A Summer Training Report

On

Corporate Credit At

We Care Dil Se Submitted in partial fulfillment of requirement for the award of degree of Masters of Business Administration 2006-08 Submitted to: Mr. Vikram Sandhu Submitted by: Sumeen Kaur MBA IIIrd Sem Roll no: 44

Department Of Commerce and Business Management Guru Nanak Dev University Amritsar

Acknowledgement
The formal statement of acknowledgement will hardly meet the ends of justice in matter of expression of my deep sense of gratitude and obligation to all those who helped me in completion of my summer training report. The sincere assistant and contribution of many people led to the culmination of this effect. This will be the most appropriate form to thank all of them. I express my heartiest appreciation for all these concerned. I feel to acknowledge my indebtedness and deep sense of reverence to Mr. Vipan Kapur (Branch Head Amritsar, IndusInd Bank Limited) for giving me an opportunity of doing my summer training at their branch. It had been a wonderful learning experience for me to have worked with such professional people as himself and other employees. I am extremely thankful to Mr. Navin Bedi (Deputy Manager- credit, Amritsar) for being my project co-coordinator and rendering a helping hand to me whenever I needed assistance of the kind. In spite of his busy schedules he extended me his full co-operation and support. His constant encouragement, inspiration, personal interest, guidance and patience have gone a long way in completion of my training and project report.

Certificate
This is to certify that Miss Sumeen Kaur D/O S. Pritpal Singh student of MBA-III rd Semester, GNDU, Amritsar has undertaken 6 weeks practical training on Corporate Credit at IndusInd Bank Limited.

Training was imparted at the request of the candidate for two months from 4/06/07 to 16/07/07. Her behavior and attitude during training period was quite satisfactory.

I wish her success in life.

Declaration
I Sumeen Kaur is hereby affirm that the summer training project report on Corporate Credit at IndusInd Bank Limited submitted to Guru Nanak Dev University, Amritsar in partial fulfillment for the award of degree of Masters of Business Administration is bonafide report and no copy of this report has been submitted for any other degree or diploma.

(Signature) Sumeen Kaur

Preface
The most motivating aspect with pursuing a course in management or business studies is the dynamism associated with it. Dynamism of adding a new perspective to ones personality and vision by accumulating wider knowledge, developing analytical and conceptual skills, not only by traditional ways of

teaching and learning but by observing the things at work. The summer training gives a considerable exposure to students and provides them with an opportunity to see the practical aspects of working of corporate world. It exposes a student to an invaluable treasures experience.

My training report is on Corporate Credit at IndusInd Bank Limited. The banking industry is probably the most dominant financial services industry in the world today. Banks have been around for a very long time and have now evolved into more specialized and sophisticated institutions.

Corporate Banking deals with the industry financing and servicing part of the banking operations. The bank provides various kinds of services to its corporate clients and markets them in a manner which is notably different from other marketing practices.

Contents
Chapter No.
1) Industry Profile
Introduction to Banking Industry History of banking Banking in India Defining Bank

2) Company Profile
About IndusInd Bank Limited History of Indusind New Era at IndusInd Financial Status Future Outlook

3) Services offered at IndusInd Bank

Personal Banking Wealth Management Services Corporate Banking International Banking Treasury Capital & Commodities market NRI Services On Line Banking

4) Corporate Credit at IndusInd

Organization of Credit Credit Origination Credit Appraisal Credit Risk Assessment Credit Risk Rating Security Pricing Documentation Standards Broad Parameters for different Borrower Segments Products Credit Administration Credit Monitoring & Risk Containment Credit Audit Benchmark norms for various Segments/ Activities Corporate Credit Products

5) Evaluation & Conclusion References and Sources

Industry Profile
Introduction to Banking:
Banking system occupies an important place in a nations economy. A banking institution is indispensable in modern society. Banking institutions are the premier financial institution which plays a private role in the economy of the country. The main principle of the business of banking is that the resources mobilized through the acceptance of deposits must institute the main stream of funds which are to be utilized for lending or investment purpose. The banker, is thus, an intermediary and deals with money belongings to the public. A number of other institutions, which also deals in money, are not designated as banking institutions, because they do not fulfill all the pre-requisites of a bank. The specialized financial institutions e.g. Industrial Finance Corporation of India (IFCI) and State Financial Corporation (SFCs) etc are not banks they do not accept the deposits as banks.

History of Banking:
At the end of late-18th century, there were hardly any bank in India in the modern sense of the term. At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the Americas. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. With large exposure to speculative ventures, most of the banks opened in India during that period could not survive and failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century.

At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that time there were very small banks operated by Indians, and most of them were owned and operated by particular communities. The banking in India was controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the State Bank of India. There were also some exchange banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the economy. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency banks, and the exchange banks. There was potential for many new banks as the economy was growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." Under these circumstances, many Indians came forward to set up banks, and many banks were set up at that time, and a number of them set up around that time continued to survive and prosper even now like Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank.

Banking in India:
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.

Defining Bank:
A bank is a commercial or state institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. A commercial bank accepts deposits from customers and in turn makes loans, even in excess of the deposits; a process known as fractional-reserve banking. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for example, most banks also rent safe deposit boxes in their branches. Currently in most jurisdictions commercial banks are regulated and require permission to operate. Operational authority is granted by bank regulatory authorities which provides rights to conduct the most fundamental banking services such as accepting deposits and making loans. A commercial bank is usually defined as an institution that both accepts deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank. Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analysing the financial condition of their business clients to determine the level of risk in each loan transaction. Banking services have expanded to include services directed at individuals, and risk in these much smaller transactions are pooled.

A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income. The name bank derives from the Italian word banco "desk", used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth. According to WHITEHEAD: A bank is defined as an institution which collects surplus funds from the public safeguards them and makes them available to the true owner when required but also lends sum not required by their true owner those who are in need of funds and can provide security. According to Indian Banking Companies Act : Banking company is one which transacts the business of banking, which means the accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdrawal by cheque, draft, order and otherwise.

COMPANY PROFILE
About IndusInd Bank:
IndusInd Bank Ltd. is one of the leading new-generation private-sector banks in India which commenced its operations in 1994. The Bank recently had a successful GDR issue and its net worth touched Rs. 1056 crores as on March 31, 2007. The Bank posted a total business turnover of Rs.28,700 crores and is poised for greater growth in the years ahead. Its network expansion received a fillip with the Bank securing 40 authorizations from Reserve Bank of India for new branches and 100 offsite ATMs in the last calendar year. The Bank currently has a network of 170 branches, spread over 141geographical locations in 27 states and union territories across the country. In addition, IndusInd Bank also has a representative office each in Dubai and London. The Bank has proactively adopted the requirements of ISO 9001:2000 quality certification for its entire network of branches.

Driven by technology, IndusInd constantly upgrades its support systems for the introduction of retail banking products and alternative delivery channels. The Bank continues to display its commitment to global benchmarks in technology, as testified by its winning the prestigious IBA Award for the year 2006 (Runner Up) for the Overall Implementation of Straight Through Processing between various systems. Since the merger of Ashok Leyland Finance in June 2004, the Bank has expanded its retail portfolio. It is a large player in the financing of commercial vehicles, utility vehicles, 2/3-wheelers and construction equipment. It is one of the first banks to go live on the Real Time Gross Settlement (RTGS) initiative of RBI. It enjoys clearing bank status for both major stock exchanges - BSE and NSE and three major commodity exchanges in the country MCX, NCDEX, and NMCE. It also offers DP facilities for stock and commodity segments.

IndusInd Bank has been awarded the highest A1+ rating for its Certificates of Deposits by ICRA and the highest P1+ rating for its FDs by CRISIL, which has also assigned the highest safety ratings to the Banks Pass through Certificates for securitized assets.

History of IndusInd:
IndusInd is an organisation established in 1994 with the aim of providing a common conduit to channel the entrepreneurship and philanthropy of NonResident Indians (NRIs) for the benefit of India. IndusInd derives its name and inspiration from the Indus Valley Civilisation which, over 4500 years ago, promoted flourishing trade between India and other countries, backed by sound business sense and a spirit of innovation. While the concept was originated by Mr. Srichand P Hinduja, Chairman of the Hinduja Group and Global Coordinator of IndusInd, it has been converted into reality through the collective efforts of a large number of businessmen and professionals from India and abroad. In a span of just 12 years, IndusInd has become a truly global entity through the collective efforts of its members. It has ventured into banking, financial services, media & communication, and philanthropy & social upliftment. The IndusInd Group was responsible for setting up IndusInd Bank Ltd., the first private-sector bank in India in the post-1991 liberalised era. The IndusInd organisation, having successfully established IndusInd Bank and other commercial ventures, has also set up a philanthrophic organisation, the IndusInd Foundation, to fulfil the objectives of charity and social upliftment. IndusInd Bank supports IndusInd Foundations activities.

As an extension of its multidimensional activities, IndusInd, has also created an apex body of resident and overseas Indians and foreign investors, namely IndusInd International Federation, to promote, advance, protect and stimulate the interests of trade, commerce and industry in India and other parts of the world. The Bank was formally inaugurated in April 1994 by Dr. Manhmohan Singh, Honorable Prime Minister of India who was then the countrys Finance Minister, started with a capital base of Rs.1, 000 million (USD 32 million at the prevailing exchange rate), of which Rs.600 million was raised through private placement from Indian Residents while the balance Rs.400 million (USD 13 million) was contributed by Non-Resident Indians.

A New Era at IndusInd:

The merger with the Bank in June 2004 of Ashok Leyland Finance Ltd., among the largest leasing finance and hire purchase companies in India, set in motion a process of consolidation through the combined customer base of the merged entity and its increased geographical penetration. IndusInd Bank has become one of the fastest-growing banks in the Indian banking sector today with its branch network expanding from 61 as on March 31, 2004 to 137 as on March 31, 2006 reflecting an increase in excess of 125% in 24 months. The Bank has approximately 150 ATMs of its own, and has concluded multilateral arrangements with other banks with a total network of 15,000 ATM outlets. All the outlets of the Bank, including its branches and ATMs, are connected via satellite to its central database that operates on the latest version of IBMs AS400-720 series hardware and Midas Kapiti (now, Misys) software.

IndusInd Banks broad lines of business include Corporate Banking, Retail Banking, Treasury and Foreign Exchange, Investment Banking, Capital Markets, Non-Resident Indian (NRI) / High Networth Individual (HNI) Banking, and (through a subsidiary) Information Technology. IndusInd Bank provides multi-channel facilities including ATMs, Net Banking, Mobile Banking, Phone Banking, Multi-city Banking and International Debit Cards. It was one of the first banks to become a part of RBIs Real Time Gross Settlement (RTGS) system. It has implemented an enterprise-wide risk management system encompassing global best practices in the area of Risk Management, with help from KPMG. This has enabled the Bank to remain in the forefront in complying with the requirements of Basel II. It is the first bank in India to receive ISO 9001:2000 certification for its Corporate Office and its entire network of branches. With its roots in Indian tradition and emphasis on customer care, IndusInd Banks service philosophy is well reflected in the communication tagline We Care Dil Se.

Financial Status:
An Overview 2006-2007 (for year ending 31st March, 2007)
Net profit of Rs. 68 crores vis--vis Rs. 37 crores last year (increase of 84%). Healthy growth in business balance sheet size crosses Rs. 20,000 crores. Net worth now in excess of Rs. 1000 crores. Capital Adequacy Ratio of 12.54% - up from 10.54% last year. Branch network touches 170, against 137 last year. Significant growth in non-interest income Rs. 244 crores vis--vis Rs. 189 crores Total income has grown, and operating expenses have also been contained by and large, but interest expense has continued to rise. Capital The Bank took major strides during the year in enhancing its capital. These included: A maiden GDR issue of Rs. 147 crores (which also raised the paidup capital by Rs. 30 crores) Tier-II issue of Rs. 50 crores. Upper Tier-II issues (in two trenches) of Rs. 209 crores. The Bank now has a very healthy CRAR of 12.54 per cent. The CRAR would be even higher as per the new capital adequacy framework (in line with Basel-II guidelines) and would come to 13.24 per cent, largely because of the retail portfolio comprising schematic loans such as vehicle loan, housing loan, etc. and small-ticket loans to small businesses.

Major Initiatives The Bank took several major initiatives during the year. Among these are: Launch of new products and services like Mobile Banking, Visa Gold Debit card, Gift Card, On-line issuance of insurance policies, Sunday Banking, 8-to-8 banking, etc. Tie-up with Aviva Life Insurance for bancassurance. Tie-up with the National Financial Switch (NFS), and now allowing our customers access to more than 19,000 ATMs in India. Strategic alliance with Doha Bank, Qatar and launch of e-remittance product. Additional tie-ups with Exchange Houses in respect of inward remittance.

Financial Results 2007-2008 (for quarter ending 31st June, 2007)

Performance Highlights Operating profit and net profit have both gone up, vis--vis the levels a year ago Operating profit is up from Rs. 27 crores to Rs. 32 crores an increase of 19 per cent Net profit has grown by more than 62 per cent - from Rs. 8 crores last year to Rs. 13 crores in the current year Deposits are up from Rs.15,400 crores as of June 2006 to Rs.17,329 crores as of June 2007 a year-on-year growth of 13 per cent Advances have grown by 6 per cent during this period - from Rs. 10,809 crores to Rs. 11,469 crores Average deposits (up from Rs. 14,853 crores to Rs. 17,047 crores) and average advances (up from Rs. 9761 crores to Rs. 11,247 crores) have each grown by 15 per cent

Future Outlook:
The bank is quite positive about the coming months. They do not expect any further rise in cost of deposits, partly because of their focused CASA thrust and partly because of the hopefully benign interest rate scenario for the remainder of the current year. At the same time the yield on advances should continue to go up, even if the interest rates stabilize, with existing low-yielding loans making way for newer higher-yielding loans. And, going ahead, their focus on fee-based income is also expected to make significant contributions to the bottom-line

Key Focus Areas during 2007-2008 International Banking. Capital and Commodity Markets. M&A Advisory. Rapid scale-up of alternate distribution channels such as ATMs, Internet Banking, Contact Centre, Direct Sales Force (e.g., Business Facilitators and Business Correspondents), etc. Effective re-branding in the marketplace. Implementation of new technology relating to data warehousing, customer relationship management, Basel-II compliance, kiosk banking, online share trading and mutual funds purchase and redemptions, cheque truncation, etc. You

SERVICES offered at IndusInd

Personal Banking:
IndusInd Bank understands that Personal Banking needs are unique. That is why they offer a wide range of services that combine convenience with care for their customers time, money and security. IndusInd Personal Banking services makes banking easier for us.

