shown below the line of
Balance Sheet, they are classified as ‘Off Balance Sheet
Exposures’ e.g.
1. Short-term trade related contingent liabilities arising
from movement of goods.
2. Commitments of over one year maturity – RUF, DPG
etc.
3. Sophisticated money market products like Swaps,
Futures and Options.
4. Forward Exchange Contracts.
38. Option This refers to a contract bestowing a ‘right’ but not an
obligation to buy or sell a financial instrument at a fixed
price (exercise or strike price) before or at a designated
future date. Call Option is a buying option and Put Option
a selling option. Option is in the nature of an insurance
obtained by the buyer of the Option from the ‘Writer’ of
the Option against adverse price movements, like Interest
Rate, Exchange Rate, etc. against payment of a premium
to the Writer.
39. Prime Rate This is the rate of interest fixed by Bankers for lending to
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their best (prime) customers. All-in-cost to the borrower
is the Prime Rate plus cost of compensating balance to be
maintained by him.
40. Problem Credits Problem credits are those which have shown signs of
default of principal and/or interest viz. sticky and stagnant
account, non payment of one or more instalments due
from borrowers having prolonged cash flow problems or
whose net worth has gone negative etc.
41. Repurchase Agreement in which the seller of an asset agrees to buy
Agreement (also back the asset he sold at fixed price on a specified future
known as Repo) date. Money Market Dealers use REPOs for selling
securities to finance their fund requirements. Banks
frequently adopt this technique.
42. Revolving A medium term arrangement, in which a borrower can
Underwriting raise short-term resources by issuing notes or CDs in the
Facility International Money Markets, backed up by underwriting
commitments upto the agreed limit by a syndicate of
banks over the period of the agreement (generally five
years). RUF is a variant of NIF.
43. Sovereign Risk Risk that the Government of a country may Interfere with
the repayment of a debt contracted by a national of that
country with a lender outside the country. When country
of residence of the borrower and country of operation of
the lender differ, the risks such as non-externalisation of
foreign currency by the authorities of Debtor’s country or
embargo on repayment imposed by the Government of the
Debtor’s country, arise which are referred to generally as
Sovereign Risks. Such risks may arise even if the debtor
is economically sound and capable of repaying the loan in
local currency. Mostly money raised for government/
semi-government projects under general-purpose loans
also fall under this category. Sovereign risk is to be given
due weightage while fixing interest rates.
44. Special Mention When an advance is considered potentially weak and may
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Credit cause difficulties of recovery, it is sometimes desired to be
classified as ‘Special Mention Credit’. This term is used
by the regulatory authorities in UK, USA etc.
45. Term Insurance Life insurance coverage protecting the individual for a
specified period of years at the end of which there is no
value left in the policy. Such a policy has no saving
features unlike other policies, viz. Endowment Policy,
Whole Life Policy etc.
46. Value Dating/ Day on which a financial transaction involving payment
Compensation and receipt is settled, i.e. date on which payments are
actually made and received. Deployment of funds carries
normally a financial reward (receipt of interest) and
receipt of funds in like manner, a financial sacrifice
(payment of interest). In such funding settlements,
therefore, the date of delivery of funds on either side is
very important and must be done on the same day, known
as value date or value compensation date.
47. Zero Coupon These are Bonds issued for medium term and long-term
Bonds (Also maturities generally by corporate borrowers, but also
known as Zero sometimes by sovereign bodies, having no interest
Bonds or Discount coupons. These Bonds are generally issued at a deep
Debentures) discount on the face value. Sometimes, the coupons borne
on normal interest bearing bonds are separated from the
bonds and disposed of in the secondary market. This is
called ‘Coupon Stripping’. The remainder of such bonds
will also be Zero Bonds. Coupon stripping is done for
meeting requirements of certain investors who need only
interest income and certain others who wish to have only
capital gains.
For example, bond with face value of Rs.100 may be
issued at Rs. 85.00 for a duration of two years. At the end
of two years the investor will get Rs. 100 implying an
interest income of Rs.15.00
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Financial Ratios for Credit Appraisal.
While appraising credit proposal various items in profit and loss account and balance
sheet of the borrower should be analysed to arrive at meaningful conclusions. Ratios
analysis can be expressed in percentage terms or as a simple ratio (like 2:1). Whenever
we recast the profit & loss and balance sheet, the recasted figures should be taken into
account for analysis. Some of the important financial ratio, required for credit appraisal
are as under: -
Current Ratio:
It is also called the Liquidity Ratio and a test for short-term solvency. Current ratio is
arrived at by dividing, as on a date, total value of current assets by current liabilities.
Current Ratio = Current Assets/Current Liabilities.
Hence, Any adverse trend should be carefully examined. Generally a current ratio of
1.33:1 is considered satisfactory, which may be treated as a benchmark rather than the
minimum acceptable level. It should not be applied uniformly as it varies from industry
to industry. The reasons for a lower or higher current ratio to the benchmark needs to be
examined. The sanctioning authority may take a view and satisfy himself/herself while
accepting a lower current ratio and the reasons may be suitably recorded. While taking a
final view on the current ratio and/or projected level of current ratio, the sanctioning
authority may examine various options to improve the ratio such as exploring possibility
of injection of additional funds and / or ploughing back of profits, stipulations for not
declaring dividend / non withdrawal of profits, reduction in the level of non-current assets
and liquidation of investments outside business, if any, within a reasonable time.
Debt – Equity Ratio :
This ratio indicates relationship between the external term borrowings and the own funds
of the concern. Bank takes total term liabilities as Debt i.e. total liabilities minus net
worth and total current liabilities. Equity means net worth of the concern minus
intangible and fictitious assets. However, the subordinated funds (i.e. long-term
unsecured loans from friends and relatives, etc.) may be considered as quasi-equity and
included in equity while arriving at ratio, if the borrower retains the same at the existing
level/ projected level and generally for non-corporate borrowers. The subordinated debt
however should not to exceed borrower’s tier I capital i.e. capital plus free reserves less
intangible assets.
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Debt-Equity Ratio = Total Term Liabilities (TL)/Tangible Net Worth.
A ratio of 3:1 is considered satisfactory. However, higher ratio is generally allowed

keeping in view activity of the borrower, industry, sectoral classification such as SSI
units, other priority sector advances etc.
Fixed Assets Coverage Ratio (Applicable for Term Loan):

This ratio shows the number of times the value of fixed assets (after providing
depreciation) covers term liabilities.
Fixed Assets Coverage Ratio = Net Fixed Assets/ Term Debts (Medium & Long)
Fixed Assets Coverage Ratio of more than 1 is considered reasonable.
Debt Service Coverage Ratio (DSCR) - Applicable for Term Loan :
Ability of a concern to service its term liabilities can be assessed from this ratio, which is
applied while appraising all term loans proposals, studying rehabilitation/ reschedulement
proposals, etc. DSCR measures whether interest and instalments can be paid out of
internal generation of funds. A ratio of 1.75 would indicates that the concern’s internal
generation of funds would be 1.75 times of its commitments towards term loan
obligations and interest thereon. It works out as under: -
DSCR = (Profit after tax + Dep.+ Int. on TL) / (Int. on TL+TL Instalment).
The average DSCR (i.e. the sum of numerator divided by the sum of denominator of
DSCR formula as stated above for entire repayment period of the loan) of 1.75 is
considered reasonable. However, in any year it should not be less than 1.25. The
sanctioning authority may consider lower average DSCR depending upon the nature of
project / Industry after recording the reasons for the same.
Pricing of the loan

As per extant guidelines, the pricing has been de-linked from credit rating in respect of
advances (fund based) over Rs. 2 lacs but less than Rs.25 lacs and the pricing is based on
predetermined spread irrespective of credit rating. For loans of Rs.25 lacs and above
pricing continues to be determined by the rating of the borrower with appropriate spread.
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TAKE OVER OF LOAN ACCOUNTS
Bank provides the operating units to take over accounts from other FI s/Banks keeping in
view the foremost objective of canvassing only good quality accounts. The following
financial and Non financial aspects are however to be followed:
Non-Financial:
a) Accounts of profit-making (i.e. net profit before tax) concerns only as per last audited
balance sheet.
b) Accounts with existing lenders should be under the category of “Standard Assets”
c) Satisfactory report from the existing bank/FI and/or satisfactory conduct of account as
per latest statement of accounts.
d) Take-over accounts are to be rated as under:-
• As per BOBRAM credit rating model (CRISIL), minimum ‘BOB6’ obligor
ratding rade for all exposures of Rs. 25 lacs and above, other than MSME
exposures. For MSME exposures, this rating model is applicable for accounts
having exposure of above Rs. 2 crore.
• As per New Scoring Card Type model for MSME accounts of Rs.25 lac and
above up to Rs.2 crore subject to minimum ‘MSMEBOB 6’ rating (Circular No.
BCC:BR:101:194 dated 13.07.2009)
e) Take-over accounts (retails) are to be rated as per the applicable scoring model
subject to minimum grade as per the scoring model.
f) There should not have been any reschedulement / restructuring in the account during
last two years.
g) All other existing norms, guidelines as applicable to borrowal accounts are to be
scrupulously followed.
Financial(other than Retail & SME –Regulatory & Expended)

a. Current Ratio : Min. 1.33.
b. TOL/ Equity : Max. 4.5:1
c. Debt Equity Ratio : Max: 3:1
Max: 4:1
d. Debt Service Coverage Ratio : Min 1.75 in case of Term Loan
(Average DSCR to be calculated for entire
repayment period).
Authority for Take-over
1. Proposal for takeover under the powers of Chief Manager and above: -
• Proposals under the powers of Chief Manager and above no prior clearance
from next higher authority is required for takeover.
• Delegated authorities under bank’s discretionary lending powers may consider
takeover cases within their powers.
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2. Proposal for takeover under the powers of below Chief Manager: -
• Prior approval of next higher authority i.e. Regional Manager is required for
takeover.
• After obtaining prior clearance as above, delegated authorities may consider
the proposals as per their discretionary lending powers.
• In case of take over of retail loan, approval from Regional
Manager/Zonal Manager is not required.
Take over of Retail Loan Accounts
Take over accounts are to be rated as per the applicable scoring model subject to securing
minimum investment grade for the specific produce.
Accounts with existing lenders should be under the category of ‘Standard Assets’. There
should not have been any reschedulement/restructuring in the account during the last two
years.
In case of traders loan, accounts should be profit-making and with minimum of Current
Ratio 1.17 and maximum Debt Equity Ration of 6.1
All existing norms, guidelines as applicable to borrowal accounts re to be scrupulously
followed
Exposure to unsecured guarantees and unsecured advances