1. Accounts
IndusInd Bank Deposit Schemes help manage finances better by saving time and money. A wide range of deposit schemes cater to the varying needs at every stage in ones life. 1.1 Regular Saving Bank Account: IndusInd Bank extends Savings Bank Account with various facilities Quarterly Balance Rs.5000/- in case of A class cities, Rs.3000/- in case of B class towns and Rs.2000/- in case of C class towns Multicity Operation Customer are able to operate the account from any of their branches directly Statements Statement of Accounts is provided at quarterly intervals Debit Card International Debit Card is issued to the customer at reasonable charges and access to 1700 ATMs under bilateral arrangements with free of charges Internet Banking Access to Internet banking is allowed free of charges Standing Orders Standing Orders and Balance orders will be activated at nominal charges

1.2 Indus Easy Saving Account: Indus Easy Savings Account is a facility to provide basic banking facilities to common man without tedious processes and higher minimum balance. One may recommend eligible potential customers to be a part of IndusInd Family through Indus Easy Savings Account. 1.3 Demat Account: A depository system is a system, which holds your shares in the form of electronic accounts in the same way a bank holds our money in a savings account. When one decides to have his shares in electronic form he should approach a Depository Participant (DP) who is an agent of the depository to open an account. He should surrender his share certificates in physical form and his DP will arrange to get them sent to and verified by the company and on confirmation credit his account with an equivalent number of shares. This process is known as dematerialisation. We can always reverse this process if you so desire and get your shares reconverted into paper form. This process is known as rematerialisation. Share transactions (like sale or purchase and transfer/transmission etc.) in the electronic form can be effected in a much simpler and faster way. All we need to do is that after confirmation of sale/purchase transaction by our broker, we should approach our DP with a request to debit/credit our account for the transaction. The Depository will immediately arrange to complete the transaction by updating our account. There is no need for separate communication to the company to register the transfer.

1.4 RFC Account: As an important step towards further liberalisation of foreign exchange facilities available to individual residents, it has been decided by Reserve Bank of India to permit a person resident in India to open, hold and maintain with a licensed Bank (which is also an Authorized Dealer) in India a Foreign Currency (Domestic) Account and foreign exchange acquired from any of the sources specified as under can be kept in this account by the resident. while on visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or From any person not resident in India and who is on a visit to India, as honorarium or gift payment for services rendered or in settlement of any lawful obligations; or by way of honorarium or gift while on a visit to any place outside India; or from an authorized person for travel abroad and represents unspent amount; or Gift received from close relative; or foreign exchange earned through export of goods and/ or services.

1.5 ZERO-C-Account: Indus Zero-C-Account is a unique type of Current Account with all benefits of a Premium Account without insisting for a pre-defined minimum balance. Customers are able to get any number of Demand Drafts/Pay orders, irrespective of the amount, on any of their branches free of commission (Zero Charges account). This account is ideally meant for transactions by Cheques/DDs/POs and not for Cash transactions (Zero Cash account), even though cash deposit/withdrawal upto Rs.10000/per day is permitted.

1.6 Premium Current Account IndusInd Bank extends Premium Current Account with a number of benefits to the Business community Quarterly Balance Average Quarterly Balance of Rs.50000/Multicity Operation Personalized Multicity Cheque book will be issued Statements Monthly statements would be available before 5th of succeeding month Debit Card International Debit card is allowed in the case of Sole Proprietorship account Internet Banking Allowed without charges Standing Orders Standing Orders and Balance Orders will be executed at free of cost Demand Drafts Free DDs and POs will be allowed, if it is not out of cash remittance even on Correspondent Banking arrangements

1.7 Premium Saving Account: IndusInd Bank extends Premium Savings Bank Account with a number of facilities. Quarterly Balance Average Quarterly balance of Rs.25000/Multicity Operation Personalized Multicity Cheque books will be issued to the account Statements Monthly statement of accounts will be available before 5th of succeeding month Debit Card International Debit Card with access to 1700 ATMs without any charges Internet Banking Available without any charges Standing Orders Standing Orders and Balance Orders will be executed free of charges Demand Drafts DDs and Pos will be issued free of charges, if it is not out of cash remittance Best For All Premium customers

2. Deposits
IndusInd says You have worked hard to earn your money. Now, let your money work hard to earn for you with IndusInd Bank Fixed Deposits. 2.1 Flexi Term Deposit: IndusInd Bank extends flexibility in partial withdrawal of Term deposit without affecting the remaining portion of deposit. A Cheque book is issued to the Zero Balance account to be opened along with the deposit.

Minimum Deposit amount Rs.25000/Interest Rate As applicable to Term deposits including Senior Citizen benefits TDS on Interest Applicable Deposit Tenor 7 days to 120 months Documents required > Application form > Passport size photograph > Proof of Residence > Introduction Features Term deposit is treated as a cluster of Rs.1000 units and part withdrawals are being treated as closure of units with applicable rate of interest. Loan facilities 95% of the Balance Principal and interest credited Nomination facility Available Premature Closure Allowed

2.2 Two-In-One Deposit: IndusInd Bank extends Overdraft facility along with Term Deposit, to enable the depositor to avail 95% of the deposit as overdraft with reasonable interest rate for the period and amount overdrawn.

Minimum Deposit amount Rs.10000/Interest Rate As applicable to Term deposits including Senior Citizen benefits TDS in Interest Applicable Deposit Tenor 7 days to 120 months Documents required > Application form > Passport size photograph > Proof of Residence > Introduction Features An overdraft limit to the tune of 95% of the deposit will be set along with the placement of deposit Loan facilities Built-in Overdraft Nomination facility Available Premature Closure Allowed Best For Individuals and Corporate who expect short term credit limits without affecting the deposit

2.3 Sweep-In/ Sweep-Out Deposits: IndusInd Bank offer Sweep out facility over a cut off limit in CA and SB accounts. Similarly, the Term deposits would be closed and credited to the CA/SB account (Sweep-in) as and when it is required, with minimum interest loss to the customer.

Minimum Deposit amount Rs.10000/- SB Rs.20000/-CA Interest Rate As applicable to Term deposits including Senior Citizen benefits TDS in Interest Applicable to the Term deposits Deposit Tenor 7 days to 120 months Documents required > Application form > Passport size photograph > Proof of Residence > Introduction Features Balance over Rs.10000/- in SB and Rs.20000/- in CA will be automatically transferred to Term Deposit for a predetermined period, as per customers instruction. In case of insufficient balance in the CA/SB account at any point in time, required amount will be transfered to these accounts by breaking deposits to the benefit of the customer . Loan facilities 95% of the deposit Nomination facility Available Premature Closure Allowed Best for Individuals and Corporate who are getting continuous float in CA/SB

2.4 Monthly Income Plan: IndusInd Bank offer Monthly Income Plan to Term Deposit holders Minimum Deposit amount Rs.10000/Interest Rate As applicable to Term deposits including Senior Citizen benefits TDS in Interest Applicable Deposit Tenor 12 months to 120 months Documents required Application form Passport size photograph Proof of Residence Introduction Features There are two options available under Monthly Income Plan a) Monthly discounted interest will be credited to account/by DD/by ECS credit b) Monthly interest without any discount from third month onwards which will be credited to account/by DD/ECS credit Loan facilities 95% of the deposit Nomination facility Available Premature Closure Allowed Best For Individuals and Corporate who expect short term credit limits without affecting the deposit

2.5 Young Saver Deposit: IndusInd Bank inculcate savings habit among children with high return on their savings by linking Savings Bank Account with Flexi Recurring Deposit. Account is being opened and operated by the guardian for the minor. Opening Balance Rs.11/Interest Rate As applicable to Term deposits in the case of Recurring Deposit TDS in Interest Recurring Deposits are exempted from TDS Deposit Tenor 12 months to 120 months Documents required > Application form > Passport size photograph > Proof of Residence > Introduction Features Balance in Savings Bank account will be transferred to a flexi recurring deposit on the last day of every month, leaving Rs.100/- in SB account. Loan facilities 95% of the amount available in RD account Nomination facility Available Premature Closure Allowed Best For Young children

2.6 Senior Citizen Scheme: IndusInd Bank offer special rates to Senior Citizens on Term Deposits Minimum Deposit amount Rs.25000/- No maximum Interest Rate + 0.50% than the actual rate for General Public TDS on Interest Applicable Deposit Tenor 7 days to 120 months Documents required Application form Passport size photograph Proof of Age & Residence Introduction Features Special rate is applicable to Senior citizen those who have completed 60 years of age. In case of joint deposits, the first name should be of the Senior citizen. Deposits under Senior citizen should not be used as security for commercial purposes. Loan facilities 95% of the Balance Principal and interest credited Nomination facility Available Premature Closure Allowed Best For Individuals and Corporate who are in need of short term investment

2.7 Regular Recurring Deposit: IndusInd Bank accumulates our monthly installments with high yield through its Recurring Deposit Scheme. Opening Balance Rs.500/Interest Rate As applicable for term deposits including the benefits of Senior Citizens TDS in Interest No TDS as per current regulations Deposit Tenor 12 months to 120 months Documents required Application form Passport size photograph Proof of Residence Introduction Features Fixed monthly installments are being remitted to Recurring Deposit by a Standing Order, ECS Mandate or by regular direct remittance Loan facilities Up to 95% as Loan or Overdraft Nomination facility Available Premature Closure Allowed with eligible rate of interest for the period run without any penalty Best For Business class and Self employed with varying income stream

3. Loans
IndusInd Bank offers a range of loan schemes for all our special needs that require finance. 3.1Personal Loan: It is an easy and sensible way to have quick access to the money we need and when we need it. Competitive fixed interest rates with flexible terms that are customized to fit our budget. Purpose To help pay for unexpected expenses, household goods or just about any personal need. Nature of facility Balance transfer facility is available to reduce the high interest burden with existing financier Security Personal guarantee Period 12 to 60 months Quantum Rs.20000/- to Rs.10 lacs Rate of Interest 16% Repayment Equated Monthly Installments Processing Charges 1% of the Loan Best For Individuals, Professional, Self employed and Businessmen

3.2 Home Loans: Home Loan for Resident Individuals Home Loan for construction / purchase of house / flat or take over of an existing loan Renovation / improvement / extension of House Nature of facility Loan Margin 20% of Agreement Value+Stamp Duty +Registration 30% cost of construction Security House property and Spouse to be Co-applicant. Equitable Mortgage will be created and cost to be borne by applicant Quantum Rs.3 lacs to Rs.50 lacs Rate of Interest 10.5 % (for amounts <20 lakhs) reset fixed -Interest calculated at monthly rests 13 % (for amounts >20 lakhs) reset fixed -Interest calculated at monthly rests 9.25 % floating rate (for amounts <20 lakhs) 12 % floating rate (for amounts >20 lakhs) Prepayment charges 2% of outstanding amount Processing Charges 1.25 % of the loan amount Best For Individuals, salaried, professional & self-employed Home Loan for Non Resident Individuals Home Loan for construction / purchase of house / flat / renovation / improvement / extension of house to Non Resident Indians. Margin 20% of the Agreement Value + Stamp Duty + Registration.

Security Mortage of the house property. Co-applicant should be spouse (wherever applicable) and Personal Guarantee of Resident Individual Tenure Maximum 120 months Quantum Rs.5.00 Lacs to Rs.50.00 Lacs Rate of Interest Best in the Industry Processing Charges 1.25% of Loan amount Best for Salaried Individuals, professionals and self-employed

3.3 Small Business Loan: For any business to succeed, the availability of funds throughout its life cycle is of paramount importance. Bank offers a wide range of services to meet all the banking requirements of small and medium enterprises. The limits are fixed keeping in view the enterprise's need for funds against the value of the security, margin available and credit worthiness of the borrower's enterprise. 3.4 Loan Against Shares: INDUS demat cash scheme Eligibility Adult Individuals Purpose The loan is given for any of the purposes broadly categorized as under : Personal Purposes: For meeting personal expenses like for marriage, housing, education, medical etc.

Business Purposes: For meeting financial requirements for your professional or business purposes other than operations on stock markets Loan Amount Minimum Rs. 1 lac, Maximum Rs.20 lacs Security Equity Shares of the Companies on the approved list of the Bank held in demat form. Margin 40% of the value of shares for approved Stocks only. Value of Shares Current Market Price Interest Rate 10.50% p.a. with quarterly rests payable monthly. Processing Charges 1% (of the loan amount sanctioned) upfront and no processing charges on renewal Period of Loan For 12 months. May be renewed on request, at Bank's discretion: Conditions: Current Account Only Demat shares security. to be opened with the Bank for availing the OD facility Depository Account to be opened with the Bank for holding the Demat shares. from the Banks' approved list will be accepted as security. However shares held with other Depository Participants may also be accepted as

3.5 Credit Against Specific Securities: IndusInd Bank solves your liquidity problem without liquidating your long term investment. Nature of Facility Overdraft Margin 20% of face value Security Pledge of specified security Quantum No ceiling Rate of Interest Best in the Industry Period Renewable every 12 months Repayment Service the monthly interest. Settle account with own source or by bullet payment at the time of maturity Processing Charges 0.25% of the advance Best for Saleried class and IT payers

3.6 Traders Advances: IndusInd Bank extends Working Capital limits to small traders and businessmen on the basis of turnover and other parameters. Nature of facility Demand Loan / Overdraft Margin 25% Security Primary security of stock and collateral security of property. Quantum 20% of annual turnover upto Rs.10 lacs. Projected turnover and audited financial statements for credit limits over Rs.10 lacs and the eligibility would be fixed as per various financial parameters. Rate of Interest Best in the industry. Repayment By monthly installment / on demand and servicing of monthly interest. Processing Charges 0.25% of advance Best for Wholesale / Retail traders with valid licence / registration

4. Cards
Surprising how a slim piece of plastic with a magnetic strip eases life! Whether it is an ATM card or a credit card, there are definite advantages to the increasing trend of cashless transactions. But not without limitations. The advantage of almost universal acceptability of a credit card comes with a subtle disadvantage of indulging in extravagance without thought of prudence.

4.1 Power card And trust IndusInd Bank to bring it to us - the IndusInd Bank Visa PowerCard - an International Debit Card that is as widely accepted as a credit card but restrains us from overspending! After all, for someone who is going places, need a card that can accompany him too! The IndusInd Bank International VISA PowerCard ensures that there are no inconvenient detours to an ATM Center in our journey to our destination, be it shopping, eating out, travelling or whatever. Using the VISA Electron Online debit card program, our IndusInd Bank Account will instantly debited every time we transact using our PowerCard at any VISA-accredited Merchant Establishment or ATM, anywhere across India or the world. 4.2 Mahila Card: Mahila Card is a variant of Power Card wherein the features of International Debit Card are blended with Personal Overdraft to make it user-friendlier and with wide customer accessibility. This product is developed focusing the Debit Card requirements and Credit needs of female customers.

Eligibility: Women in the age group of 21 to 60 are eligible for Mahila Card. Customer Accounts with Cheque returns on account of financial reasons will not be eligible for this Card.

4.3 Gift Card: IndusInd Bank brings us the Indus Gift Card - an ideal gift for any occasion. This card is available at IndusInd Bank branches, from Rs.250/- to Rs.20,000/- for any amount. Beneficiary has the option to purchase any item of his / her choice from any of the merchant establishments in India or abroad using the gift card. And it can be used for on-line purchase from shopping portals also. 4.4 Gold Debit Card: IndusInd Bank also provides its value added Gold Debit Card. This card is designed for us, to exceed our expectations at any of the VISA ATMs or PointOf-Sale terminals, in any part of the world. Gold Debit Card cardholders of IndusInd Bank can receive global assistance, 24 hours a day, 7 days a week, when they travel overseas from VISA Global Customer Assistance Services. These services can be used for lost/stolen Card reporting or miscellaneous information that we may require overseas.

Wealth Management Services

1. Portfolio Management Services
IndusInd Bank (IBL) has tied up with one of Indias leading financial service providers- Religare, to offer Portfolio Management Services (PMS). IBL customers can now avail of PMS to get the best out of equity markets. Religare is a decade old company, promoted, controlled and managed by the promoters of Ranbaxy Ltd. The Portfolio Management team at Religare has 52 man years of experience in the equity market. The process-driven approach to wealth management aims to safeguard our interests, while leveraging risk to our advantage. We can choose among different portfolios according to our investment objectives and our risk-return profile.

2. Investments
IndusInd Bank offers us personalised investment options to help achieve your financial objectives. Solutions are tailor-made to suit each individual's requirements. They offer a host of financial instruments that includes Fixed Deposits, Mutual Funds, Bonds and Insurance products. 2.1 GOI Bonds: GOI Savings Bonds are instruments that are issued by the RBI, and currently has one option - 8% rate of interest per annum, which is taxable. The maturity period of the 8% (taxable) bond is six years. These are among the safest instruments available for investment, and we can be assured of getting back the full amount of your investment.

2.2 Capital Gains Bonds: Bank also distributes other bonds like National Housing Bank (NHB) and Rural Electrical Corporation Ltd. (REC).

3. Mutual Funds
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. Mutual Funds can broadly be classified into three categories: Equity Funds - An equity mutual fund identifies and invests in shares of high quality companies whose businesses are sound and have good, steady growth. These funds seek to provide good returns in long-term. This is an ideal category for those who want to participate in stock market but do not have sufficient time or expertise required for an active tracking. This category of funds would help in growing investors money with the help of Fund Managers expertise. Balanced Funds - A balanced fund seeks a mix of the two classes, debt and equity, to achieve a higher return than debt without forsaking completely its safety and stability. The offer document of the fund would specify the percentage range that would be allocated to equity and to debt. Usually, the range is between 50 per cent and 75 per cent in equity, and the rest in debt. Debt Funds - This one would aim to achieve steady income at low risk to the invested principal. To achieve this the mutual fund would invest in what are called fixed-income instruments.

Corporate Banking
1. Large Indian Companies
IndusInd offers credit facilities including working capital finance, term loans, trade and transactional services, foreign exchange and cash management services to large Indian companies. The facilities are structured to meet specific needs of the clients keeping in mind their risk profile. With thier strong customer oriented approach, they have built relationships with a number of Indian companies including those belonging to well known industrial houses. 1.1Fund Based Facilities: a) Working Capital Finance Working Capital facilities are provided to finance the day-to-day business requirements. Funding requirements are structured to finance procurement of raw materials/stores and payment towards manufacturing costs and other overheads. Sales are financed against sundry debtors/ receivables. The Bank offers a combination of operative cash credit and working capital demand loan to meet the domestic working capital requirements of its clients. b) Short Term Finance The Bank offers short-term loans for a period ranging from 3 months to 12 months to sound corporates for meeting their specific short-term working capital requirements. The funds are provided with interest rates either linked to BPLR or at a fixed rate with varying repayment patterns. c) Term Loans IndusInd offers term loans to both Industrial as well as Infrastructure sectors promoted by strong business houses. These loans are for a period of 3-5 years with a moratorium period. Interest rates could be fixed or floating linked to the bank's BPLR.

d) Bills Finance- Supply/ Purchase This product enables corporates to fund their operating cycle right from the stage of procurement to sale. Bill Financing is extended by IndusInd Bank to its clients at competitive rates. Letter of credit backed bill discounting and clean bill discounting are the convenient mode of financing for domestic trade transactions. BOE could be broadly classified into Demand and Usance bills and are further classified into clean and documentary bills. e) Asset Securitization Bank also extends loans for asset securitisation comprising lease rental receivables and other receivables backed by firm arrangements. In such cases, the future cash flows of the client are discounted applying a discount rate and arrived at the Net Present Value (NPV) which is the amount lent to the borrower. f) Line of credit This facility provides total flexibility to corporates to utilise the line (sanctioned limit) of credit. The terms of the line of credit are either predetermined or negotiated at the time of availment. This facility is used as and when the client has a requirement. g) Asset Based Financing Bank offers finance for the purchase of Construction / Earth Mining Equipments of all brands, new and used Commercial Vehicles of all manufacturers and Two Wheelers. Their schemes are structured to suit our specific requirements. (i) Commercial vehicles (ii) Two- wheelers/ white goods (iii) Construction equipments

1.2 Non Fund Based Facilities: a) Letter of credit The Basic objective of Letter of Credit is to facilitate orderly movement of trade. It is therefore necessary that the evidence of movement of goods is present. Banks are not connected with the quality / quantity of the goods and are concerned only with the documents which should conform to the terms and conditions of Letter of Credit. IndusInd Bank establishes Letters of Credit for inland and foreign transactions. b) Bank guarantees Bank Guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. IndusInd Bank sanctions Bank Guarantee limit to facilitate issue of guarantees on behalf of its clients. Various types of guarantees offered are financial, performance, bid bond, tenders, customs, etc. These guarantees are well accepted. And their overseas correspondent bank alliances also enable them to issue guarantees overseas for participation in global tenders, etc. 1.3 Value Added Facilities: a) Associate financing Working capital finance is extended to Enterprises having business association with large Indian Companies. IndusInd Bank sanctions bills discounting facilities for bills drawn by the supplier/vendor and accepted by the corporate. The Bank also offers our cash management solutions to integrate your associates with the bank to facilitate quick transaction delivery.

b) Cash management services IndusInd CMS aims at collecting, maintaining, and disbursing our funds in a way that minimizes the risk of misuse, maximizes profitable cash flow, and supports our operations and mission. c) Corporate salary accounts Indus Comfort accounts offer us many conveniences. Employees can avail the comfort of all the facilities of a savings account, preferential pricing on loans, salary advance and overdraft facility. All these come at no extra cost and at no minimum balance. d) Investment avenues for cash surplus corporates (i) Deposits: Term Deposits ranging from 7 days and above can be made. No penalty on premature closure upto Rs. 50 lacs. And special rates for amounts more than Rs. 15 lacs are quoted on a daily basis. Flexible term deposits from 7 days and above can also be made. Deposits can be placed in units of Rs. 1/- giving you the convenience of withdrawal in an emergency. And special rates for amounts more than Rs. 15 lacs are quoted on a daily basis. (ii) Other avenue: The bank is empanelled as a distributor for most of the well performing and leading mutual funds. Certified personnel assists in making an investment decisions for us. Instruments by the RBI and various other bonds like National Housing Bank

(NHB) and Rural Electrical Corporation Ltd. (REC) are also distributed.

2. Small & Medium enterprises

For any business to succeed, the availability of funds throughout its life cycle is of paramount importance. Bank offers a wide range of services to meet all the banking requirements of small and medium enterprises. The limits are fixed keeping in view the enterprise's need for funds against the value of the security, margin available and credit worthiness of the borrower's enterprise. 2.1 Fund based facilities a) Working capital finance b) Short term finance c) Term loans d) Bills finance- supply/ purchase e) Asset securitization 2.2 Non- fund based facilities a) Letters of credit b) Bank guarantees 2.3 Value added facilities a) Associate financing b) Cash management services c) Corporate salary accounts d) Investment avenues for cash

3. Supply chain management

3.1 Working capital finance 3.2 Bill discounting This product enables Suppliers and Customers of large business establishments to fund their operating cycle right from the stage of procurement to sale. Bill Financing is extended by IndusInd Bank to its clients at competitive rates. Letter of credit backed bill discounting and clean bill discounting are the convenient mode of financing for domestic trade transactions. BOE could be broadly classified into Demand and Usance bills and are further classified into clean and documentary bills.

International Banking
IndusInd Bank provides a wide range of international banking products and services to corporate clients, both large and medium, and small-scale enterprises. Innovative products are designed with focused approach and to suit the requirements of the clients. Bank offer Trade Finance to exporters, both at pre and post shipment stage, in Indian Rupees and Foreign Currencies at competitive price.

1. Correspondent Banking
Bank has a full-fledged Correspondent Banking Dept. It has correspondent banking relationships with over 232 banks spread across the globe to facilitate cross-border trade and payment related services. The services offered include a

wide variety of fee-based corporate products and services like documentary credits, stand by letter of credit, guarantees, remittances, acceptance of collections etc. The Bank takes care of specialized project/activity funding in foreign currency.

2. SWIFT
Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a highly secured mechanism to transfer funds. The users of SWIFT are a closed group, consisting of member banks, securities houses, financial institutions, etc. In order to become a member of the SWIFT network and use SWIFT communications facilities, a bank has to become a shareholder of SWIFT. SWIFT has standard message formats which is defined for all kind of messages, hence all messages sent and received have a standard SWIFT format for Customer to Customer, Bank to Bank, Statements, Foreign Exchange, Precious Metals deals, Cash Management, Letters of Credit and Trade Finance etc. are few among them.

Over 40 branches of IndusInd are connected with Swift directly which helps speedy transmission and delivery of messages. Messages sent through SWIFT are cost effective against messages sent through telex or any other mode of communication.

3. Rupee drawing arrangement

IndusInd Bank offers INR remittance services to NRI's and persons residing abroad through drawing arrangement/fast remittance facility through exchange houses for their remittance requirement to India.

For it, Bank has entered into a money transfer agreement with Gulf Express Exchange and M/s. Wall Street Exchange Centre Dubai. Bank is also in process

of entering into 4-5 new exchange houses based in Dubai and Kuwait facilitating remittance in INR to India.

4. Advisory services
Bank provides advisory and financial services to Indian entities for setting up joint ventures and wholly owned subsidiaries abroad and trade finance solutions in the area of cross border trade and to exploit the emerging business potential and support international banking operations.

5. Facilities to exporters
5.1 Export Finance in Rupees As an important incentive to the exporters community for boosting exports, financial assistance in Rupees is extended to exporters on priority basis on relatively liberal terms. Such finance is provided both at pre-shipment stage (as working capital finance) and at post-shipment stage (to bridge the time lag between the shipment of goods and the realisation of proceeds). Interest charged on export credit is exempted from the purview of interest tax. 5.2 Forward booking Facilities to Exporters Exporters can book forward contracts to cover their crystallized exposure to exchange risk in respect of genuine transactions permitted under the Exchange Control Regulations, against production of suitable documentary evidence. The choice of the currency and tenor are left to the exporter. The maturity of the cover should not exceed the maturity of the underlying transaction. 5.3 Other Facilities The bank also provides all the other facilities to exporters permitted by Reserve Bank of India and allowed under FEMA viz.

6. Trade finance
IndusInd Bank offers special schemes to provide timely credit to Importers/Exporters at competitive interest and exchange rates in Indian rupees well as foreign currency.

7. Gold banking
Government of India has liberalised the policy on Bullion Trading and permitted Authorised Dealers to import gold/silver/platinum for sale to NRIs, exporters manufacturing gold ornaments, SIL holders and residents. Reserve Bank of India has permitted IndusInd Bank to import gold, silver and platinum. Their branches at Ahmedabad (Ellisbridge), Bangalore (M.G.Road), Chennai (Nungambakkam), Coimbatore (Avinashi Road), Jaipur (Church Road, Off M.I.Road), Mumbai (Opera House), New Delhi (Barakhamba Road) and Secunderabad (Begumpet) are designated for importing gold on consignment basis to cater to the need of Gold traders, jewellery manufacturers exporters, and domestic consumers.