The domestic outstanding unsecured guarantee plus the total of domestic outstanding
unsecured advances in terms of definition of ‘unsecured exposure’ of RBI should not
exceed 30% of total domestic outstanding advances.
Limit on shareholding in companies

In terms of Section 19(2) of Banking Regulation Act 1949 no banking company shall
hold shares in any company, whether as pledge, mortgagee or absolute owner, of an
mount exceeding 30 per centof the paid up share capital of that company or 30 per cent of
its own paid share capital and reserves, whichever is less
Exposure to Capital Market

The aggregate exposure of a bank to the capital markets in all forms( fund and non fund
basis) should not exceed 40% of its net worth as on March 31 of the previous year.
Within this overall ceiling, the bank’s direct investment in shares, convertible
bond/debenture, units of equity-oriented mutual funds and all exposures to Venture
Capital Funds(VCFs) should not exceed 20% of its net worth.
Advances against shares/issue of guarantees

• Margin of 50% on all advances/financing of IPOs/issue of guarantee for capital
market exposure. A minimum cash margin of 25%(within margin of 50% shall
have to be maintained in respect of guarantees issued by banks for capital market
operations
• No advance against partly paid shares.
• No advances to partnership/proprietorship concern against shares/debentures.
• Not to undertake financing of badla transactions.
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• Not to undertake arbitrage operations.
• No financing for undertaking arbitrage operations in Stock Market.
• Loans against shares/convertible bonds/convertible debentures/units of mutual
funds to individual should not exceed 10 lacs per individual in case of securities in
physical form and Rs.20 lacs in case of securities in demat form.(for financing
equities and investments in shaqres)
• For subscribing to IPOs limit is Rs.10 lacs per individual
• No finance to NBFCs for further lending to individuals for IPOs
• No advance against primary security of shares and debentures. But can be
accepted as collateral
Margin trading
• Bank has formulated a policy for Margin Trading within the cap of Rs.200 crores
of exposure to Stock brokers and Market Makers. Conditions are:-
• Minimum margin of 50%
• Shares purchased should be in dematerialized mode under pledge to bank
• System for monitoring and maintaining margin of 50% should be established by
Treasury Branch
• No ‘nexus’ develops between inter-connected stock broking entities/sstock
brokers and bank in respect of Margin Trading
CREDIT RISK MANAGEMENT
Bank continue to comply with the guidance note on management of credit risk and hence
following particulars, of Credit Risk Management are to be kept in view by the
branches/offices:-
• Corporate office has already issued detailed industry profile/studies of various
industries/sectors (covered under DSB Return of RBI). The overall performance
of the industry/sector as per the study report will facilitate our operating units in
dealing with borrowal accounts.
• Credit rating framework enables bank to classify various categories of borrowers
as a tool of identification of borrower risk grades on the basis of rating. In this
context, bank has in place an appropriate credit rating mechanism. The operating
units would continue to rate the borrowal accounts as per the applicable credit
rating mechanism.
• Bank’s guidelines on periodic inspection of securities/business sites should be
followed and depending upon the findings of such inspection reports the account
is to be monitored accordingly.
• Bank has already introduced credit approval system at Corporate Office and
Zonal/Regional Offices in respect of sanction/review of credit limit. The credit
approval system as per extant guidelines are to be scrupulously followed.
• Credit Audit / Loan Review Mechanism is being undertaken as per RBI guidelines
for various borrowal accounts as a mechanism to ensure compliance with extant
sanction and post sanction process/ procedures including picking up early warning
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signals and initiating corrective action to improve the credit quality would
continue to be adhered to.
• Bank’s existing system of early problem recognition, classification of problem
exposure and remedial action to be followed.
• Besides the foregoing, bank will continue to review and fix industry/sectoral
internal caps in the light of Eco-Industry scoring system introduced in the bank, to
avoid credit concentration in a particular industry/sector.
Restrictions for grant of Loans & Advances.
• No loan to be granted to Wilful Defaulters of our Bank/Other Banks/Financial

Institutions as per RBI / CIBIL 171uthori defaulters list etc.
• Advances against Bank’s Own Shares:
In terms of the Banking Regulation Act, 1949, Bank cannot grant any loan and
advance on the security of its own shares.
• Advances to Bank’s Directors:
Banking Regulation Act, 1949 lays down restrictions on loans and advances to the
directors and the concerns in which they hold substantial interest.
• Restrictions on holding shares in companies:
In terms of Section 19(2) of the Banking Regulation Act, 1949, no banking
company shall hold shares in any company, whether as pledge or mortgagee or
absolute owner, of an amount exceeding 30 percent of the paid-up share capital of
that company or 30 percent of its own paid-up share capital and reserves,
whichever is less, except as provided in sub-section (1) of Section 19 of the Act.
Shares held in demat form should also be included for the purpose of determining
the exposure limit. This is an aggregate holding limit for each company. While
granting any advance against shares, underwriting an issue of shares, or acquiring
any shares on investment account or even in lieu of debt of any company, these
statutory provisions should continue to be strictly adhered to.
• Restrictions on Credit to Companies for Buy-Back of their securities:
In view of provisions contained in section 77 A(1) of the Companies Act, 1956
bank should not provide loans to companies for buy-back of their own
shares/securities.
• Granting loans & advances to relatives of Directors:
Without prior approval of the Board or without the knowledge of the Board, no
loans and advances should be granted to Directors (including Chairman &
Managing Director) and relatives of directors of Bank, other banks, Scheduled
Co-operative Banks, Subsidiaries/Trustees of Mutual Funds/ Venture Capital
Funds set up by the Bank/ Other Banks subject to the following:-
a) Loans & advances aggregating Rs. 25 lacs and above are to sanctioned
by the Board of Directors/MCB.
b) The proposals for credit facilities of an amount less than Rs. 25 lacs to
these borrowers may be sanctioned by the appropriate authority under
powers vested in such authority, subject to reporting to the Board.
Every borrower should furnish a declaration to the bank to the effect that:-
a) he is not a director or specified near relation of director of a banking company.
b) None of the partners is a director or specified near relation of a director of a
banking company; and
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c) None of its directors, is a director or specified near relation of a director of a
banking company.
• Grant of loans & advances to officers and the relatives of Sr. Officers:
RBI guidelines on grant of loans and advances to officers of the Bank and to
relatives of senior officers of the bank will continue to be scrupulously followed.
The term senior officer will refer to officials in Grade/Scale SM IV and above.
• Restrictions under Selective Credit Control (SCC):
Presently the following commodities are covered under Selective Credit Control
(SCC):-
- Buffer Stock of sugar with sugar mills.
- Unreleased stocks of sugar with sugar mills representing levy sugar and
free sale sugar.
• Restrictions on loans & advances to industries producing/ consuming Ozone
Depleting Substances (ODS):
Bank should not extend finance for setting up of new units producing/ consuming
following Ozone Depleting Substance (ODS):-
• Loans & advances against shares, debentures and bonds:

Following restrictions are applicable on grant of loans and advances against
shares and debentures:-
- No Loan to be granted against partly paid shares.
- No loan to be granted to partnership/ proprietorship concerns against the
primary security of shares and debentures.
- Banks and their subsidiaries should not undertake financing of “Badla”
transactions.
• Advances against Fixed Deposits Receipts issued by other Banks.
Bank should desist from sanctioning advances against FDRs, or other term
deposits of other banks.
• Advances to Agents/Intermediaries based on Consideration of Deposit
Mobilisation.
Bank should desist from being party to unethical practices of raising of resources
through agents/ intermediaries to meet the credit needs of the existing/ prospective
borrowers or from granting loans to the intermediaries, based on the consideration
of deposit mobilisation, who may not require the funds for their genuine business
requirements.
• Loans against Certificate of Deposits (CDs)
No loan can be granted against Certificate of Deposits.
Bridge Loans
RBI has permitted Banks to sanction bridge loans to companies for a period not
exceeding one year against expected equity flows/issues. Such loans would be included
within the ceiling of 40% of consolidated net worth as on March 31 of the previous year
for exposure of bank to capital market, including both fund based and non fund based
exposure to capital market in all forms
. Banks can also extend bridge loans against the expected proceeds of Non-Convertible
Debentures, External Commercial Borrowings, Global Depository Receipts and/or funds
in the nature of Foreign Direct Investments, provided the banks are satisfied that the
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borrowing company has already made firm arrangements for raising the aforesaid
resources/funds.
Keeping in view the RBI guidelines, Bank has devised the following guidelines:
• Such loans to be considered only at our Corporate Centre, for Corporates who
are banking with us with satisfactory track records.
• Bridge Loans capped at Rs.75 crores (all type of facilities)
• Such Bridge Lending should be used for the purpose for which the issue
(debenture/ECB/Equity etc.,) is proposed and not for any other purpose.
• The amount of individual Bridge Loan shall not exceed 75% of the amount
called-up on the shares minus any other similar bridge lending, interim finance
availed or to be availed.
• Repayment period upto a maximum of one year.
Monthly Monitoring
For the purpose of monitoring of large borrowal accounts, to prevent asset quality
slippage, to take timely corrective steps and to improve the quality of credit portfolio
bank has the system of monthly monitoring. Under the system, advance accounts with
exposure(FB+NFN) are to be monitored at Regiona/Zonal/Baroda Corporate Centre
levels based on monthly monitoring reports submitted by branches within 5 days of
reporting date(i.e. 15th of each month) of MMR to Regional office as under:-.
• Advance accounts of over Rs.10 crores through Zonal Office to Baroda Corporate
Centre within 10 days of reporting date.
• Zonal Manager to monitor all advance accounts above Rs.5 crore to Rs. 10 crore.
The Zones will also submit copies of the MMRs of these accounts to BCC for
further monitoring.
• Regional Manager to monitor all accounts above Rs.1 crore to Rs. 5 crores.
Regional Office will also submit copies of the MMRs of these accounts to Zonal
Office for further monitoring
• Branch Manager to monitor accounts of Rs. 1 crore and below.
Accounts Causing Concern:
Regional Offices are to submit a summary report in the prescribed format on advance
accounts causing concern:
• With exposure of above Rs. 1 Crore to Rs. 5 Crore along with copy of
MMRs to BCC with a copy to Zonal Office at monthly interval, within 7 days of
reporting date of MMR (i.e. before 22nd of each month).
• With exposure of above Rs. 25 Lac to Rs. 1 Crore along with copy of
quarterly monitoring report (QMR) to BCC with a copy to Zonal Office at quarterly
interval, within 7 days of reporting dates of QMR which are 15th March, 15th
June,15th September and 15th December.
The Regional Office will also submit their views/recommendations on the above accounts
causing concern, with the steps taken by them to safeguard the bank’s interest & future
strategy /recommendations.
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• As regards to accounts causing concern, officials from RO/ZO may take
appropriate decision to visit such accounts on case- to-case basis, to conduct on the
spot study of the unit and discussions with the borrower for taking timely remedial
actions to prevent slippage in the account
Commitment Charges:
Commitment charges are to be levied on quarterly basis at following rates:-
 0.50% p.a. in case of accounts where the average utilization is below 75% of the
Limit OR as indicated in the QIS/ QMR statements.
Limit OR as indicated in the QIS/ QMR statements
Limit OR as indicated in the QIS/ QMR statements
• PENAL INTEREST & ADDITIONAL INTEREST
• Penal interest is charged over and above the regular/ applicable interest rate of the
borrower when the borrower fails to comply with one or more stipulated terms
and conditions, such as delay in submission of financial statements/ stock
statements, creation of security, etc. without any explicit approval / concurrence of
appropriate authority,.
• Bank also charges additional interest over and above applicable / regular interest
for any adhoc credit facilities, disbursement of credit facilities pending
compliance of certain terms and conditions.
• The additional or penal interest rates are charged to motivate the borrower to
comply the terms & conditions as described and to deter the borrower from
remaining non-compliant.
Other points:
• The bank shall charge overall penal and additional interest upto 2% p.a. over the
applicable/regular interest rate.
• Waiver/ relaxation of penal interest for non-compliance of terms other than
default of interest/ instalment payments.
a) Zonal Heads, upto the designation of Deputy General Manager, are
authorized to waive/relax levy of penal/ additional interest in respect of
accounts falling upto the powers of Regional Managers.
GMs (including GMs as Zonal Head) are Authorized to waive / relax levy of penal /
additional interest in all other cases.
REJECTION OF PROPOSALS
Credit Proposals falling beyond the discretionary lending powers of Branch Managers
shall not be rejected at the level of Branches. The authority empowered to sanction a
credit proposal may reject such proposal. Branches shall at monthly intervals submit a
consolidated statement to the Regional Office, giving the details of the applicant viz.,
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name, activity, facility sought etc., along with reasons for rejection of the proposal for
their perusal and comments. However, proposals of MCB powers may be rejected by
CMD/ED.
The rejection of credit proposal pertaining to Priority Sector and Export Credit shall be by
the next higher authority. The existing guidelines about reporting of rejection of Export
Credit proposals to CMD through concerned department at Corporate Centre continue.
The time frame for conveying reasons of rejection will be as under:-
Priority Sector – upto Rs. 25000 – within two weeks, upto Rs.5 lacs – within 4 weeks,
Above Rs 5 lacs within 8-9 weeks,
Export Credit- within 45 working days.
Others – within 46 working days.
Credit Audit
The Bank has established Credit Audit Wing in Central Inspection and Audit Department
to achieve following objectives:
• Improvement in quality of credit portfolio

• Review Sanction process and compliance status of large loans
• Feedback on regulatory compliance
• Independent Review of Credit Risk Assessment
• Pick-up early warning signals and suggest remedial measures
• Recommend corrective action to improve credit quality, credit administration and
credit skills of staff etc.,
The major features of Credit Audit are:
• Following accounts are covered under Credit Audit:-

- All fresh sanction / increase limit where Fund based and / or Non-Funded
limits individually and combined exceeds Rs. 5.00 crores.
- All existing accounts with sanctioned limit (Fund based and Non-Fund
based) of Rs.10.00 crores and above.
- 5% accounts of Region on random selection basis with sanctioned limit of
Rs. 1.00 crore and below Rs. 10.00 crores (from rest of the portfolio).
-
• Credit audit should be conducted within 3 to 6 months of sanction.
• Credit Audit of eligible accounts of one Region is to be carried out by Officers of
another Region within the Zone. Zonal Office shall do identification of Credit
Auditors and eligible accounts.
• Accounts of CFS/CBB/IFB/Specialised branches shall be treated accounts of the
region to which these branches are reporting for administrative purposes.
• Identified Credit Auditors shall submit the Credit Audit Report in the prescribed
format within a period of 15 days to Credit Audit Department with a copy to
Branch & Regional Office.
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Project Finance
Project Finance may be defined as an arrangement of financing long term Capital

Projects, large in scale, long in life.
Usually projects cover life cycle of a minimum of 8/10 years although it would depend on
the nature and size of projects.
The term Project for the purpose of Project Finance refers to:
• All new projects involving outlay of fixed assets afresh or relocation with or
without balancing equipments in connection with any commercial venture;
• All existing projects involving outlay of fixed assets under expansion for de-
bottlenecking, increasing capacity, forward/backward integration,
diversification, renovation etc., in connection with any commercial venture.
The bank uses its team of technical officers for appraisal of Projects, which come up for
financing. The Bank also utilizes the services of reputed and empanelled Technical
Consultants for viability study, if necessary.
Bank has formulated detailed guidelines in respect of Project Finance proposals regarding
the conduct of viability of the project for existing borrowers and also for new borrowers
based on the Project Cost and the bank’s exposure, which are conveyed by circular
BCC:BR:99/109 dated 3rd April, 2007..
Line of Credit
Line of Credit system offers flexibility to clients to switch over between the various
working capital facilities sanctioned with relative ease as per their needs compared to the
prevalent system of restricting the usage of funds within the maximum limits available
within the facility only. This system will essentially facilitate medium/large business
units in efficient management of their borrowing requirements within the sanctioned Line
of Credit facility. Under the Line of Credit, instead of considering/ sanctioning separate
limits for Cash Credit (Stocks/Book Debts) and DA LC facilities, a combined limit for
Cash Credit (Stocks & Book Debts)-cum-DA LC limit is to be sanctioned, with a sub-
limit for DA-LC facility. The Line of Credit as a product is innovative and the branches
should take every effort to canvass and make it the Unique Selling Proposition (USP) of
the bank.
MIBOR Linked Advances

To facilitate better funds planning, limit utilization and considering the scope for credit
expansion bank has in existence this short term credit product. This is linked market
related Anchor Rate viz. MIBOR for eligible corporates. The product is top-notch for
general corporate purpose including substitution to CPs, working capital limit, etc. to be
marketed very selectively to top rated corporates after ascertaining the bank’s funds
position. Eligibility is:-
• Large corporate borrower of the bank with credit rating not less than BOB-3 of
our bank or preferable P1 or equivalent by reputed credit rating agencies.
• Overall exposure ceiling prescribed is Rs.2000 crores.
Film Financing
• Over all cap of Rs.250 crore
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• To be considered only by ED
• Well known/well established with good track record
• Advance from distributors at least 35% of the budget and producer’s contribution
25%
• Bank finance shall exceed 40% of project cost.
• Maximum 2 years
• Average DSCR not less than 2.5:1
• Personal guarantee of Promoters/directors
• Assignment of Intellectual Property Rights in favour of bank
• Tangible collateral security coverage 1.25 times, etc.
DRI Advances
• As per RBI guidelines for lending under DRI Scheme, banks are required to grant
loans at concessional rate of interest 4% p.a. to the eligible beneficiaries.
• Ceiling of family income of the borrower per annum in rural and urban should be
Rs18000 and Rs.24000 respectively.
• Only to the borrowers who are not assisted under any subsidy linked schemes of
Government.
• Limit Rs.15000. For Housing loan Rs.20000 per beneficiary.
• The loans to be granted under the scheme should be not less than 1% of total
advances.
• Not less than 40% of total DRI advances should be granted to borrowers
belonging to SC/ST communities and 2/3 rd of DRI advances shall be granted
through rural and semi-urban area branches.
• Loans granted to Institutions/organizations for the purpose of their onward lending
to beneficiaries eligible for coverage under DRI Scheme shall be covered under
DRI advances of the bank.
• Bank is required to lend 1% of total outstanding advances as at the end of
previous year under DRI Scheme. Further 2/3rd of advances should be routed
through rural and semi urban branches.
Weaker Section
Weaker section includes the following:
• Small and marginal farmers with land holding of 5 acres and less and landless
labourers, tenant farmers and sharecroppers.
• Artisans, village and cottage industries where individual credit limits do not
exceed Rs. 50,000/-.
• Beneficiaries of Swarnjayanti Gram Swarojgar Yojana (SGSY), Swarna
Jayanti Shahari Rojgar Yojana (SJSRY) & Scheme for Liberation and
Rehabilitation of Scavangers (SLRS).
• Scheduled Castes and Scheduled Tribes.
• Advance to Self Help Groups – Bank Linkage Programme
• Beneficiaries of Differential Rate of Interest (DRI) scheme
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Priority Sector Classification
• Housing Loans upto Rs.20 lacs irrespective of locations, for constructions of
houses.
• Loans for repair and renovations up to Rs. 1 lac in Rural and Semi Urban Area
and upto Rs. 2 lacs in Urban Areas.
• Education Loan – Study in India up to Rs.10 lacs and Study abroad – up to Rs.20
lacs
• Traders Loan up to Rs. 20 lacs under Baroda Traders Loan
• Enterprises whose investment in equipments does not exceed Rs.2 crores-. Micro
Enterprises and Small Enterprises.
• Agriculture(Direct and Indirect Finance)
• Small Enterprises
• Advance granted to Fair price shops dealing in essential commodities, consumer
co operative stores
• Micro Credit- Loan of very small amount not exceeding Rs.50000 per borrower
either directly or through SHG/JLG
• Investment by banks in securitized assets, representing loans to various categories
of priority sector
• Outright purchase of any loan asset eligible to be categorized under priority sector
• Fresh deposits placed by banks on or after 30.04.2007 with NABARD/SIDBI on
account of non achievement of priority sector lending targets
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Major Loan Products of bank for financing under Farm Sector
• Baroda Kisan Credit Card
• Financing farmers for purchase of agricultural land
• Financing for setting up Agri clinics and agri business centres by Agricultural
graduates
• Capital Investment subsidy scheme for construction of cold storage and onion
godowns.
• Capital investment subsidy scheme for construction/renovation/expansion of rural
godowns.
• Farm Water Management Scheme
• Financing farmers in Agri Export Zones under contract farming
• Advances against pledge of gold ornament ts
• Scheme for providing fresh finance to borrowers who have settled their NPA as
per one time settlement schemed of RBI
• Scheme of providing production credit to tenant farmers and sharecroppers.
• Financing of hi-tech agri projects under co financing arrangement with NABARD
• Farm produce marketing loans to farmers against pledge of receipt of private
registered warehouses, godowns and cold storages.
• Baroda General Credit Card Scheme
• Baroda Kisan Group Loan Scheme (JLG)
Procedure of charging interest in Agriculture Advances"