9. Remittance services (Money transfer services)

9.1 MoneyGram IndusInd Bank offers a new International money transfer product 'MoneyGram'. MoneyGram is a person to person money transfer service launched by M/s. MoneyGram International Ltd., Colorado, USA. This enables a person to transfer funds upto USD 10,000 to any person in just 10 minutes. 9.2 M/s Zoha Inc M/s Zoha Inc. is also a licensed money transfer company based at New Jeresy, U.S.A. Besides their own locations the company has tied-up with 1000 other agents in New York and New Jeresy states, USA. The arrangement of

transferring funds favouring beneficiaries in India by M/s Zoha Inc. is through their web site.

10. Suvarna mudra A range of 999.9 pure gold coins

Attractively priced gold coins (5gm and 10gm) and ingot (50 gm) Magnificently designed product, presented in Tamperproof Assay Certified Certicard Highest purity 999.9 Available at 69 branches across the country Can be purchased by cash (upto Rs. 50,000), debit to account (IndusInd customers) or against Payorder /Demand Draft. In case of DD/PO, delivery will be affected only after receipt of clear funds.

Can be purchased by non-customers too. Discount available for bulk purchases

Treasury
The treasury of the bank is a very active participant in the inter-bank market. It mobilises resources for the bank from domestic as well as international markets and also manages the surplus funds available by deploying it profitably. The treasury is divided into foreign exchange and money market desks. The foreign exchange desk is supported by the sales desk, which interacts with the corporate clients keeping them abreast of the latest happenings in the international markets and advising them on risk management tools available and the best strategies for hedging their exposures.

1. Foreign Exchange desk

Foreign Exchange Desk is bifurcated into Inter-bank & Corporate Desk. The corporate desk interacts with the branches and clients for trade and other related transactions, while the Inter-Bank desk undertakes the cover operations for such transactions. The Inter-bank desk also trades in currencies on banks account.

2. Money market desk

Money Market desk performs the following activities on the banks account: >Funds Management >Balance Sheet Management >Debt securities trading 2.1 Treasury bills Treasury Bills are short term money market instruments issued by RBI on behalf of the Govt. of India. Basically, they are Zero coupon bonds issued at a discount to face value and redeemed at par on maturity date. On which no Tax is deducted at source. RBI has permitted booking of forward contract against face value of T-bills on the maturity date. A finite yield is thus possible insulating the investor against exchange rate fluctuations. However, booking a forward contract is optional to the customer. The return offered by bank is the sum of the yield on treasury bills and exchange gains, if any. 2.2 GOI securities These are sovereign coupon bearing instruments issued by the Government of India. These are fixed half-yearly coupons paid on specific dates. Available in wide range of maturities from above one year (short-dated) to twenty years (longdated). These are available in primary & secondary markets and are highly liquid.

Capital and Commodities markets

The Banks Capital and Commodities Market group has a range of services for different segment of clients like Investors, Brokers, Corporates etc

1. Stock exchange cell

The Bank is clearing banker to cash and F & O segments of National Stock Exchange of India Ltd. (NSE) and The Stock Exchange, Mumbai (BSE). Bank extends following credit facilities to the members of these exchanges subject to Banks internal credit norms, which is framed on the lines of guidelines issued from time to time by RBI. 1.1 Bank Guarantee 1.2 Secured overdraft 1.3 Delivery versus payment 1.4 Intra Day Funding

2. Commodities exchange cell

The Bank is clearing banker to Multi Commodity Exchange (MCX). As Clearing Bankers it acts as the intermediary carrying out the flow of funds from the MCX accounts to the trading members account and vice versa depending on the statement provided by the exchange. Bank carries all the various transactions as the Clearing Bank to the MCX and gives the required effects to the various accounts on receiving a statement of instructions from

MCX. Members have to open 2 accounts with the clearing bank at the designated branch.

3. Bankers to public/ rights issues

Bank is registered with SEBI to act as banker to issue. All branches and extension counters are connected through V-SAT to the central database with IBM - AS 400 hardware and Kapiti/3 International banking software. This enables us to give on-line the collection figure to the issuing company at any given point in time and expedite various reports to be given to SEBI or stock exchanges.

4. IPO funding
As per RBI guidelines, Bank has started funding IPO subscription to individuals. Product : Eligibility : Purpose : public issues Loan amount : Margin : Interest : Conditions : Indus Prime Invest Resident Individuals At the discretion of the Bank to fund subscription of selective Maximum Rs. 10 lacs As stipulated by RBI, at present being 40% Charged upfront at the rate of interest decided by the Bank for specific IPO. Current and depository accounts to be opened with the Bank.

Documentations : Simple, Standard and pre-printed document sets.

5. Depository services

In line with its commitment of providing highly evolved products and prompt services, the Bank provides depository services to its clients. IndusInd Bank is one of the first banks to offer depository products to its customers, which commenced with the enactment of Depositories Act 1996, in India. The Bank got registered as a Depository Participant (DP) of National Securities Depository Limited and started offering a range of Depository Services since January, 1997.

NRI Services
NRIs (Non Resident Indians) have always been the most important focus of IndusInds business. It is their endeavor to cater to the evolving needs of NRIs and to continuously meet their expectations with new products and services to deliver prompt and efficient personalised customer service at all times through the best of Electronic and other Direct Banking Channels.

On Line Banking
1. Indus-Net- Internet Banking
Indusnet - Internet Banking service from IndusInd Bank offers us banking services online with the same personal effort that we receive at their branch. Our online requests are processed by a proactive team of Personal Bankers adhering to service quality standards.

Security features include multi layered security architecture comprises of firewalls, filtering routers, Verisign's 128-bit SSL enabled encryption and digital certification to ensure security and protect against any unauthorized access.

2. Indus Pay- e-wallet

It is a simple and convenient way to transact online from anywhere at any time. With this service we can create our own e-Wallet and assign accounts to it. We can then shop / donate / subscribe online with list of Merchants and authorize the transaction from chosen bank account using our transaction password. Moreover, we can also view all these transactions online.

3. VISA money transfer

No more waiting in queues in Bank branches, getting the Demand Drafts made, and writing cheques that takes days to clear, here is the only solution to make it simpler, convenient and faster by IndusInd Bank VISA Money Transfer. Transferring money has never been so easier before. From our IndusInd Bank account, we can now transfer money to any of the 23 million VISA Cards anywhere in India through IndusNet - IndusInd Banks Net Banking service and any of IndusInd Bank ATM.

4. ATMs
Easy access to the national network of IndusInd bank ATMs 4.1 Deposit Cash / Cheque Special deposits slip-cum-envelopes are provided at the ATM centers. All we have to do is fill in the details of cash or cheques and insert it into the deposit slot. Just remember not to put stapled notes or coins into the envelope 4.2 Withdraw Cash We can withdraw up to Rs 15,000/- per day from our account using the ATM/Debit card in any of ATMs across the country subject to availability of balance in our account. Also we can shop up to Rs 25000 per day using our debit card.

4.3 Statement Enquiry We can get a mini-statement of last five transactions done on our account. 4.4 Balance Enquiry We can check the available balance in our account and even get it printed on the transaction slip 4.5 Request for a Cheque Book We can key-in the request for a Cheque book and get it collected with valid authorisation or in person as soon as it is ready. 4.7 Funds Transfer Flexibility to allow on-line transfer of funds between our various accounts linked with our ATM/Debit card.

5. Mobile Top ups

INDUS MOBILE TOP UPS - enables the customer to refill his mobile prepaid card directly through IndusInd ATMs. Mobile Top Ups is a Value added service offered to all IndusInd customers through ATM channel. Customers can now recharge their mobile refills from IBL ATMs anytime.

6. E-statement
Now we can have your account statement information at our fingertips. Just choose to receive Monthly/Quarterly Savings or Current Account Statement Online at your e-mail address/es in an all-new PDF format. These online statements can be downloaded to print, save and archive for future reference. It is completely user friendly.

9. Mobile banking
Mobile Banking is a new convenience Service for IndusInd customers. Under this, information based services is offered to customers by way of SMS messages, for which one register. These could be event or frequency based alerts.

Corporate Credit at IndusInd

Credit Organization:
Business Segments
IndusInds business segments for building credit portfolio are broadly classified as under: 1.1 Retail Banking -- Vehicle Finance Division This segment covers individuals, corporate and non-corporate entities. Vehicle Finance Division has two product groups, as under: Commercial Vehicle Division handles loans for acquisition of new Personal Products Division handles loan for acquisition of vehicles vehicles/equipment for commercial application viz. cars and two wheelers for personal use 1.2 Retail Banking (other than vehicle finance) This includes: a. b. All advances and credit facilities sanctioned to individuals and Non-individual borrowers excluding public limited companies with

Hindu Undivided families, mainly schematic loans. annual net turnover of less than Rs.25 crores to whom -- either singly or

in association with related entities our Banks aggregate exposure is Rs.2 crores or less. 1.3 Wholesale Banking All other borrower segments are covered under wholesale banking including all non-individual borrowers with annual net turnover of Rs.25 crores or more, or to whom -- either singly or in association with related entities our Banks aggregate exposure is more than Rs.2 crores. Further wholesale banking is sub-divided into following segments based on annual turnover: a) Corporate and Institutional Segment: annual net turnover of more than Rs.300 crores. b) Small and Medium Enterprises (SMEs) and Agricultural Banking: Covers All Entities with annual net turnover of Rs.25 crores or more, but not exceeding Rs.300 crores and All those with annual net turnover of less than Rs.25 crores to whom -either singly or in association with related entities our Banks aggregate exposure is more than Rs.2 crores. Covers all Entities with

Agricultural banking with reference to WBG refers to direct/indirect lending for agriculture/Micro-Finance where under under tieup is and arrangements through Collection with such Agency Corporates/Institutions, Corporates/Institutions lending Managing

agreements or other such well defined arrangements. Direct loans to farmers for agriculture would be handled by RBG and VFD. c) Financial Institutions Group: All financial institutions irrespective of turnover.

2. Business Groups
As per our organization structure, following business groups are responsible for building Banks credit portfolio: 2.1 Retail Banking --- Vehicle Finance Division (VFD): VFD specializes in Vehicle Financing and functions through various branches across the country. Vehicle financing covers all commercial vehicles, mining/ earth moving/ construction equipment, cars/jeeps, etc. 2.2 Retail Banking (other than vehicle finance) (RBG) RBG handles all Retail advances extended to individuals and Hindu Undivided families, mainly as schematic loans and Non-individual retail borrowers defined at 1.2 above. This group operates through all branches.

2.3 Wholesale Banking Group (WBG) WBG comprises Business, Product and Support Groups covering the following functions: I. Groups a) Corporate and Institutional Segment: Responsible for Corporate advances and liabilities from this segment. b) Small and Medium Enterprises (SMEs) and Agricultural Responsible for ensuring a significant market share in Responsible for developing Development Finance

Banking: c)

SMEs segment to enhance returns to the Bank and distribute risk. Financial Institutions Group: Financial Institutions relationships from target customer segment consisting of Commercial Banks, including Institutions, Mutual Funds and Co-operative Banks, etc. and achieve business and revenue targets.

II. Product Group 1) Treasury : Responsible for acquiring product-specific relationships for Forward Contracts, other Derivatives like Interest Swaps and structured investment products General Ledger accounts (CSGL). 2) Trade Finance: Responsible for originating and building client including Constituent Securities

relationships with a focus on Trade Finance products for domestic and international Remittances, Collections, Negotiation (LC & non-LC based), Discounting (LC & non-LC based) (build fund based bills portfolio) as also non-fund based credit portfolio. 3) Capital / Commodity Markets : Responsible for originating and building client relationships with a focus on Capital and Commodity Market products such as Fund based Loans to brokers, Non-fund based Bank guarantees for brokers towards exchanges Depository services, Brokers pool accounts, Advances against shares (capital) or warehouse facilities (commodity), Bullion operations (consignment and retail), etc. 4) Transaction Banking : Responsible for originating and building client relationships with a focus on remittance and cash management products such as Anywhere Banking, Electronic fund transfer, RTGS, Dividend / interest warrant payments, Draft / pay orders (bulk), Cash Management Services, Online remittance products including NRI focused inward remittances. 5) Liabilities: Responsible for originating and building client

relationships with a focus on Liability products mainly Time Liabilities.

6) Private Banking (Insurance, HNI / NRI & Mutual Funds): Responsible for achieving premium collections and commission earnings as per budget and provide value added services to customers. Distribute all third-party products to achieve fee-based income to augment overall earnings of the bank and ensure top-line and bottom-line budgets for HNI and NRI segment. WBG set-up has identified Business / Product Heads for every line of activity in Corporate Office. These Business / Product Heads are supported by their respective team of Relationship Managers/ Product Managers placed in branches.

Business Heads at Corporate Office and their Relationship Teams will focus on customer segments of Corporate and Institutions, SME/SSI/Agriculture and Financial Institutions Group (FIG) with following roles and responsibilities: To originate fund and non-fund relationship from respective customer target segment To originate Corporate Finance/Investment Banking deals for advisory and placement by Investment Banking Division of the Bank To cross-sell other products/services through the support of Product Heads To develop a portfolio of Customers originated through Credit relationship and ensure cross selling of other products/services. Product Heads at Corporate Office and Product Managers at Branches will focus on customer origination through non-credit relationship and by sale of Banks products/services covering segments like Liabilities, Transaction Banking, Trade Finance, Treasury & Risk Management products and Capital & Commodity Market products. The responsibilities would include the following:

 Customer/Business origination through sale of respective product and services Sale of respective products through leads generated by Business Heads Provide leads to Business Heads for Credit relationship and cross-sell other products/services Sale of Mutual Fund products (as alternate investment to deposits) Employee Salary accounts and retail loan products (including demat accounts) As and when any customer (product/service user) gets converted into a credit relationship by way of credit exposures (covering either fund based or non-fund based exposures), entire relationship (including product /service-based) will stand shifted from related Product Group to respective Business Group. Both teams will converge towards Banks ultimate objective of acquiring customer relationships and expanding customer base.

WBG has realigned the set-up in 13 Branches identified as A category branches having greater potential for entire gamut of wholesale business (13 erstwhile Corporate Banking Branches). Similarly, the Group also proposes to position WBG team at B category Branches identified depending upon their segment specific potential, mostly at non-metro urban centers, from where they will cover nearby C category branches.