(a) In respect of direct agricultural advances, the interest should not be
compounded in the case of current dues, i.e. crop loans and installments
not fallen due in respect of term loans, as the agriculturists do not have
any regular source of income other than sale proceeds of their crops.
(b) When crop loans or installments under term loans become overdue,
interest can be added to the principal.
(c) Where the default is due to genuine reasons the period of loan should be
extended or the installments should be rescheduled under term loan.
Once such a relief has been extended, the overdues become current
dues and interest should not be compounded.
(d) Interest on agricultural advances in respect of long duration crops should
be charged at annual rests instead of quarterly or longer rests, and the interest
can be compounded, if the loan/installment becomes overdue
In case of sanction of fresh loans to borrowers upto Rs. 5.00 lacs who have
settled their accounts under “one time settlement” scheme of RBI/our Bank
may be considered after obtaining prior clearance from next higher authority
as per circular no. BCC:BR:95/108 dated 26.03.2003 & BCC:BR:95/155
dated 02.05.2003
Security Norms in case of Agriculture Advances:

• Crop Loan – upto Rs. 50,000.00 no mortgage.
• Investment Loan – Upto Rs. 1,00,000.00 no mortgage
• Land Based activities – Upto Rs. 10,000.00 no mortgage.
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Wherever there is genuine difficulty in creation of mortgage, sanctioning
authority/ Regional authority is empowered to waive it upto Rs. 3.00 lacs for
investment loans wherever moveable assets are created & upto Rs. 50000/- for
investment loan where moveable assets are not created (i.e. dug well, land
development etc.).
In case of non-land based activities such as marine fisheries etc, third party
guarantee may be accepted in place of mortgage of land.
Bank’s Specific Priority Sector Products
Baroda Kisan Credit Card
Government of India introduced Kisan Credit Card Scheme in 1998-99, for short-term
credit access to farmers. The objective of the scheme is to provide adequate and timely
support from the banking system to farmers for cultivation needs including purchase of
inputs in a flexible and cost effective manner. Our Bank has launched Baroda Kisan
Credit Card for meeting such short-term as well as long term financial needs of farmers
for cultivation and allied needs.
Baroda Traders’ Loan
• For meeting the working capital requirements, Bank has a specific scheme for
persons engaged in trade of commodity/goods, which are required by community
and trading in them is not prohibited by law or opposed to public interest. A
minimum of Rs.25,000/- upto Rs.25 lacs can be sanctioned, subject to the
guidelines. Loans granted to Private Retails would be eligible for classification under
Micro & Small Enterprises ector within Priority Sector only upto a credit limit not
exceeding Rs. 20 lacs and provided they satisfy the definition of Micro and Small(Service)
Enterprises in respect of investment in equipment. (BCC:BR:102/24 dated 21.01.2010)
BOB Laghu Udhyami Credit Card (BOBLUCC)
Bank has introduced a Credit Card Scheme for SSI borrowers for providing hassle free
credit facilities with credit limits upto Rs.10 lacs. The scheme would enable the
borrowers to avail credit limits with minimum paper work. The cumbersome procedural
aspects relating to reviews/renewals and submission of statements, Balance Sheet etc., are
done away with and credit delivery is made simple and easy. The limit fixed under the
scheme will be valid for a period of –3- years subject to annual review.
Swarojgar Credit Card Scheme
SCC scheme aims at providing adequate and timely credit by way of composite loan to
small artisans, handloom weavers, service sector, self employed persons and other micro-
entrepreneurs in a hassle free and cost effective manner. The normal limit under the
scheme is Rs. 25,000/- per borrower. However in deserving cases branches may consider
higher quantum of loan upto a maximum of Rs. 50,000/- per borrower. Payment of
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interest as applicable to saving bank (SB) a/c on credit balances maintained in cash credit
account is also paid.
A laminated credit card and a pass book is issued to the beneficiaries under the scheme.
Baroda Artisans Credit Card

All artisans involved in production/manufacturing process (otherwise eligible for credit
facility for carrying out the proposed activity as per the bank’s existing schemes) would
be eligible for adequate and timely assistance to meet their credit requirements, both
investment needs as well as working capital in a flexible and cost effective manner. The
scheme is operational in rural and urban areas. The credit limit is fixed based on
assessment of working capital requirements as well as cost of tools and equipments
required for carrying out manufacturing process. The maximum limit of Rs. 2 lacs is
sanctioned under this scheme for a period of –3- years subject to annual review.
Baroda General Credit Card(BGCC)

Introduced to provide hassle-free credit to rural customers based on the assessment of
cash flow without insisting on purpose or end use of the credit. For rural and semi urban
branches.
• No other credit card is issued.
• Maximum loan limit Rs. 25000 – or two times of Net Accepted Annual
Income(whichever is less)
• No security or purpose of end use stipulation
• Interest will be paid on credit balance at Savings Bank Account rate.
• Minimum documentation
• Valid for 5 years.
• Turnover in account should be equivalent to or more than the limit sanctioned plus
interest charged.
Baroda Kisan Group Loan Scheme

Introduced to finance tenant farmers cultivating land either as oral lessees or
sharecroppers and small farmers who do not have proper title to their land holding
Financing by forming Joint Liability Group(JLG)
The JLG would prepare a credit plan for its individual members.
The individual credit plans will be discussed in the JLG and consensus arrived on the
amount of debt liability of each member.
All members would jointly execute one inter-se document making each one jointly and
severally liable for repayment of all loans taken by all individuals in the Group
Purpose – crop production, consumption, marketing, other productive purpose.
Maximum loan – individual Rs.50000.00, JLG Rs.5 lakhs
Corporate Social Responsibility (CSR) of Bank

As a responsible corporate citizen, it has been the vision of the Bank to empower
the community through socio-economic development of underprivileged and
weaker sections. In its continued efforts to make a difference to the society at
large, the Bank further intensified its efforts inthis direction in FY10.
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(i) Baroda Swarozgar Vikas Sansthan (Baroda R-SETI) has been established
for imparting training to unemployed youth, free of cost for gainful self
employment and entrepreneurship skill development which help them improve
their family economic status and also gives a boost to the local economy in those
locations. So far 25 such Santhans have been established by the Bank in which
more than 37,000 youth have been trained and around 22,000 have been
gainfully self employed.
(ii) Baroda Gramin Paramarsh Kendra(BGPK):- Most of the Bank’s social

activities are linked to rural masses. The Bank has established 52 Baroda Gramin
Paramarsh Kendra for knowledge sharing, problem solving and credit counseling
for rural masses across the country. In order to spread awareness among the
rural mass on various financial and banking services and to speed up the process
of financial inclusion, the Bank has also established four Financial literacy and
Credit counseling Centres (FLCC) at Ajmer, Amethi,Baroda and Raebareli.
(iii) Micro Loan Factory:- The Bank has opened Micro Loan Factory at
Sultanpur UP. The bank is already having mobile micro finance factory at Rae
Bareilly. The Micro Finance Loan Factory has mibile van with facilities and all
related stationeries/documents on SHG financing. It is manned by officers who
are duly authorized to sanction disburse loans upto Rs. 25,000.00 to SHGs on
the spot and their door steps.
(iv) The Bank has adopted 101 villages across India for their all around
development of infrastructure facilities like setting up village libraries, community
hall and solar lighting systems in villages. The Bank has also adopted Dungarpur
District in Rajasthan for total integraed rural development and 100% financial
inclusion. Under the project, the Bank has also provided scholarships to 50 tribal
girls to promote education among tribal community.
Direct Finance to Agriculture:

• Crop Loan
• Advances upto Rs.10 lacs against pledge/hypothecation of agriculture
produce for a period not exceeding 12 months.
• Working capital term loan for financing production and investment
requirements for agriculture and allied activities.
• Loans to small and marginal farmers for purchase of land for agricultural
purposes.
• Loans to distressed farmers indebted to non-institutional lenders
• Loans granted for pre harvest and post harvest activities.
• Finance to others(such as corporates partnership firms and institutions) for
agriculture and allied activities
Indirect Agriculture Finance

• Loans to food and agro based processing units with investments in plant and
machinery utpo Rs.10 crores.
• Credit for purchase and distribution of fertilizers, pesticides, seeds, etc.
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• Loans upto to Rs. 40 lacs granted for purchase and distribution of inputs for the
allied activities such as cattle feed, poultry feed, etc.
• Financed for Agriclinics and Agribusiness Centres
• Finance for hire-purchase scheme for distribution of agricultural machinery and
implements.
• Loans to farmers through Primary Agricultural Credit Socities(PACS), Farmers’
Service Societies(FSS) and Large-sized Advasi Multi Purpose Socities(LAMPS)
• Loans to co operative societies of farmers for disposing of the produce of
members.
• Financing farmers indirectly through co operative system.
• Existing investments as on March 31, 2007, made be banks in special bonds
issued by NABARD with the objective of financing exclusively agriculture/allied
activities may be classified as Indirect finance to agriculture till the date of
maturity of such bonds or March 31, 2010 which ever is earlier.
• Loans for construction and running storage facilities designed to store agriculture
produce.
• Advances to Custom Service Units who maintain a fleet of tractors, bulldozers,
well-boring equipment, threshers, combines, etc.
• Finance extended to dealers in drip irrigation/sprinkler irrigation system upto a
ceiling of Rs.30 lacs per dealer.
• Loans to Arthis for extending credit to farmers for supply of inpouts as also for
buying the output from the individual farmers/SHGs/JLGs
• Fifty per cent of the credit outstanding under loans for general purposes under
General Credit Cards.
• Loans to NBFCs for on lending to individual farmers or SHGs/JLGs
• Loans granted to NGOs/MFIs for on lending to individual farmers/SHGs/JLGc
CRISIL Rating Models
Management of Credit Risk determines the asset quality of the Bank. An effective way to
mitigate credit risk is to have robust credit rating system in place.
Bank has introduced Basel II compliant credit risk rating models of M/s CRISIL. The
new rating models are based on two-dimensional rating methodologies specified under
Basel II requirements wherein 4 types of risks viz. industry risk, business risk, financial
risk and management quality risk are assessed pertaining to characteristics on an
obligor(borrower) while facilities proposed/sanctioned to a borrower are assessed
separately under second dimension of rating i.e. Facility Rating
The Credit rating can (i) Identify potential risk in a particular asset.(ii) Allow a bank to
maintain healthy Asset Quality (iii) Impart flexibility in pricing assets to meet the
required risk return parameters as per the bank’s strategy and credit policy.
New CRISIL Rating Models for commercial advances are based on two dimensional
rating methodology specified under Basel II Accord requirements
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Eleven models for Credit Risk rating of all commercial advances i.e. existing as well as
new with exposure of Rs.25 lacs and above (FB+NFB) for implementation have been
introduced by our Bank. The details of applicability of these models are:-
1. Large Corporate-Manufacturing units with Annual Net Sales of over Rs.100

crores and investment in Plant and Machinery of Rs. 10 crore and above and for
infrastructure projects which have started cash generations from the project
operation with part/full implementation
Service sector units with net annual sales over Rs.100 crore and/or investment in
equipment of over Rs.5 crore.
2. SME(Manufacturing)-Manufacturing units with Annual Net sales of Rs.100

crore and below and/or investments in P & M less than Rs.10 crore.
3. SME(Services)-Service Sector with Annual Net Sales of Rs.100 crore and below
and/or investment in equipment of Rs.5 crore and below.
4. Traders-Units engaged in trading activities irrespective of sales turnover.
5. Banks
6. NBFCs-Organizations registered with RBI/NHB
7. Brokers
8. Infrastructure(Power)
9. Infrastructure (Roads and Bridges)
10. Infrastructure(Ports)
11. Infrastructure (Telecom)
Large Corporate Model

This model is applicable in case of Manufacturing units with Annual Net Sales of
over Rs.100 crores and investment in Plant and Machinery of Rs. 10 crore and above
and for infrastructure projects which have started cash generations from the project
operation with part/full implementation. In case of Service sector units with net
annual sales over Rs.100 crore and/or investment in equipment of over Rs.5 crore.
These models are applicable to SME(Manufacturing Sector), SME(Services), Traders,

Banks, NBFCs,. infrastructure(Power), Infrastructure(Roads & Bridge),
Infrastructure(Ports) and Infrastructure(Telecom)
These Models involves three types of ratings-

• Obligor Rating(PD)
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• Facility Risk Rating(LGD)
• Composite Rating(EL)
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Obligor (borrower) Rating for credit worthiness indicating the Probability of Default
(PD). The obligor rating is indicative of creditworthiness of an obligor or the Probability
of Default(PD) and it is based on the assessment of past; and projected cash flows of the
company
For assessment of an obligor, the rating structure consists of evaluation by way of four
models viz.:-
Industry Risk:- The assessment of this module which is external to borrower and is done
by assessment of industry related macro economic parameters like demand supply
gap/capacity utilization level/financial ratios like ROCE/OPM etc. applicable to the
specific industry and having different risk weights.
Business Risk:- The assessment of this module is based on internal working of the
Borrower and relates to parameters such as after sales service, distribution set up,
capacity utilization etc.
Financial Risk: - The assessment of this module is based on internal working of the
Borrower and relates to parameters ;such as past and projected financials.
Management Quality:- The assessment of this module is based on internal working of

the Borrower’s management and relates to parameters such as past repayment record,
quality of information submitted, group support, etc.
Obligor rating grades range from BOB 1 to BOB 10
Facility Rating:-It involves assessment of the security coverage for a given facility and
indicates the Loss Given Default(LGD) for a particular facility.
Facility Rating is dependent upon the type of facility and securities charged to the bank
against the facility.
Facility rating grade ranges from FR 1 to FR 8
3.Composite Rating (CR 1 to CR 10) It is matrix of PD and LGD and indicates the
Expected Loss in case the facility is defaulted. The composite rating is worked out
automatically by software based on the matrix of Obligor Grade and Facility Rating
Grade
Composite rating grade ranges from CR 1 to CR 10. Bank has accepted BOB 6 as the cut
off point for the acceptance of an obligor based on obligor rating carried out as the
applicable model
Scoring Models for Educational Loan, Baroda Traders’ Loan have also been approved by
the Board rolled out for implementation. Efforts are being made to have scoring model
for all retail products keeping in view Basel II Accord.
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Small and Medium Enterprises (SME) Model
There are two models for SMEs viz. SME(Manufacturing) and SME(Services)
For all units engaged in trading activities, there is a separate model called Traders Model.
SME Model (Manufacturing Sector) – Applicable for manufacturing units with Annual
Net Sales Less than Rs.100 cr and/or investment in Plant and Machinery less than Rs.10
cr.
SME Model (Service Sector) – Applicable for Service Sector units with Annual Net Sales
less than Rs.150 ccr. And/or investment in Plant and Machinery less than Rs.10 cr.
Broad parameters are same in both the above models as applicable in case of Large
Corporates models except that the branch evaluates all modules including industry risk,
where as under large corporate model(LCM) the industry risk is evaluated at Corporate
Level and ready score is provided in the system to the branches
New Rating Models for commercial lending have been rolled out for all branches w.e.f.
1st January, 2004.
Assessment of Working Capital
PBF I Non SSI Limit Rs.2 lacs to Rs.2 Crores

SSI upto limit of Rs.5 crores
Example:
Turnover Rs.100 crores

Projected annual sales 25% of turnover as per Nayak Committee
Gross Working Capital Rs.25 crores
Less Margin 20% Rs 5 crores
PBF Rs 20 crores
PBF II Non SSI Rs.2 crores upto Rs.5 crores.
Example
Turnover Rs.100 crores
Projected annual sales 25%

Gross working capital Rs. 25 crores
Margin 25% Rs 6.26 crores
PBF Rs 18.75 crores
PBF III
All borrowers above Rs.5 crores upto Rs.10 crores
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2nd method of lending
Total Current Assets

Less 25% of total current assets
Less Current liabilities
MPBF
F
Example
Current Assets Amount(Rs. In Current Amount(Rs. In

crores) Liabilities crores)
Plant & Mach. 200 Creditors 100
Stocks 110 Other C/L 50
Receivables 50 Bank Borrowing 200
Total Current 370 Total Current 350
Assets Liabilities
In Second Method of Lending(Rs. In Crores)
Total Current Assets 370