3. Other functions relating to business processes:

3.1 Credit Function Credit function support, which will have no budget responsibility, is available to above business groups, as under:

 Credit Department at Corporate Office is responsible for facilitating approvals for credit proposals (other than exposures to Capital/Commodities market) sourced by WBG. Vehicle Finance Division has its own credit structure coming from its organization before merger with the Bank. Retail Banking Group has its retail credit structure reporting to Retail Head. Capital and Commodity Markets Division also has a credit structure within its set-up. Over a period of time, all credit groups would be completely separated from business groups. In 2004-05, this separation has been implemented in corporate credit, which now functions independent of business origination process. 3.2 Treasury: Treasury handles inter bank exposures, exposure to rated and traded paper FOREX and interest rate derivatives.

3.3 Capital and Commodity Markets Division (CCMD) : CCMD handles capital market related activities including depository services, IPO financing, loan against shares, issue of guarantees (and other services) on behalf of brokers, etc. 3.4 Risk Management: Bank follows a strong enterprise-wide risk management system put in place wIth the help of KPMG in 2003-04. Bank has set up Integrated Risk Management Department responsible for continuously monitoring credit risk, market risk and operational risks and also taking proactive measures as warranted for mitigating such risks in advance. 3.5 Asset Management

This group is responsible for monitoring and follow up of Non performing assets, preparing strategies for recovery / rehabilitation/ restructuring of assets, etc. and ultimate recovery of Banks dues.

Credit Origination
The Credit Origination will be done by Business Groups as follows :

1. Vehicle Finance Division (VFD)

VFD will look after specific business of erstwhile Ashok Leyland Finance Ltd. for financing acquisition of trucks, commercial vehicles, construction vehicles, two and three wheelers, cars, etc. New products will be added on ongoing basis.

The essential nature of lending is schematic lending and there is an organization structure in place for credit origination, credit approval and credit monitoring. There are standardized benchmarks for credit norms for various schematic-lending programmes.

This group will decide on credit strategy within the overall business strategy in conjunction with credit and risk management to decide on the credit scoring templates and risk containment measures and monitoring requirements.

This business group will, as and when considered necessary, securitise its receivables within the overall business strategy of the Bank. Securitised assets will be managed by credit and monitoring department within this group.

2. Retail Banking (other than vehicle financing) (RBG)

RBG will originate credit at all branches in schematic or non-schematic lending formats. Schematic lending covers loans to individuals in form of housing loans, personal loans, consumer loans, car loans, etc. Nonschematic lending is by way of credit facilities to small traders and businessmen, self-employed individuals, agriculturists, etc.

This business group will evolve its own credit strategy looking at business environment and market opportunity in various retail branches. This will be done in conjunction with credit and risk management to evolve suitable credit benchmarks and risk containment strategies. The group will also develop sales and support organizations for customer relationship management. Branch Head / Relationship Officials will be responsible for all customer interface necessary for maintaining asset quality through monitoring/follow up.

3. Wholesale Banking Group - (WBG)

WBG will target non-schematic lending to Corporate and Institutional Segment, SME (at times schematic for SMEs), Agriculture Banking and Financial Institutions Group. These will be fund based as well as non-fund based exposures including short term, medium term, and long term exposures and will also include forex exposures.

Based on the strategy formulated for WBG, Relationship Managers will plan business strategy for related segment after evaluating emerging business opportunities in command area. Credit Relationship Managers/ Branch Heads

at various branches will market corporate business guided by overall business plan. Relationship Managers/ Branch Heads will be responsible for customer acquisition, retention, business/profit maximization and all customer interface necessary for maintaining asset quality through monitoring/follow up.

3.1 Treasury The credit exposures will be of following nature: Exposures for management of banks balance sheet. Inter Bank exposures for various business requirements. Counter party exposures taken for trading requirement. Customer related exposures. All these exposures can be either inland or forex exposures.

Except for customer related exposures, all other credit exposures will be taken at Central Treasury at Mumbai. Customer related credit exposures will be originated at branches by Relationship Managers.

Apart from credit risk, Treasury exposures carry market risk and settlement risk. This will be closely monitored by Risk Management Department.

All customer related credit exposures would be appraised by Credit Department, which will evolve suitable appraisal methods so that risks are addressed while business opportunities are captured.

3.2 Capital and Commodity Markets Division (CCMD) The Bank is acting as Clearing Bank for settlement of trades at two major stock exchanges (NSE / BSE) and two major commodity exchanges (MCX / NCDEX).

The Bank has established a specialized branch at Fort, Mumbai to act as link between members (of the exchanges) and the exchanges. CCMD looks after credit exposures related to capital market and commodity market. WBG Group will formulate business strategy paper every year in conjunction with CCMD and Risk Management Department. CCMD will operate through all branches.

Credit Appraisal
Bank is aiming for separation of credit appraisal from business origination process. This separation has already been implemented in case of Corporate Credit. Similar structure exists in Vehicle Finance Division. This system is to be implemented in Retail Banking Department.

1. Organizational Structure for Credit Appraisal

Business originated by various business groups is appraised by Credit Analysts /Executives and reviewed by suitable senior personnel before recommending to specified authority as per DOP for sanction or further recommendation to specified sanctioning authority. Credit Analysts/executives do not have business or volume targets to ensure that risks are evaluated independently. Credit executives are expected to evaluate the credit risk within overall framework of Banks credit policy/RBI guidelines. At the same time, they facilitate timely decisions to enable business groups to close out all business opportunities.

In case of A category branches, Credit Analysts are placed in Branches to facilitate better understanding of customer and local business environment, though they are part of Central Credit Team and report to Head Credit or his immediate deputies / subordinates.

2. Credit Appraisal Methodology

The Bank adopts both the Subjective Approach and the Objective Approach to credit decision making. Subjective Approach to lending is based on assessment of the borrower's ability and willingness to repay the loan and this takes into account the Six 'C's of lending viz. Character, Capacity, Capital, Collateral, Conditions and Concentration. In the Objective Approach, the credit decision is based on more scientific way of assessing the quality of the asset by shifting the emphasis from the 'borrower' to the 'quality of the asset' based on assessment of the risks involved. To facilitate objective appraisal of credit proposals, the Bank has acquired from Crisil and operationalised Rating and Appraisal Models (RAM). Currently, it is mandatory that all nonschematic proposals for exposure of more than Rs.2 crore be rated in RAM. There are 5 models for different segments of borrowers viz. Large Corporates, SME borrowers, Traders, NBFCs and Capital market brokers. Besides, Bank has developed internal rating model for rating domestic banks, domestic entities of international banks, financial institutions and primary dealers.

In each of the models, ratings are done on a scale of 1 (most superior) to 8 (most inferior). The rating grades are uniquely named for each model. For instance, rating grades of Large Corporates are named as L1 to L8, whereas those of SME model are named as S1 to S8.

However, all these model-specific rating grades are mapped to a common scale rating grades IB-1 (most superior) to IB-8 (most inferior).

Going forward, we may add new models and separate appraisal formats for agriculture, infrastructure, services, etc. for standardizing appraisal and capturing segment specific characteristics, risks and risk mitigants and facilitating timely decisions. Vehicle Finance Division has its own policy and detailed manuals for schematic lending. Detailed paper on evaluation techniques/recovery set up is presented in Section II. Retail Banking Department has separate manuals for advances. Detailed paper on evaluation techniques/recovery set up is presented in Section III. Corporate Credit : Detailed paper on approach to Corporate Credit and assessment methods, segment specific parameters and products is presented in Section IV of this policy. Segment specific parameters and products will be applicable to all credit facilities sanctioned by the Bank (other than schematic loans) whether originated by RBG / WBG. Any other existing norms/parameters in this regard adopted by any Group will have to be within the broad parameters and product specifications contained in this document. Treasury works within the overall framework of Bank Risk policy, country risk policy and other policies on derivatives, etc. Detailed paper is presented in Section V. Capital and Commodity Markets Division : For business from capital and commodity market segment, origination of business is from branches and

analysis / processing of credit proposals is centralized. Detailed paper is presented in Section VI.

Credit Risk Assessment

In last decade, the business environment has undergone radical change. Before liberalization the business environment used to be reasonably stable and predictable. Moreover, in a shortage prone economy most of what was produced was sold at cost plus pricing. In such an environment, it was adequate to analyse the past performance based on financial data and extrapolate into the future. However, now the business environment is free from capacity constraints internally and is exposed to global competition externally. change in the credit risk assessment methodology. Credit risk assessment will therefore be based on Understanding of business cycles and industry risk in the segment Stability of business model of the borrower in competitive Financial risk based on balance sheet structure (Financial Risk). Promoters competence and reputation (Management Risk). Availability of credit enhancements (Risk Mitigants). Adequacy of security offered (Risk Mitigants). where borrower operates (Industry Risk). environment (Business Risk). This necessitates

The Rating and Appraisal Models (RAM) acquired by the Bank from CRISIL, which have been fully operationalised, adequately cover all the above aspects and all the credit proposals should be compiled on the appropriate RAM model.

Bank will progressively work towards credit enhancements by discriminating between the quality of different cash flows of borrowers and aim to capture the better quality cash flows through pooling of cash flows, use of escrow/TRA accounts or any other methods of credit enhancement.

1. Assessment of Requirements:
1.1 Working Capital Assessment For over two decades banking industry primarily followed Tandon Committee methods of lending for assessment of maximum permissible bank finance (MPBF). RBI has now permitted Banks to have an independent approach on methods of assessing working capital requirements. However, in absence of any stabilised alternative, large number of banks continue to use the same method for working capital assessment. In the changed industrial and business environment, borrowers are becoming more efficient in use of working capital with help of technology and better management process. So, Corporates are aiming at reducing working capital borrowings. Best of the companies have already migrated to negative working capital cycle. In such a situation, Bank has to adopt different methods for assessing borrowers requirements. Moreover, MPBF method of credit assessment is typically meant for manufacturing units. In FY05, manufacturing contributed 27% of GDP whereas services accounted for over 52% of GDP. Taking these changes into consideration, our approach to assessment of working capital requirement will be as follows:

In case of manufacturing companies, second method of lending as per Tandon Committtee will be followed for assessment of working capital requirements.

As recommended by RBI, cash budget method will be adopted for assessment of working capital needs of seasonal industries like sugar and certain other industries like Construction, Film production, Infrastructure, services/service intensive industry (software, hotels, ship breaking, plantations, etc.).

In case of SSI units (with requirement upto Rs. 5 crores), we will follow the Nayak Committee method based on turnover. In all the above cases, our endeavour will be to move towards structured finance to fund receivables/payables based on cash flow control and credit enhancements.

1.2. Assessment of Term Loans:

Bank will provide project-specific Term Loans as also for normal capital expenditure and augmenting long term working capital and other general purposes. Maturity of Term loans will normally be restricted to seven years except in the case of Home loans where the maturity could extend upto 20 years. In case of project specific loans, assessment of loan will be based on : Requirement as per business needs Project cost and means of finance Pattern of funding Technical feasibility Financial viability

In case of other term loans, Bank will accept reasonable assumptions on projected earnings from the borrowers business as a whole and analyse the debt servicing capacity, based on which, bank will take suitable credit risk. Bank will try to identify one or more good quality cash flows and escrow the same to enhance credit quality, wherever feasible. In case of syndicated loans, the Bank will base its appraisal on the Lead Manager's appraisal. However, the Bank will endeavour to make an independent verification of the same.

2. Structured Loans
In keeping with the present trend, Bank will also take term exposures by securitising quality cash flows (for e.g., securitisation of lease rentals, loan receivables, receivables under specific contracts, etc.). In such cases, the adequacy and stability of escrowed cash flows will be analysed for debt servicing. Structured exposures may not be internally rated. Generally, characteristics of structured loans vary from case to case depending on identified cash flows and therefore, require specific checks and stipulations. Indicative safeguards for certain structured loans are discussed below : Securitisation of lease rentals : It will be ensured that underlying rental property is occupied by the lessee and rent is regularly paid by the lessee through the Bank. Besides identified repayment source, such exposures will be usually backed by mortgage of property. Amount of loan will be arrived at after factoring in TDS, reasonable maintenance charges as per lease terms, deposit taken by the Lessor and other such specific charge on the rentals. The loan will be normally

released only after the lease rental agreement is executed. (Product specifications are discussed in Annexure II.) Securitisation of receivables pertaining to retail loans : It will be ensured that none of Facilities in the Pool have been restructured or rescheduled and that all loans are free from any encumbrances. Pools should be geographically well diversified. Necessary certificate will be obtained from the Originator, to the effect that facility documents are valid and enforceable. It will be ensured that adequate credit enhancement by way of cash advance facility i.e. liquidity support and credit collateral by way of first loss credit facility and second loss credit facility, is available to cover portfolio leveI expected losses. Issues will be preferably rated by an external credit rating agency (No internal rating), with Minimum rating A (Adequate safety). (Product specifications are discussed in Annexure II.) Securitisation of receivables under specific contracts : This type of facility will be normally considered in case of large value contracts where payment risk is on a top quality corporate with exceptional market standing. Underlying contracts will be thoroughly scrutinized to ascertain payment terms to schedule repayment relating to specific milestones, factoring in time for administrative processes, if necessary. Generally, such exposures would be taken up under syndication arrangement, which will provide for scrutiny of documents, clearing disbursement based on completed work/supplies, tracking milestones, etc. by facility auditors, to ensure thorough checks and one-point reference for borrowers facilitating operational convenience.

3. Non fund based limits

Limits for Letters of Credit for procuring raw materials will be

assessed based on estimated purchases during the year, cycle of purchase, usance period, shipping period, etc. In case of capex LCs, limit will be based on project related / capex Bank Guarantee limits will be based on existing outstanding, cash outflows. expected cancellation and fresh issues depending on the need in line with the activity of the borrower. Non-fund base facilities like LCs and Guarantees will not normally be sanctioned on a stand-alone basis, except to customers of exceptionally good standing. No guarantees will be issued in respect of disputed liabilities except when backed by 100% cash margin as security.