Less 25% of C/A 92
278
Less C/L other than
Bank Borrowing 150
Bank Borrowing 128
Excess Borrowing 72
PBF IV Cash Flow Basis:
Cash Flow financing conceives self liquidating finance during various time zones unlike
the present MPBF system which is defacto a perpetual of financing working capital
requirement .
The cash requirement lending is aimed at to perceive the borrower’s requirement rather
than monotonously assess with arithmetical rigidities.
Cash requirement financing imposes its own discipline , such as sound resource planning,
receivable management, purchase planning and management of inventory.
More suitably, working capital finance on the basis of future cash flows facilitates a more
holistic view of the company’s earning capacity rather than on the basis of its capacity to
maintain a particular asset holding level.
The method is not applicable in – NDFC Construction Company, tea company, ship-
breaking, diamond industry, sugar, gud and khandsary company, SSI upto Rs.500 lacs,
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small borrowers upto Rs.2 lacs, specific long term working capital and software
companies.
SME
Our bank has for internal purposes given focused attention to finance all Commercial enterprioes
i.e. enterprises which may be outside the purview of regulatory definition of SME but having
turnover upto 150 crores and new infrastructure and real estate projects where the project cost is
upto Rs.50 crores by treating them as part of SME segment.
SME Banking will include the following across the bank:
• Micro, Small and Medium Enterprises – as per regulatory definition irrespective

geographical location, i.e. rural, semi-urban, metro areas.
• All other entities with their annual sales turnover of Rs.1 crore to Rs.150 crores and new
infrastructure and real estate projects, where the project cost is up to Rs.50 crores.
• SMEs which are Associate/sister concerns of Wholesale Banking customers.
• Club, Trust, etc.
• Financing under various Government schemes launched for MSME Sector.
• Loans granted by banks to Retail Traders dealing in essential commodities/Fair Price
Shops and Consumer Cooperative Stores are eligible for classification under Micro and
Small Enterprises Sector within Priority Sector, without any ceiling in credit limit, provided
investment in equipment (original cost excluding land and building and furniture, fittings
and other items not directly related to the service rendered or as may be notified under
MSMED Act) does not exceed Rs.10 lacs and Rs. 2 crores for Micro(Service) Enterprises
and Small(Service) Enterpruses respectively.(BCC:BR:102/24 dated 21.01.2010)
• Loans granted to Private Retails would be eligible for classification under Micro & Small
Enterprises ector within Priority Sector only upto a credit limit not exceeding Rs. 20 lacs
and provided they satisfy the definition of Micro and Small(Service) Enterprises in respect
of investment in equipment. (BCC:BR:102/24 dated 21.01.2010)
SME Business segment will not include the following:-
Financial institutions including banks, RRBs and all types of NBFCs

Central and State Governments
Associate/sister concerns of Wholesale Banking Customers, irrespective of their annual
sales/income turnover.
Direct & Indirect Agricultural Business as per Regulatory definition
Micro Finance
Whosesale Proposals SME Proposals

As per our bank’s guidelines, this As per our bank’s guidelines, this
proposal is in respect of those borrowersproposal is in respect of those borrowers
whose projected gross turnover is more whose projected gross turnover is upto
than Rs.150 crore Rs.150 crores.
Credit rating is done under Large Credit Rating is done under both
Corporate Module onlhy SME(Mfg/Service) and Large Corporate
Module
Working capital requirement is assessed Working capital requirement upto Rs.500
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as per PBF method(I-IV) lacs is assessed as per turnover method or
as per Ist method of lending, whichever is
higher. Above Rs.500 lacs, in the same
manner as is done for a Wholesale
Proposals.
- Micro (manufacturing) Enterprises
Enterprises engaged in the manufacture / production, processing or preservation of goods

and whose investment in plant and machinery (original cost) does not exceed Rs.25 lakh,
irrespective of the location of the unit.
Small (manufacturing) Enterprises
Enterprises engaged in the manufacture / production, processing or preservation of goods

and whole investment in plant and machinery (original cost excluding land and building
does not exceed Rs. 5 crores.
Micro (service) Enterprises
Enterprises engaged in providing /rendering of service and whole investment in

equipment ( original cost excluding land and building and furniture, fittings, items) does
not exceed Rs.10 lakh.
Small (service) Enterprises
Enterprises engaged in providing / rendering of services and whose investment in

equipment (original cost excluding land and building and furniture, fittings and other
items not directly related to the service rendered or as may be notified under the MSMED
Act, 2006) does not exceed Rs.2 crores.
. The Small and Micro (service) Enteprises shall also include Small Road and Water
Transport Operators, Small Business, Professional and self-employed Persons and all
other Service Enterprises as detailed below :
Small Business (whose original cost price of the equipment does not exceed Rs.20 lacs.
-Professional and self-employed persons (with limits upto Rs.10 lacs with sub-ceiling of
Rs.2 lacs for working capital) and in case of professionally qualified Medical
Practitioner in semi-urban and rural areas with limits of Rs.15 lacs with sub-ceiling of
Rs.3 lacs for working capital).
Khadi and Village Industries Sector (KVI)

All advances to units in the KVI sector, irrespective of their size of operations, location
and amount of original investment in plant and machinery would be part of direct finance
to Small Enteprises. Such advance will be eligible for consideration under the sub target
of the Small Enterprise segment within the Priority Sector.
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Indirect finance to Small Enterprises :
It will include finance to Persons involved in assisting the decentralized sector in the
supply of inputs to and marketing of outputs of artisans, village and cottage industries,
Advances to co-operatives of producers in the decentralized sector viz. artisan, village
and cottage industries, existing investments as on March 31, 2007, made by banks in
special bonds issued by NABARD, loans granted by banks to NBFCs for on-lending to
Small and Micro Enterprises (Manufacturing as well as Service Sector).
Finance to Medium Enteprises

i)A medium (Manufacturing) Enterprises.:
An Enterprise where the investment in Plant and Machineries (Original Cost excluding
Land and Building) is more than Rs.5 crores but does not exceed Rs.10 crores.
ii) Medium (Service) Entperprises :

An Enterprise where the investment in Equipments is more than Rs.2 crores but does
not exceed Rs.5 crores.
Accordingly, definition of Micro, Small and Medium Enterprises is summarized as

under based on original investment in Plant and Machinery in case of
manufacturing units and original investment in equipment in case of Service
Sector units :
Particulars In case of In case of Service Classification

Manufacturing Sector Enterprises,
Enterprises, original original investment in
investment in Plant Equipments
and Machineries
Micro Upto Rs.25 lacs Upto Rs.10 lacs` Will form part of
Enterprises Priority Sector
Advance
Small Above Rs.25 lacs and Above Rs.10 lacs and Will form part of
Enterprises upto Rs.500 lacs upto Rs.200 lacs Priority Sector
Advance
Medium Above Rs.500 lacs and Above Rs.200 lacs and Will not form
Enterprises upto Rs.1000 lacs upto Rs.500 lacs part of Priority
Sector Advance.
• Banks lending to Micro Enterprises and Small Enterprises will be classified under
Priority Sector.
• Bank’s lending to Medium Enterprises will not be included for the purpose of
reckoning finance under Priority Sector.
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• With implementation of above guidelines, instead of Tiny and SSI units, such
industries will now be recognized as Micro Enterprises and Small Enterprises
respectively.
• With the revised guidelines as issued by the RBI, Advance to Priority Sector will
also stand increased as :
 Advances to Manufacturing units with investment in Plant and

Machineries upto Rs.5 crores will form part of priority sector advance.
 Many Service Sector units with investment in equipments upto Rs.2 crores
will form part of priority sector advance.
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SME LOAN FACTORY – CONCEPT, STRUCTURE & ROLE
Bank has for internal purpose redefined SME as those entities with gross turnover upto
Rs.150 crores including:-
Professionals
Traders
SSI as defined by RBI
MEs as defined by RBI
Clubs, Trust, etc with large investable assets
All other entities(including services) with gross sales turnover upto Rs.100 crores.
In order to achieve the above objective, the bank has set up dedicated SME Loan
Factories at identified centres for providing customized products and services to SME
customer through simplified processes with the least turnaround time.
Structure:
SME factory is divided into two divisions – Central Hub and Sales Hub
Central Hub to be headed by Head(Credit)

Sales Hub to be headed by Head (Sales) and sales coordinatdor.
Both are located in same premises for better liaison and coordination.
Relationship Managers and Relationship officers are located at strategic designated

branches in various locations of the city, based on business potential available in the
designated branches and other factors.
The Head of SME Loan factory is ex-officio Head of Processing Hub
Head(credit) and Head(Sales) are executives/officials holding one rank lower than the
Head of SME Loan Factory. All the credit officers in the Credit Appraisal Hub report
to the Head(Credit), who in turn, reports to the Head of SME Loan Factory. All
Relationship managers and Relationship officers report to the Head (Sales) irrespective
of their locations.
Role and Functions:-
Role of Marketing Team is to generate leads, exploring new customers and

strengthening relations with existing customers.
Targets are fixed for Relationship Managers/officers for growth in advances to SME as
also cross selling and monitoring of their performance
Role of Credit Hub is to examine/purse leads generated by Marketing Team for
financing. Based on proposals received from successful leads, credit proposals are
processed. Proposals falling under the powers of Head of SME Loan Factory/in-charge
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of Credit Hub will be prepared and sanctioned at the Hub. And proposals beyond the
powers of the Head of SME Loan will be submitted directly to the sanctioning
authorities.
Follow up with customer/Relationship officer/Manager for required documents,
preparation of sanction letters and documents is also carried by Credit Hub.
The entire sanction procedure is to be completed within a maximum of 11 working days
from the date of receipt of complete information and disbursement is to be completed
within 14 days. In case TEV study is required the time taken is 20 days
Advantages of SME loan factories

Focused attention to the proposals leading to better quality of borrowers and projects
financed.
Developing complete customer franchised leading to growth of overall business
including non-interest income.
Development of expertise among credit officers and relationship managers who handle
the sale part.
Service as per customer’s convenience and requirements. Prompt attention to customer.
Great potential – develop high yielding business.
Step in line with government priorities
Difference from our normal credit delivery system:-
SME loan factories work on assembly line factory concept in which each individual
performs specialized functions to achieve efficiencies of scale through simplified
processes with the least turn around time as against normal credit delivery system at
branch level where all functions are performed by same branch functionaries.
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Urban Retail Loan Factories(URLF):
With a view to maintaining high standards of credit quality and at the same time
delivering the decisions faster, the bank has set up a new outfit known as Urban Retail
Loan Factory comprising of two units i.e. Sales and Central Processing Cell (CPC) in a
few cities.
The area of operation of URLF is extended to entire city, wherein it is located, covering
area of all Regions operating in that city. Retail Loan Factories are attached to one of the
Regions located in the city for all administrative and PSR proposals.
• The primary objectives are:-

• To market/ sell various retail products.
• To assist Regional/Zonal Authorities in gathering information about builders
functioning in the area for the purpose of approving the builders and their projects
• To popularize the Bank’s products through participating in various exhibitions,
fairs, conferences, etc.
• To cross sell the bank’s various products.
Central processing cell is catering to the processing needs of retail loan proposals
emanating from the Urban Sales units/branches in the same city.
Branches functioning the operational area of URLF shall continue to canvass new retail
business and pass on leads to the Loan Factories for quick processing and decision.
Courtesy:- 197
B S Bisht
Lucknow
SME Loan products
Bank has recently launched 4 new SME products:-
a. Baroda SME Loan Pack

b. Overdraft against Land and Building
c. Baroda Vidyasthali Loan
d. Baroda Arogyadham Loan
Other SME products are:-
a. SME Short term loan

b. SME Medium Term Loan
c. Baroda Laghu Udyami Credit Card (BLUCC)
d. Baroda Artisans Credit Card(BACC)
e. Credit Linked subsidy Scheme for Technological Upgradation of Small Scale
Textile and Jute Industries (CLCSS TUFS)
f. Credit Linked Subsidy Scheme for SSI Units (CLCSS)
g. Collateral Free Loans under Credit Guarantee Fund Trust Scheme for Micro &
Small Enterprises (CGTMSE)
h. Loans under National Equity Fund(NEF) Scheme
Baroda SME Loan Pack
Parameters Particulars
Eligibility All commercial Enterprises, i.e. S & M Enterprises and other
entities (including service sector) wit sales turnover upto 100 crores
exclusively banking with us.
New borrowers if desirous of having sole banking arrangement with

us.
Purpose W.C. as well as capital expenditure related to borrower’s business.
Composite Limit 4 times of borrower’s tangible net worth as per last audited B/s or
Rs. 2.00 crores whichever is lower.
Delivery of Fund based and non fund as per the borrowers requirements, within
Product overall composite limit sanctioned.
Margin 25% on all the facilities
ROI As per credit rating & guidelines
Security Exclusive charge on the assets of the enterprise. Personal
Guarantee of all promoter directors Charge on the unencumbered
personal properties of the partners, promoter directors. Wherever
applicable IIIrd party guarantee in case of credit line is above Rs.
25.00 lacs. Any other collateral for the credit line above Rs. 20.00
lac to maintain asset coverage ratio above 1.25.
Documentation • DP Note
• Letter of Continuing security
• Letter of installment with acceleration clause
• General form of Guarantee signed by the promoter directors /
Courtesy:- 198
B S Bisht
Lucknow
other guarantors / corporate guarantee etc. in terms of sanction.
• Composite agreement.
• Equitable mortgage of fixed assets
• All other usual undertakings / documents as per bank’s
guidelines.
Other Conditions • Minimum Financial Ratio
Current Ratio 1.20

D/E ratio 3.00
Assets coverage ratio 1.25
• Provisions of CGFTS of SIDBI applicable for credit lines upto

Rs. 25.00 lacs in case of SSI unit.
• Credit rating as per extant guidelines.
OVERDRAFT AGAINST LAND & BUILDING
Nature of facility Overdraft
Purpose • To meet fund based Working capital requirements
• To augument long term Margin requirements
Limit • Minimum Rs. 15.00 lac for all types of branches
• Maximum Rs. 50.00 lac (Rural / S-U branches)
Rs.200.00 lac (Urban / Metro branches)
Eligibility • Proprietorship, partnership firms, Pvt. / Public Ltd. Company
engaged in Manufacturing and / or service sector of any
commodity goods.
Notes
• The unit should have been established in the line of activity for
a minimum period of 2 years.
• In case of new units the facility can be granted if the unit is
being established by the existing customers with satisfactory
track record from their own resources.
• Units with less than two years establishments may be
considered with the prior approval of one authority higher than
the sanctioning authority.
Units with credit rating B+ ad above (Old module)

Units with credit rating BOB6 and above (New Module)
• For take over of accounts :

Product norms plus norms prescribed in domestic loan policy
2005 / SME policy 2005 to be complied with.
Security Primary
Courtesy:- 199
B S Bisht
Lucknow
• Mortgage of factory, Land & Building and/or any other property
(L&B) belonging to promoters.
• Personal Guarantees of all partners / directors
• IIIrd party guarantee if available
• Charge on unencumbered personal properties of the partners,
Promoters Directors if available.
Margin 40% of the Market Value of the property Mortgaged.

Regional Head may reduce to 35%.
Period 12 months
Documentation • DP Note
• Letter of continuing security
• Hypo of goods covering stocks, book debts
• Equitable Mortgage of the property
• General form of Guarantee signed by the Directors / other
guarantors
• Undertaking from the borrower to exclusively deal with our
Bank.
• Other documents / undertakings as per bank’s guidelines.
ROI As per guidelines

Sanctioning As per discretionary lending policy
Authority
Method of W.C Limits
Assessment
Manufacturing sector :
As per Nayak Committee recommendations viz. Min, 20% of
accepted turnover, or, under PBF method, whichever is higher.
Service Sector :
20% of projected gross receipts subject to verification of ST returns

of previous years / quarters in case the enterprises is not under
audit.
Note
Drawl for working capital (Fund based and non fund based) should
not exceed advance value of L & B / sanctioned limit whichever is
lower.
Insurance Security / property charged / mortgaged to be insured as per banks
norms.
Classification SSI / ME in manufacturing / service sector as the case may be.
Financial Ratios Current Ratio SSI (Manf) 1.17
ME (Manuf) 1.20
Debt Equity Ratio Existing A/cs Take over A/cs

Courtesy:- 200
B S Bisht
Lucknow
TL/TNW 3:1 3:1 (4:1 in case of SSI)
TOL / TNW 4.5:1 4.5:1
Asset Coverage Ratio : 1.50

Other conditions • Credit rating as per loan policy, 2005 norms.
• Borrowers to route the sales and other transactions through OD
a/c
• Stock / book debt statement to be obtained on half yearly basis.
• Facility under the scheme and as well as under usual scheme not
to be considered simultaneously.
• Existing borrowers can get their facilities transferred to OD
against Fixed Assets after compliance of terms and conditions.
• In case any defect is observed during inspection of security,
security is to be substituted of equal value otherwise the facility
is to be liquidated immediately but not later than 12 months.
• In case of Guarantee and L/C the bank’s extant guidelines to be
followed against earmarking of OD facility.
Processing & • As per prevalent service charges.

Documentation
Fee
Baroda SME Gold Card
All Micro, Small & Medium Enterprises as per the regulatory definition in standard
category for last two years and with obligor rating of ‘BOB4’ and above in CRISIL
module are eligible for Gold Card. The product is also available to SMEs in service
sector also
Baroda SME Gold Card envisages provision of additional limit of 10% of the assessed
eligible bank finance for working capital to existing Small and Medium Enterprises, on
request along with regular application for Working Capital Limits to meet emergent
requirements.
Purpose To provide hassle – free on the spot assistance to take care of
borrowers’ emergent requirements and tie-up temporary mismatch
in liquidity arising out of delayed payment buyers, tax payment,
execution of bulk orders etc.
Enterprises • Accounts in Standard Category for last 2 years, with Obligor
Criteria Rating of ‘BOB4’and above and enjoying Working Capital
limits of Rs. 25 lacs and the above.
• Accounts having sole banking arrangement with our Bank.
Rate of interest As applicable for regular Cash Credit facility depending upon
applicable credit rating.
Security • Charge on current assets, extension of charge on fixed assets if
Courtesy:- 201
B S Bisht
Lucknow
stipulated for Cash Credit
• Personal Guarantee of Directors
Collateral security as available to other facilities.
Documents • DP note
• Hypothecation Agreement
• General Form of Guarantee signed by the Guarantors
Note
Documents to be obtained along with the documents for other

facilities.
Margin NIL
Period 12 months to be allowed on 4 occasions during the year for a
maximum period of 2 months on each occasion.
Courtesy:- 202
B S Bisht
Lucknow
TIE-UP DETAILS (3rd Party Product)
Bancassurance:-
Name of Tie-up Partner Name of Product Date of Tie-up

National Insurance Co Ltd Non Life Insurance - General 01.06.2004
National Insurance Co Ltd Medical aid Insurance 23.02.2006
Co-branded Product –
“Baroda Health”
IndiaFirst Life Ins. Co. Ltd. Life Insurance 13.11.2009
Mutual Funds:-

UTI Mutual Fund AMC Various Mutual Fund Products 01.03.2006
Birla Sunlife AMC Various Mutual Fund Products 05.04.2006
Reliance Capital AMC Various Mutual Fund Products 06.06.2007
Sundaram BNP Paribas AMC Various Mutual Fund Products 15.10.2007
Franklin Templeton MF Various Mutual Fund Products 15.10.2007
Baroda Pioneer AMC Ltd. Various Mutual Fund Products 05-10-2007
Kotak Mahindra AMC Ltd. Various Mutual Fund Products 03.06.2009
IDFC AMC Ltd. Various Mutual Fund Products 05.06.2009
Products under other Tie-up Arrangements:-

M/s India Infoline Limited E-Trading 25.01.2007
ECGC Ltd. Export Credit Insurance 06.11.2007
Courtesy:- 203
B S Bisht
Lucknow
Introduction of General Credit Card
The Reserve Bank has advised scheduled commercial banks and RRBs to
introduce a General Credit Card (GCC) Scheme for issuing GCC to their customers in
rural and semi-urban areas. The GCC will operate like the Kisan Credit Card and there
will be no linkage to purpose or end-use of funds or security. The GCC can also be used
for withdrawing cash against the limit sanctioned. Fifty per cent of the outstanding
amount will be treated as indirect finance to agriculture. Women will be given
preferential treatment under the GCC Scheme. Banks have been asked to utilise the
services of local post offices, schools, primary health centres, local government
functionaries, farmers' associations/clubs, etc., for sourcing of borrowers for issuance of
GCC. Detailed guidelines have been communicated to banks in this regard.
Courtesy:- 204
B S Bisht
Lucknow
General Insurance
1. Bank has signed an MOU with National Insurance Co. Ltd for distributing their
non life insurance products through our branch network under Corporate Agency
arrangement.
2. Bank is acting as an Agent of the National Insurance Co. Ltd.
3. There is no risk participation by the Bank.
4. Bank gets 10% average commission on premium collected from all General
Insurance policies.
5. This is yet another stream for generating fee income for the Bank.
6. There are over 200 general insurance policies. Some important policies are Fire,
Motor, Shopkeepers, Householders, Personal Accident, Mediclaim etc.
7. All Bank branches are selling general insurance policies of National Insurance Co.
Ltd.
8. From corporate office we done mapping of our branches with offices of NICL and
advised the names of contact persons from NICL to our branches at various
locations for necessary support and handholding to ensure business through NICL.
9. We have huge captive business and potential.
10. All the assets financed by the Bank are to be insured and if we convince the
borrower to take insurance from our Bancassurance partner Bank can earn sizable
fee income.
11. Insurance is a subject matter of solicitation and hence we should not insist
unwilling customers to take insurance policies from NICL.
BARODA HEALTH MEDICALIM INSURANCE POLICY
It is a Medical Insurance Scheme, available only to account holders of our Bank, which
takes care of the hospitalization expenses incurred by the customer up to the amount of
sum insured, in respect of the following eventualities.
• Any illness / disease.