Credit Risk Rating

Bank will rate all credit exposures as per Risk Assessment Module (RAM), which classifies exposures from IB-1 (highest) to IB-8 (lowest). Minimum Acceptable Rating Grades would be as under: The minimum acceptable credit rating shall be IB-4 for all borrowers.

In case of existing borrowers having a rating of IB-5 or IB-6, we

propose adoption of any one or more of the following strategies: Strengthen the collateral security and other comforts. Efforts will be made to increase the interest rate in order to compensate for additional risk.

 Continue with the exposure if there are additional comforts such as collateral, good conduct of the account, effective support from Group, etc. If additional comforts are not available, Bank will consider gradual reduction in exposure or initiate efforts to exit.

In case of existing borrowers having a rating of IB-7 or IB-8

No further exposures to such account Strengthen the collateral security and other comforts. Exit the account in a time-bound manner, in any way within a maximum period of one year. Meanwhile, efforts will be made to increase the interest rate in order to speed up the exit. If exit proves difficult, reduce the exposures in a phased manner

The exact strategy to be followed will depend on the nature of the exposure. Any one or more of the above strategies may be adopted on case-to-case basis. Other measures for maintaining asset quality In case of A category branches, Relationship Managers and Credit Analysts will monitor all exposures on an on-going basis with the ultimate objective of maintaining asset quality. This process will involve identification of 2 lowest quality exposures at Branch level for exit during every financial year, among borrowers having credit rating IB-6 and above, as under: In case of all borrowers having credit rating of IB-5 and IB-6, specific strategy - whether to continue, reduce or exit from the exposure, would have to be discussed in appraisal/review notes to facilitate a conscious view.

In case of borrowers with credit rating upto IB-4, there may be

some cases where adverse features like specific market developments, impact on market share, size vis-a-vis competitors, etc. impact credit risk; even though credit rating may remain within acceptable level of IB-4. In such cases, these developments would have to be discussed in appraisals/review proposals giving specific strategy. This exercise would ensure that early warning signals are detected and conscious /timely decision is taken in respect of all such accounts (irrespective of the credit rating) to ensure that quality of our credit portfolio is maintained.

Security
Advances extended by Bank should normally be secured. In exceptional cases, unsecured advances will be considered on merits of each case. Security obtained should be marketable and documentation should ensure that Bank foreclosure of security is facilitated in the event of default. Decision to grant credit facilities will not be based only on availability of security, Following factors will be primarily considered while evaluating a credit proposal: a. b. Stability and sufficiency of cash flows, to pay the debt. Ability and intention of the borrower to pay. Value of security will be constantly monitored. Personal guarantees of promoter directors/partners will

be insisted upon in the case of closely-held companies, companies which do not have a professional management set-up, family concerns, etc.

Undertakings provided by the customers as per sanction terms should be carefully read, on receipt, at Branch level to ensure that they comply with the Bank's requirements and are relevant for the purpose for which they are obtained.

In compliance with RBI guidelines, the Bank will not grant advances against fixed deposits / or term deposits of other banks. Bank will not grant loans against Certificate of Deposits, as per extant RBI directives.

Pricing
As per RBIs Guidance Note on Credit Risk Management, banks should evolve scientific systems to price the credit risk, which should have a bearing on the expected default. The pricing of loans normally should be linked to risk rating or any other indicator of credit quality. Pricing for a particular facility will have to take into account all the factors relating to risk and return and be governed by overall earnings from the relationship/group. A comprehensive pricing framework, taking into account all the related factors, is being formulated and shall be submitted to Board shortly by Risk Management Department. Extant guidelines on pricing as approved by BOD as part of Credit Risk Policy shall continue till revised pricing policy is approved.

Bank will aim at pricing all products in a way to derive suitable risk adjusted returns on overall relationship basis and as such bank may be flexible in product specific pricing. Competitive pricing may be used as a tool for customer acquisition.

Documentation Standards
Banks standardised documents as contained in manual for

documentation should be used. Any deviation to the above and specially drafted documents in respect of specific cases will need prior clearance of Legal Department. In the case of consortium advances and loans sanctioned in participation with Financial Institutions, common documents approved by Lead Bank/Lead Institution may be taken. Specific issues relating to documentation impacting credit risk will

be referred to sanctioning authority through Credit Department. Documents should be vetted by empanelled advocates and

disbursal should be made only after obtaining prior clearance from Legal Department as per the guidelines issued by the Bank, from time to time.

Broad Parameters for different borrower segments

It would be ideal if standard financial parameters like current ratio of 1.33 and TOL/TNW of 3 are applied to all borrowers. Similarly, standard margins for individual facilities are as under:

1. 2. 3. 4. 5. 6. 7.

Raw materials Consumable and Spares Packing materials Stock in process Finished goods Bills Book debts

25% 331/3% 50% 40% 25% 25% 50%

These standard parameters do not, however, factor in the peculiarities of different borrower segments and as such deviations may have to be permitted in order to factor in peculiar features of different sectors/activities. Broad parameters for certain activities/sectors are set out in Annexure I and these could be adopted while appraising credit proposals.

Products
Besides regular working capital limits like Cash Credit, export credit facilities, term loans, Letters of Credit and Bank Guarantees, as also term loans, Bank will continue to offer other products in line with changing market trends. Details of some products are given in Annexure II. These are not intended to be exhaustive, but only indicative. Going forward, new products will be added to this list based on market conditions. Segment specific parameters and products specifications discussed in these Annexures will be applicable to all credit facilities sanctioned by the Bank (other than schematic loans) whether originated by RBG / WBG. Any other existing norms/parameters in this regard adopted by any Group will have to be within the broad parameters and product specifications contained in this document.

Credit Administration
Disbursement should be as per the guidelines laid down in operating manual on advances: Compliance with all terms of sanction including documentation and pre-disbursement covenants should be ensured before disbursal of the facility. Also compliance with RBI guidelines e.g. undertakings from borrower/guarantor in respect of non-payment of commission on guarantees obtained from directors, etc. should be ensured. There may be certain terms which are required to be completed

within a prescribed period from disbursement. Branches should maintain a follow up Register and ensure compliance within prescribed time. Noncompliance / progress should be reported to Corporate Office.

Credit Monitoring and risk containment

1. Credit monitoring
Credit Management requires close and continuous monitoring of all exposures. Early warning signals need to be detected and addressed to control slippage in asset quality. Operating manual of advances contains detailed guidelines for post-sanction compliances. Major steps for exercising effective supervision and follow up are given below: i) Periodic Inspection

Inspection of factory premises, production process, Inspection of books of accounts, accounting procedures Discussions with the owners/key officials on issues like

and system of financial planning and control. overall performance, problems and prospects of the unit, market trends, competition, quality etc. Inspection of specific assets financed by the Bank and collateral security charged to the Bank.

ii) Scrutiny of Financial Statements/Returns and other Information iii) Monitoring operations in the Account iv) Ongoing compliance with terms of sanction, as applicable

2. Renewal / Review
Timely annual review is an important step in the follow-up, supervision and administration of credit. a) Review/Renewal exercise gives the Bank an opportunity, inter alia, to assess : Performance of borrowers business activity. Utilisation of borrowed funds Position of Banks security. Any signs of incipient sickness and if so, take corrective steps

b) In case of companies where audited Balance Sheet is not available, and the renewal is due, a quick review/continuation memo should be put up (Continuation for a maximum period of 6 months); and within

one month of finalisation of audited Balance Sheet, regular renewal should be submitted. c) Due date diary should be maintained indicating month-wise record of credit proposals falling due for review/ renewal. d) If the borrower does not co-operate in submitting the required documents despite follow-up by the Branch Manager, penal interest should be charged over the stipulated rate on such credit facilities.

Periodic reviews/renewals The following discriminatory schedule has to be adopted for interim/periodic reviews and renewal depending on the credit quality of assets and size of the exposure. However, validity period for renewal will be one year or as decided by the approving authority at the time of sanction. Rating Exposure Frequency for Interim Reviews/ Renewal ## Brief Quarterly review based on published information and Annual renewal

size All listed companies irrespective of exposure Unlisted companies IB-1 Rs.25 cr & to IB-4 IB-5 to IB-8 above Below Rs.25 cr Rs. 2 cr and above Below Rs.2 cr

Half-yearly review based on available information and Annual renewal Annual renewal (i.e. no interim review) Half-yearly review based on available information and Annual renewal Annual renewal (i.e. no interim review)

## Half-yearly review and annual renewal shall be submitted to the sanctioning authority as per the delegation of powers in force, while the quarterly review shall be submitted to Credit Dept, Corporate Office. The above discriminatory schedule will cover all credit exposures. Credit Department. The

interim review shall be carried out based on a concise format designed by

3. Credit Administration set up

In the revised set up of Corporate Credit Department, credit administration function is separated from Relationship Management. Credit administrators at CBBs will work under supervision of Credit Analysts, and will report to Head (Credit Administration) at Corporate Office. At the branches, Credit Administrator will analyse conduct of account and the periodical financial feedback from the borrower and raise alert on early signs of weakness to Branch Head and Head (Credit Administration) at Corporate Office. At the branches, Credit Relationship Managers (CRM) will closely monitor credit risks based on market reports, external information and feedback from Credit Administrator. Branch Head will then work on account strategy in consultation with CRM based on the above information. At Corporate Office, Head - Credit Administration (who reports to Head Credit) will follow up each irregular account. Head - Credit Administration will interact with Credit Administrator and Branch Head on these irregularities to ascertain the seriousness and finalise strategy on each of them.

Head - Credit Administration will also interact with concurrent auditors, internal auditors and Loan Review Mechanism Team on a regular basis to track irregular features and ensure compliance /rectification and also take steps to eliminate such observations in future.

4. Risk Containment and Exit Strategy

Credit monitoring will lead to identification of weak accounts for which Credit Department and WBG will decide an account-wise strategy whether to continue, reduce or exit from the exposure. Bank shall endeavour to obtain suitable credit enhancement by way of additional security and/or higher margins, etc., wherever deemed fit. Such account-specific strategy will be implemented by Branch in a time bound plan, under close follow up from Credit Administration. Credit Administration Department will periodically put forth a monthly report to the Board / Committee of Directors on irregularities and steps being taken to address them.

Loan Review Mechanism/ Credit Audit

A separate policy on Loan Review Mechanism has been approved by the Board. The policy stipulates details of accounts to be covered under Credit Audit, as reproduced below: a) All fresh sanctions and enhancements after the last visit are to

be subjected to LRM during every visit.

b)

For accounts which are not included in (a) above, LRM is to be

conducted as per the following schedule:

Credit Rating IB-1 to IB-4 IB-5 & IB-6 IB-7 & IB-8

Limits Rs.10 crores & above Below Rs.10 crores Rs.5 crores & above Below Rs.5 crores All accounts

Frequency Once in a half-year Once in a year Once in a half-year Once in a year Once in a half-year

c)

If one or more companies of a particular group fall(s) under

Category (b) above, all other companies in the group will be subjected to LRM in the same frequency as applicable to the company falling under the above category (irrespective of the rating or exposure size of such other companies). d) During every visit, LRM should also cover randomly selected

exposures (say 10%) from the accounts not covered by above criteria.

NPA Management
The Bank's objective is to contain NPAs to the minimum levels through a combination of measures like (i) ensuring selection of quality assets through welldesigned credit approval process, (ii) closely monitoring the credit portfolio and initiating effective measures to upgrade quality, (iii) upgrading non-standard assets through rehabilitation/restructuring wherever possible, and (iv) recovery through compromise settlements in appropriate cases and legal process in other cases. NPAs will be recognised on the basis of the Income Recognition and Asset Classification norms of RBI. In addition, potential NPAs will be identified through the early warning signals observed during the course of credit monitoring.

The Bank will also observe the guidelines provided under the Corporate Debt Restructuring (CDR) mechanism in appropriate cases.

Benchmark norms for various segments/activities

I. Manufacturing Companies: Financial profile of manufacturing companies differs widely for different industrial segments. Indicative benchmark norms:

1. Current Ratio 2. TOL/TNW 3. Interest Cover (For term loans)

: 1.25 (Minimum) : 3 (Maximum)

: 2 (Minimum)

4 (a) Average DSCR (Gross) : 2 (Minimum) (b)Minimum DSCR(Gross) 5. Asset Cover 6. Tenor 7. Margin : 1.5 : 1.5 (Minimum) : Not exceeding 7 years : Not less than 20%

II. Project Construction Companies : This reference is to companies which undertake large infrastructure projects like construction of roads and highways, railway bridges, hydel power projects, dams, barrages thermal and nuclear power projects, marine structures, water supply, factories and waste treatment plants, metro rail projects and others. Real Estate developers will not be covered under this category.

Such companies have a different profile from manufacturing companies. They need large guarantee limits for performance and mobilisation advance. The advance received is shown as Current or Term Liability. TOL/TNW is high and current ratio is low. Thus,

Indicative benchmark norms:

1. Business Standing (of Company / Group) : Minimum 5 years

2. TOL/TNW 3. Current Ratio

: :

6 (Maximum) 1.10 (Minimum) : NIL for reputed companies

4. Minimum Margin on LC/BG

5. Receivables from the clients to be preferably escrowed.

III. Diamond Industry:

Industry is dominated by De Beers who supply about 60% of global rough diamonds through select buyers called Sight holders. Out of 40 odd Sight holders, 60% of them are in India. All diamond exporters import rough diamonds, polish and export them. The working capital cycle is long and large export credit limits are required (about 6-9 months of sale). Indicative benchmark norms: 1. Borrower should preferably be a Sight holder or a group company of a Sight holder, existing well conducted account /consortium account 2. Turnover : Not less than Rs. 100 crores 3. Tenor for Export Packing Credit : 90-120 days

4. Tenor for Post Shipment Credit

90-120 days

5. Of the post shipment finance 50% can be in form of direct bills. House bills should not exceed 10% 6. Our exposure not to exceed 25% of borrowers working capital requirements. 7. TOL/TNW 8. Current ratio IV. NBFCs: Bank will fund only the NBFCs which are registered with RBI with the : : 3 (Maximum) 1.10 (Minimum)

exception of : a. b. Housing Finance Companies (HFCs) Stock broking Merchant Banking Companies (Separate policy

formulated by Capital and Commodity Markets Division). Banks funding will be only for activities permitted as per RBI

guidelines issued from time to time, last resting with master circular No DBOD.BP.No.17/08.12.01/2005-2006 dated July 14, 2005. Bank will follow MPBF method for assessment of requirements.