• Accident injury.
• Any surgery that is required in respect of any disease of accident that has arisen
during the policy period.
• The minimum Hospitalization should be for 24 hours.
Courtesy:- 205
B S Bisht
Lucknow
• This policy is available only to account holders of our Bank.
• It is available for a very low premium compared with similar products available in the
market.
• The insured pays one single premium and obtains cover for a family of 4- self, spouse
and 2 dependent children ( A family Floater Scheme ), i.e. either one of all of the
entire family, as stated, can avail of the sum insured opted.
• Non- earning son / daughter is considered dependent (Scholarship amount is not
considered as income). However, Married daughters are not considered dependent.
• No medical examination required for commencement of health cover.
• Income Tax benefit is available under section 80 D for the premium paid.
• Pre-existing diseases also get coverage after -3- continuous claim-free policy year.
• Insurance coverage i.e. sum assured may range from Rs.50, 000/- to Rs5.00 lacs per
family of 1+3.
• Upper age limit of primary member ( first name person ) is allowed upto 80 years, if a
person obtains the insurance cover before completion of 65 years and continue to
renew the policy upto the age he wishes to or 80 year, whichever is earlier.
• Period of insurance cover is one year. The policy needs renewal on or before the
expiry date for continuity. A grace period of 15 days may be allowed in case of break
in renewal caused due to circumstances beyond the physical control of the
policyholder.
• The scheme is administered through Third Party Administrators (TPAs) for settlement
of Hospitalization Claims under the insurance cover.
• The insured individuals get cashless hospitalization facility also in the selected
hospitals through TPAs. The whole process is hassle-free and treatment upto the limit
of insurance is available without any payment at the time of admission or discharge.
Payment of hospital bill up to the sum insured will be taken care of by the TPA
directly.
Other Third Party Products:
India Infoline: For on line trading in equity and futures.

Western Union Money Transfer for remittance of funds from abroad
Baroda Remit Express.
Courtesy:- 206
B S Bisht
Lucknow
Selling Points on Housing Loan
Service at your door step

Sanction within 6 working days
Branch of your choice
Maximum amount auto 60 times of gross monthly salary
Highest Loan upto Rs100 lacs
Lowest Margin 15%
Free Personal Accident Insurance
No Hidden charges
Low Processing Charges
8 AM to 8 PM branch – convenience in repayment
No processing charges for taking over account
0.25% discount to group borrowers
Longest repayment- upto 25 years
Home improvement Loan
Additional Assured Advance(AAA)
Finance for registration and stamp charges
Pre closure option is free if payment is made from own sources
Selling Points on Education Loan
Collateral free upto Rs.7.50 lacs

No guarantee upto Rs. 4 lacs
1% Interest concession for girls.
Processing charges NIL
Documentation charges Nil
1% rebate if interest debited is serviced during repayment holiday
Margin NIL upto Rs.4 lacs
Simple interest charged during moratorium period
Free debit card to student
In Baroda Scholar Remittance charges Nil
Capability Certificate is issued free of charge in Baroda Scholar Scheme.
Courtesy:- 207
B S Bisht
Lucknow
Important Issues related to Heart (As advised by a Medical Practitioner):
• Coronary related treatment is a 400 billion dollar industry in USA.
• 50% of the cardiologists in USA agree that angiography is not the reliable test for
measuring the health of the heart.
• Invaded heart (heart and arteries treated by angioplasty / bi-pass surgery is never
better than a natural heart. So it is better not to go for any surgery.
• A person can die of heart attack even if the heart is healthy and a person can live for
years even with weak/sick heart.
• Heart does not decide life. It is decided by GOD.
• Lot many cardiologists have died of heart attack.
• Bi-pass surgery or Angioplasty promises 24 carat Gold but delivers Lead.
Precautions / Measures suggested for heart patient:
➢ Walk leisurely in the morning and evening as long as the person/patient can
undertake; preferably for one hour at a time.
➢ Prefer standing position than sitting or sleeping position for most part of the
day.
➢ Practice breathing exercises (Pranayam) and Yogasans.
➢ Do not lift any weight of more than 5 kg.
➢ Enjoy taking meal very slowly; do maximum chewing of food; have food in
about 30 minutes.
➢ Do not drink tea/coffee/aerated drinks.
➢ Do not take catered food/ refrigerated food/ stale food.
➢ Avoid dosa/idli/vada/fast food.
➢ Do not take Khatta (sour) food items – khatta in past, present or future like
oranges, pine-apple, mangoes, lemon, imli, mausami, grapes, cooked tomato.
➢ Banana, Papaya, Chikoo and Kharbooja can be taken.
➢ Vegetables are always better than fruits.
➢ Curd (not sour) can be had but with malai.
➢ Ghia(uncooked) is Hridyavardhak.
➢ Have Ghia (loki) and Pumpkin (Green outside and white inside) as much as
possible.
➢ Pumpkin is Good, Cheap, Easy, available all the year round, available
everywhere, no side effect.
➢ Fresh Ghia should be taken preferably in natural form or boiled form.
➢ Do not take white sugar or white salt.
➢ Brown sugar and rock salt can be taken.
➢ Pumpkin juice is to be taken for about 10 times a day; anytime during the day.
The procedure for making pumpkin juice is:
“Take 200 gm of pumpkin,10 leaves of Tulsi, 10 leaves of Pudina, 4 seeds of
Black Pepper, a pinch of Rock Salt Grate and whip them in a blender/juicer and
take it. Drink fresh juice each time.”
➢ Prayer to Almighty God daily.
➢ Meditate daily saying that I am OK. My heart is strong and healthy.
➢ See a movie every week. Socialise.
➢ Remain cheerful and Happy.
Courtesy:- 208
B S Bisht
Lucknow

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CAPSULE

MAXIMISING GROWTH AND PROFIT THROUGH

I am grateful to Dr K Srinivas Rao, Secretary to Board, who has inspired me in compiling

July 10, 2010

MEMORY PAD FOR INTERVIEW

You may like to have a quick glance at the following

Sr. Name of Topic / Reference Source

4 About the banking - Reforms Newspaper

7 Other latest topics - Risk Management Paper clippings,

3. Avoid consumption of spicy/oily/heavy foods on the night previous to the

10. Answer should not exceed the allowed space.

15. Wish you the best in all your endeavors.

SL.No. Policy Measures Impact

Inflation will be contained and

CRR hike will suck out Rs.12,000

The gradual withdrawal of easy

Lending rates may not be changed in

The RBI is presently facing the

RBI has facilitated the flow of banks’

The move will improve flow of credit

The road sector is expected to receive

The introduction of option trading is a

Importers and exporters as well as

More product will certainly deepen

1st PNB 4,36,000 40.85% Rs.3905 0.53% 14.16%

2nd BOB 4,16,000 35.63% Rs.3058 0.34% 14.36%

3rd Canara 4,04,000 29.85% Rs.3021 1.06% 13.43%

4th BOI 4,01,000 31.75% Rs.1741 1.31% 12.94%

5th ICICI 3,83,000 41.07% Rs.4670 1.87% 19.40%

6th Union 2,91,000 29.36% Rs.2075 0.81% 12.51%

7th HDFC 2,22,000 50.00% Rs.2949 0.31% 17.40%

• Average Working funds(AWF) - Fortnightly Average of Total Assets

Performance of Bank during 2009-10(Global)

• Global Business Rs.4,16,080 crore (Global deposits Rs.2,41,044 crore, Global

Motto for the year 2010-11:

‘LEVEERAGING TECHNOLOGY FOR AUGMENTING BUSINESS GROWTH

Business Model focusing on Sustained Growth:

• CASA – Building a healthy CASA portfolio

Strategies and Action Points:

• ‘KYC’ is our Survival Kit

• Fast processing of loan proposals

Non Interest Income:

• The multiple delivery channels

Asset Quality and NPA Management:-

• Staff to have complete and up dated knowledge about products.

Parameters (Remember Five Rs) Growth in % p.a.

a. Reorienting our systems and procedures towards customer

Key Challenges Bank is facing to - day:

As a learning organization and an organization which is continuously evolving, we

• Ensure best in class customer service.

BANK’S MAJOR WEAKNESSES

Business segmentation allows managers to:-

Advantages of Business Segmentation:

To focus more clearly on the current and emerging business opportunities.

Wholesale Banking(Mid corporate and Large Corporate)

Electronic Products & Services

• Transaction-enabled internet banking for Anywhere Banking.

• Baroda Laghu Udhyami Credit Card

• Loans to Agriculture and Allied Activities

• Baroda Home Loan

Sl. Name Extent of Ownership

• Permitting Indian companies as well as registered partnership firms to invest in