Indicative benchmark norms: 1. Belonging to a reputed group.

2. Existence 3. Net owned funds 4. Capital Adequacy 5. Net NPA 6. Preferably external rating 7. Banks exposure

: : : :

Not less than 5 years Not less than Rs. 50 crores Not less than 12% Not more than 5%

: :

A+ and above Not to exceed Rs. 50 crores except in case of Top Grade Housing Finance Companies (HFCs) for priority sector lending.

8. Tenor of term loan not more than 5 years. (7 years in case of reputed HFCs for priority sector lending).

V. Traders: In case of traders, profit margins are low and there is faster rotation of working capital cycle. Indicative benchmark norms: 1. Standing : Should be in same line of business for minimum 5 years 2. Profit margins : Should have stable profit margins

3. TOL/TNW 4. Current ratio 5. Margin

: : :

5 (Maximum) 1.10 (Minimum) Stock 25% Book Debts 40% L/C / BG Minimum 10%

6. Security asset

Adequate security is essential with minimum cover of 1.50

VI. Services / Service Intensive Companies: These types of companies will have very low or no inventory. Current assets will be primarily receivables. Some of them may have large term loan requirements. The profitability is generally high. Indicative benchmark norms : 1. Current ratio 2. PBDIT/Sales 3. Interest cover 4. Term Loans/ Cash Accruals 5. TOL/TNW 6. Security Cover : : : 5 or less : : 1.10 (Minimum) 10% or above : 2 or above

3 (Maximum) Suitable collateral is essential.

VII. Small & Medium Enterprises (SMEs) and other entities with annual turnover upto Rs.300 crores:

SMEs are primarily manufacturing companies and will have business profile similar to larger manufacturing companies. 1. At present, SSI unit is an industrial undertaking in which investment in plant and machinery, does not exceed Rs.1 crore except in respect of

certain

specified

items

under

hosiery,

hand

tools,

drugs

and

pharmaceuticals, stationery items and sports goods where this investment limit has been enhanced to Rs.5 crore. 2. As per RBI guidelines vide circular RPCD.PLNFS.BC. No. 35/06.02.31 dated 25.08.05, units with investment in plant and machinery in excess of SSI limit and up to Rs.10 crore may be treated as Medium Enterprises (ME). (Only SSI financing will be included in Priority Sector.) RBI has directed banks to fix self targets for financing SME sector for higher disbursements as also to initiate steps to rationalize cost of loans linking them to credit rating. Our RAM provides separate module for SMEs and pricing is based on credit rating. As regards time to be taken for disposing loan applications and limit upto which banks are obliged to grant collateral free loans, RBI guidelines vide master circular No RPCD.PLNFS.BC. No. 03/06.0231/2005.06 dated 01.07.2005 on SSI sector, will be applicable for both SSI units and ME sector. RBI has also issued guidelines vide circular DBOD. BP. BC. No 34/21.04.132/2005-06 dated September 8, 2005 for Debt Restructuring mechanism for SMEs. Our Bank will follow these guidelines for restructuring in respect of following SMEs, which are viable and potentially viable : i. All non-corporate SMEs irrespective of the level of dues to banks. ii. All corporate SMEs, which are enjoying banking facilities from a single bank, irrespective of the level of dues to the bank. iii. All corporate SMEs which have funded and non-funded outstanding upto Rs.10 crore under multiple / consortium banking arrangement (for

outstanding of Rs.10 crore and above, guidelines are being issued separately). Following units will be ineligible for restructuring: i) Accounts involving wilful default, fraud and malfeasance will not be eligible for restructuring under these guidelines. ii) Accounts classified by banks as "Loss Assets" will not be eligible for restructuring. Broad parameters proposed for manufacturing companies will apply to SMEs and other entities with turnover upto Rs.300 crores. In case of additional comfort in the form of escrow arrangement for identified cash flows, exclusive security and other such credit enhancements, the parameters could be relaxed as under: 1. Current Ratio 2. TOL/TNW 3. Interest Cover (For Term Loans) 4. Average DSCR (Gross) Minimum DSCR (Gross) 5. Tenor 6. Margin : : : (Term loans) : 1.5 (Minimum) 1.25 Not exceeding 5 years 20% (Minimum) : : : 1.20 (Minimum) 4 (Maximum) 1.5 (Minimum)

7. Margin for working capital facilities : Stocks & Book debts Minimum 25% L/C & BG Minimum 10%

VIII. Agriculture Sector Our Bank will adopt innovative approach to Agriculture Business by offering complete supply chain solutions. Both RBG and WBG will have dedicated teams of agriculture sector specialists and finance professionals with deep understanding of sectoral business environment who will devise customized solutions and offer complete supply chain solutions for various segments as under: 1. Sugar Industry Bank caters to both the sugar industries as well as cane growers associated with sugar companies. The strong linkage between cane grower and processor provides Bank an opportunity to offer structured products to both parties at very competitive rates. 1.1. Products on Offer 1.1.a. Regular commercial banking services for Sugar Companies : Facilities like Working capital finance, Term loans, Forex derivatives and others as per requirements and cash flows are being extended by our Bank. 1.1.b. Corporate-linked Agricultural Loan : This is a product in which Bank ties up with a sugar company to provide financial assistance to farmers linked to the sugar company. The corporate would generally have an

arrangement with farmers to supply agricultural inputs and/or to procure/assist in marketing farm produce. (i) Features Duration of loan will be between 12-18 months depending on Loan will be disbursed directly OR through the Sugar under Management and Collection agency

duration of the crop. Company

arrangement. Value of loan sanctioned to a farmer will be a function of area grown under sugar cane cultivation. According to NABARD recommended scale of finance, farmers are eligible for Rs. 10000/- per acre to plant crop and Rs. 7000/- per acre for ratoon crop. Bullet repayment of principal and interest from the proceeds of Identification of Borrowers & Eligibility: Sugar Company will sugarcane supplied by farmers to Sugar company. identify the farmers for loans, which will qualify for agriculture loan facility. They will contact individual farmers and get loan application and other documents as prescribed by the Bank executed by individual farmers. Comfort will be available as under :

a) b)

Hypothecation of standing crops Declaration from the farmer that there are no

outstanding dues to any Bank/ other lender and there is no charge on the aforesaid crop / receivables.

c) d)

Authority to disburse the loan to Sugar Company. Power of Attorney to collect the receivables directly

from Sugar Company.

e)

Normally, guarantee of Sugar Company will also be

available. (ii) Eligibility criteria for farmer selection : These will be fixed based on following : Land ownership Consistent supply of cane for pre-specified period Registered member of sugar mill 2. Plantations: Tea, Coffee, Rubber and other plantation products Plantation sector is a significant foreign exchange earner for the Indian economy. In the international trade arena plantation products from India are unmatched in terms of the superior quality they offer. Some plantation products are covered hereunder: Tea plantation and processing: Products: 2.1.1a. Regular commercial banking services for Large Tea

Companies : Facilities like Working capital finance, Short term loans, Term loans for meeting capital expenditure on plantations and processing facilities, dealer financing through Bill Discounting for domestic marketers as also other facilities like Forex derivatives, etc. as per requirements and cash flows are being extended by our Bank. 2.1.1b. Schematic lending to small and medium Tea Growers and also stand-alone tea processing factories: (i) Features: Loan for sale through Tea Auction Center

75% of the value of stock is extended as warehouse loan to the grower. Maximum Exposure per single borrower: Rs 50 lacs. Total Exposure under the scheme: Rs 3000 lacs. Margin: Minimum 25 % Period: Maximum 45 days. Rate of Interest: BPLR plus 0.50% minimum 14 % p.a. Bank has to pay charges to the brokers for sourcing and handling the entire process as per terms defined in tripartite agreement amongst seller, broker and the bank. Security : Before Auction: Warehouse receipt endorsed in our favour. i.e pledge of Tea under auction. After Auction: Post Dated Cheque of the broker (as the payments are made by the buyer on the prompt day in favour of broker as per byelaw) Personal Guarantee of sellers, Corporate Guarantee of brokers through tripartite agreement amongst seller, broker and the bank.

(ii) Eligibility: Tea growers who sell their produce in the Auction House through brokers. Sellers with minimum 5 years of track record in the field are only eligible for consideration. (iii) Identification:

All the Growers (In auction they are known as Sellers), Buyers and Brokers must be the members of Tea Auction Center (TAC). The byelaws have well defined the roles of all participant members. 2.1.1c. Other plantations like Coffee, Rubber, etc. : On similar lines as discussed in 2.1 above, Bank would finance loans for other plantation products as under : Regular commercial banking services for Large Companies Different stakeholders in the value chain : Dealer financing,

Finance against warehouse receipts, short term finance linked to business cycle, bills discounting facilities, etc. 3. Seed sector Bank shall consider following products in the seeds sector: 3.1 Products 3.1.1 Regular working capital financing Working capital requirement for seed companies is seasonal and varies depending upon the crop portfolio and seasonality. Working capital assessment for seed companies would be under cash flow method. Regular working capital assistance would be in the form of cash credit or working capital demand loan. The fluctuating part of working capital would be structured as cash credit and balance as working capital demand loan, as a revolving credit for fixed tenor with minimum stipulated drawal. 3.1.2 Farmer / Organizer financing:

Seed organizers undertake seed production on behalf of the seed company. Bank will develop products for assisting seed organizers on recommendation and letter of comfort given by the seed companies. Short-term loans would be extended for seed cultivation or against the stocks held by the seed organizers pending seed certification process. The credit limit would depend on the value of seeds to be procured by the seed company from the seed organizer. The seed organizer would give instruction to the seed company to make payments directly to the bank on due date from the payments due to the organizer and this arrangement should be confirmed by the seed company. Features of this product will be similar to assistance extended to sugarcane growers and will be under a Management and Collection Agency arrangement with Seed Companies with well defined terms relating to eligibility, maximum tenor of loan, security, etc. 4. Fertilizer sector 4.1 Regular commercial banking services for Fertilizer Companies: Facilities like Working capital finance, Term loans, Forex derivatives and others as per requirements and cash flows are being extended by our Bank. 4.2 Dealer financing: This product will aim at providing short term finance to the dealers of fertilizer companies for making purchases of products from the companies. The financing shall be typically for the inventory-holding period of the dealer i.e. typically for a period up to 90 days.

The financing to dealers would be based on either of the following : Financial recourse by way of Corporate Guarantee for Non-Financial Recourse through Letter of Comfort for overall

overall arrangement OR arrangement (Stop supply, etc.)

4.3 Securitisation of receivables for companies Many fertilizer companies have outstanding loans in their books towards the credit provided to the dealers for a period of 90 days. These book debts would be securitised to provide liquidity to the company; pricing and structure of transaction would be worked on a case-to-case basis 5. Finance against warehouse receipts The Agricultural Commodity market in India has grown substantially in the last few years after the establishment of the Forward Market Commission and the commencement of the Commodity Exchanges viz., MCX and NCDEX. The State and Central Warehouses all over the country have now provided opportunity for farmers and private parties to store their agricultural produce. These Developments have provided a scope for banks to lend against pledge of commodities through warehouse receipts without the associated price risk arising out of controls, hoarding, etc., Our Bank has launched a scheme viz. Advance Against Warehouse receipts which has great potential for lending under priority and nonpriority segments.

5.1 Purpose: To extend financial assistance to farmers storing produce in Government ware-houses / cold storages against pledge of warehouse / cold storage receipts and also against demat warehousing receipts issued by Multi Commodity Exchange of India Ltd (MCX) and National Commodities and Derivatives Exchange (NCDEX) aimed at mitigating the losses incurred by the farmers who often resort to sale of agricultural produce immediately after harvest due to lack of holding capacity and need for ready cash.

5.2 Target Group: All categories of Farmers / Individuals /Small traders and other entities

5.3 Nature of Facility: Working capital Loan

5.4 Security:Pledge of warehouse receipt. The receipts issued by Government (Quasi / State / Central) warehouse companies / Corporations and other Government approved warehouse receipts and demat warehousing receipts issued by MCX and NCDEX are acceptable.

5.5 Quantum of Loan: 65% of the value (market price) of the produce stored. Maximum upto Rs 10 lacs to farmers shall be classified as

Priority sector direct lending to agriculture.

Loan above Rs 10 lacs shall be classified as Non-priority sector Maximum exposure is restricted to Rs 75 lacs.

and

5.6 Commodities All fresh agricultural Commodities except the commodities on which restrictions of hoarding imposed by Government / RBI at the time of request. Perishable items, which are stored under cold storage, only can be accepted. 5.7 Interest rate. Priority sector : BPLR minus 4.25 % minimum 9.25% p.a. Non-Priority Sector : BPLR minus 3.00% minimum 10.50% p.a

5.8 Appraisal: Proper appraisal of the borrower with full details of background, net worth, market report should be done.

5.9 Tenor: Loan should be liquidated as and when the produce is sold preferably within 6 months but not exceeding 9 months.

6. Other allied activities Our Bank will aim at covering all agricultural activities like crop production, horticulture, plantation crops, farm mechanization, land development and reclamation, digging of wells, tube wells and irrigation projects, forestry, construction of cold storages and godowns, processing of agri-products, finance to agri-input dealers, allied activities like dairy, fisheries, poultry, sheep-goat, piggery, etc.

Some identified segments are listed below: 6.1 Marketing Federations State Level marketing federations are one of the thrust areas and Bank is working with state level marketing federations of various states providing the following facilities Working Capital: Working Capital facilities designed to take care

of the day-to-day business requirements of the organization. Looking at the domestic trading business, Bank can provide cash credit and other customized short term products Short term financing of fertilizer distribution: Distribution of

fertilizer is a core function of marketing federations. There is a strong demand for fertilizer at the onset of Rabi and Kharif seasons, which coincides with their requirement of funds. Bank will consider structuring short term funding requirements at competitive rates. Long term fund requirement, Bank will consider medium term

and long term funds for new projects and/or expansion. Bank would consider funding construction of silos and warehouses. Bank would also consider financing the clients associated

with the marketing federations like tyre companies and seed companies, which buy rubber/seeds from state level marketing federations. 6.2 Poultry farming Regular commercial banking services for Large Integrated Poultry Operating Companies : Bank will consider working capital finance for

funding stock of feeding material like maize, Soya, de-oiled cake, vegetable oil, minerals, vaccines, medicines, etc. used while rearing the birds, live poultry stocks (chicks under rearing) and receivables. Also Term loans, Forex derivatives and others as per requirements and cash flows would be considered by our Bank. 6.3 Contract Farming: This segment is gradually emerging. Many large food and agro-based processing companies enter into contracts with farmers for undertaking farming for such companies under pre-defined terms viz. Contract Farming. Similar arrangements are also prevailing in case of poultry farming where farmers undertake broiler production for large poultry companies. Bank will consider finance to Farmers who have entered into Contract farming agreements with reputed companies. These will be corporate linked loans under Management and Collection agency arrangement. Various aspects of financing Contract Farming are being examined and separate scheme would be formulated for this segment. 6.4 Agriculture Infrastructure Financing Warehouses / Godowns Silos Refrigerated transport infrastructure Development of Market yards Agri Business clinics Value Addition farm centers Food Parks Agri Export Zones etc.

6.5 Food and agro-based processing sector 6.6 Dairy sector

Bank will aim at building Direct/Indirect Agriculture portfolio to the extent of prescribed limit as per RBI guidelines. Terms of agriculture finance will be within RBI guidelines issued from time to time. IX. Microfinance Microfinance is a term used to refer to the activity of provision of financial services to clients who are excluded from the traditional financial system on account of their lower economic status. Microfinance is unique as a development tool because of its potential to be self-sustaining. Successful microfinance institutions have proven that providing financial services to the poor can be an effective means of poverty reduction and be a profitable business. Microfinance institution (MFIs) is an organization that offers financial services to low-income populations. Such institutions generally are NGOs (Nongovernment organizations), Charitable trusts, Credit unions, Cooperatives, etc. MFIs provide a full line of financial products and services specifically customized to meet the needs of their clients. Our approach As per RBI guidelines on priority sector lending, 10% of net Bank Credit (within the overall target of 40%) has to be directed towards weaker section. Our Bank shall aim at building this portfolio gradually, through MFIs, for onward lending to weaker sections. Selection criteria for MFIs 1. MFIs should preferably have a rating from Micro Credit Ratings International Limited (MCRIL), CRISIL or other such acceptable rating agencies. Rating should be equivalent to MCRILs rating indicating reasonable safety and good systems, and above.

2. MFIs, which focus mainly on micro financing activities and provides credit to the poor for income generating activities, would be preferred. 3. MFIs portfolio should be reasonably diversified. Models adopted by MFIs would have to be discussed in the proposals. Bank will normally select MFIs, which adopt the successful model of Grameen Bank of Bangladesh (modified to suit local requirements). Salient features of the model are individual lending along with borrowers membership to a 5member joint liability group; Groups from the same village organized to form a Center; peer pressure is the key factor in ensuring repayment; and each borrowers creditworthiness determined by overall creditworthiness of the Group. Quantum of exposure Maximum Rs.5 crores per MFI

Corporate Credit Products

Product Product Description

Short Term Loan (STL) Short Term Loans can be structured as under: Mibor-linked loans Rupee loans FCNR (B) Loans, etc. For working capital finance within MPBF Short-term adhoc requirements Temporary cash flow mismatches Any other genuine requirement in the course of business

Purpose

Utility of the product to us

Eligibility norm

Our deposits portfolio has fair share of short-term deposits. Short-term loans will reduce Asset-Liability mismatch. Uncertainty and hence default risk is much lower in STL. Helps improve quality of the portfolio Can be an entry-point product for a possible long-term relationship. Bank has a short term policy (approved in January 2003). Eligibility criteria will be as per this policy, as under : Top class / blue chip corporates Large / profitable PSUs Minimum annual turnover Rs. 200 crores Profit making company for last 3 years TOL/TNW not to exceed 2.5 Minimum credit rating of IB-4 Maximum of Rs.50 crores The ceiling will go up for large PSUs like HUDCO, IOC, Coal India, etc to 40% of Banks capital funds. If the loan is to exceed single borrower exposure norm stipulated by RBI i.e. 15% of capital funds, permission of RBI should be obtained prior to disbursement of loan.

Amount Loan

of

Period of loan

We may consider STLs for maximum period of one year.

Repayment source

Source of Repayment has to be identified viz. Out of unutilized working capital limits Internal Cash generations Any other expected in flows Bank may also extend short-term exposures on strength of borrowers balance sheet not necessarily linked to expected cash flows but on borrowers ability to leverage further borrowings / group support.

Security

As per the prevailing market practices. However, the Bank will endeavour to obtain a charge on assets. Post Dated To be obtained normally. May be waived under exceptional Cheques circumstances Disbursement By crediting the proceeds of loan to any of the Working guideline Capital (WC) banker of the borrower, preferably Lead Bank if under consortium, under an appropriate covering letter If STL is used for a particular purpose, by making payment for the identified purpose, under advice to the Lead Bank (consortium) or leading Working Capital banker (multiple / sole) of the borrower. Any other form of disbursal will be discussed in the credit proposal, seeking specific approval.

Product

Line of Credit for Short Term Loan (on selective basis) Product Line of Credit, valid for a specific period, for release of fresh STL, on Description closure of the previous STL. Utility of the Healthy corporates avail STL (for say 3 months) repeatedly to product to us meet their WC needs, with an objective of reducing their interest cost. Every time when a STL is to be released, detailed proposal needs to be submitted by branch to appropriate sanctioning authority, leading to re-assessment of risks within short periods through time-consuming process. This facility will facilitate elimination of repeated appraisals. Modus Operandi of the product Line of Credit will be sanctioned for a specified validity period (say a year) for availment of STL. The minimum/maximum quantum of STL, which can be drawn under the Line of Credit, will be specified. STL would be permitted to be drawn only for the purpose of WC needs, within the validity period of the Line of Credit, without detailed re-assessment of risks. Sanction of Line of Credit for STL would permit release of successive Short Term Loans on same terms and conditions on closure of the previous STL subject to the following conditions. o Fresh STL can be released only after specified minimum gap (say 3 days-one week) of closure of the existing STL. o For interest rate on fresh disbursal, branch has to refer to Corporate Office. Head Credit will be authorized to take decision on fresh disbursal on brief reference from branches, incorporating only major developments during intervening period, which may affect credit risk. Same as for STLs

Other Parameters Basis of This facility will be considered selectively for specific customers with recommendatio whom Bank proposes to have a long-term relationship; and where n there is a specific assurance from the borrower for further business indicating earning potential for the Bank.

Product

Drawer (Sales) Bills Discounting Product Discounting of sales bills drawn by the seller, who is our borrower. Description The bills are backed by document of title to goods supplied. The bills may or not may not be backed by Letter of Credit of other banks. Not Backed by other banks LC Backed by other banks LC Utility of the Self-liquidating in Comfort is available in the product to us nature. form of confirmation from LC opening bank as regards Each transaction is payment on due date short term, though the facility is for Working Default risk is low. (Mainly Capital. exposed to operational risk.) Each transaction is secured by document of title to goods Maximum Normally 90 days. Usance period exceeding 90 days can be usance period permitted only in specific cases. Approval from Corporate Office required for this deviation) RBI regulations Bill discounting policy contained in circular CB/358/72/12/2003 dated 11.12.2003 and reiterated in circular CB/237/81/09/20 01.09.2004 will be followed, with following changes : 1. NOC in case of consortium accounts : NOC may not be obtained if following procedure is followed : a) Branches obtains CA's certificate specifying details of Lead Bank/ Account No. b) Branch issues Pay Order/Demand Draft for credit to account with Lead Bank with narration on face of Pay Order /Demand Draft. 2. Opening of current account in case of Constituents availing limits under multiple banking arrangement Current account need not be obtained if similar procedure as for Consortium accounts mentioned above is followed, with Lead Bank read as Bank having largest share.

Product

Drawer (Sales) Bills Discounting Discounting of Extant guidelines will be applicable; Branches will have to refer to service bills Corporate Office for discounting bills of service companies. After the Additional approval, branches have to ensure the following. norms The bills are accompanied by a certificate (from the entity which enjoyed the service from our borrower) that the service under the discounted bill has actually been provided to them to their satisfaction and they do not have any objection to make the payment to the service provider. The genuineness of the certificate should be appropriately verified, depending on the case on hand. The bill should be accompanied by the agreement for the service between the two parties. Branch should verify that the amount under the bill is appropriate for the service rendered as per the agreement. Disbursement LCBD proceeds shall be disbursed through any of the Working guideline Capital banker of the borrower (preferably Lead bank in case of consortium accounts) under an appropriate covering letter

Product

Drawee (Purchase) Bills Discounting Product Discounting of sales bills drawn on the buyer of goods, who is our Description borrower. The bills are backed by document of title to goods supplied. Nature of the Our borrower purchases goods supplied under bills, transaction accompanied by document of title to goods. The document of title to goods is drawn on our Bank. At the request of our borrower, Bank discounts the bill and immediately pays the amount directly to the supplier. Our borrower pays the amount on due date. Maximum usance period Eligibility Disbursement guideline Other guidelines Normally should be restricted to a maximum of 3 months. In special cases, may be extended to 6 months. Limit under this product will be restricted to Rs.25 crores or as stipulated in Credit Risk Policy, whichever is lower. Proceeds shall be disbursed directly to the suppliers banker, under an appropriate covering letter Normally this facility will be within overall MPBF. Only bills covering supply of raw materials/stores will be eligible for discounting. Bank will inform existing banker / consortium leader / members of multiple banking, as the case may be.

Product Product Description

Channel Financing Basic comfort will flow from recommendation from the reputed and acceptable Company, with whom these parties have been associated for a specified period. An arrangement can be in place where the reputed corporates will agree to delist these parties from business in case of default with Bank to ensure desired discipline. Suppliers of reputed companies Extending pre supply and post supply finance to suppliers (outside their regular borrowing arrangements) of reputed and well-known companies. Post supply finance may or may not be backed by bills. Post supply finance (if backed by bills) is comparable to Drawee Bills Discounting since acceptance will be available from buyer in the form of bills or accepted delivery challans or other documents. However, pre-supply stage finance will not be backed by any tangible comfort from the buyer. Case specific mitigants for firming up the arrangement to ensure that supply bills are routed though the bank for liquidating the advance, will have to be built in while sanctioning broad scheme of financing.

Buyers /Dealers of reputed companies Extending post supply finance to buyers/dealers of reputed and well-known companies. Post supply finance may or may not be backed by bills. In case of post supply finance not backed by bills, tenor will be decided based on credit period extended by reputed corporate.

In both the cases, nature of finance will be purely short term and transaction related. Based on the comfort with focal corporate, the lending program will be finalised with template driven appraisal formats for the suppliers/buyers/dealer. Utility of the Multiple borrowers can be financed relying on strength of one product to us Corporate with a simplified appraisal format for each supplier / buyer / dealer.

Product Maximum period Eligibility Maximum exposure

Channel Financing Period of advance (whether bills/STL) should be restricted to 3 months In special cases, may be extended to 6 months. Individual suppliers/buyers need not be rated. However, focal corporate will be preferably rated. Total exposure together (a) under Channel financing to suppliers/dealers/buyers of particular buyer and (b) our direct lending to the focal corporate should be within the prudential exposure limit relevant to individual borrower as stipulated in Credit Risk Policy.

Product Product Description Nature of risk

Forward cover exposures and other derivative exposures Off-balance sheet items which do not involve lending or borrowing These exposures do not involve default risk for face value of contracts/deals. In case default happens, exposure is restricted to cancellation charges, early delivery charges, etc. There could be gains or losses to the extent of small percentages of face value of contracts/deals. Therefore, credit exposure in these transactions is usually a specified percentage (say 2% or 5%) of the notional limit sanctioned.

Equivalent credit exposure

As per our scheme of DOP and Credit Risk Policy, 5% of value of Forward Cover limit is treated as exposure. As regards other derivative limit, it is specified that a specific percentage of the limit (depending on nature of limit) will be treated as exposure. RBI has revised the risk weights for Forward Cover and derivative exposures. Credit risk policy is under review and risk weights are likely to be revised in line with RBI guidelines, which will be followed.

Utility of the As these are fee-based products, opportunity for profits is product to us significantly high. Rating 1. If these exposures are accompanied by other regular credit limits to the same borrower, rating and appraisal process as applicable for the said advances will be applicable for these exposures also. 2. Such exposures could be sanctioned on stand-alone basis to only customers of exceptionally good standing. 3. Simplified process has been put in place vide Corporate Office circular CR/141/87/05/2005 dated 04.05.05 for cases where (i) the customer is offered only forward cover limits and (ii) exposure is upto Rs.2 crores, as under: Proposals need not be submitted in RAM / rating exercise need not be carried out in RAM Proposals should be submitted in simplified format attached with circular For such proposals, branches need not send financial statements to Corporate Office.

Product

Product Description Purpose Can be for any business purpose. Utility of the Repayment is assured, if product to us o The premises under finance is occupied by a lessee and o Rent is regularly paid by the lessee through the Bank Besides identified repayment source, exposure is usually backed by mortgage of property. As tenor of the loan progresses, (a) exposure reduces (b) value of the property usually goes up. Therefore, asset cover goes up continuously. Rating As the exposure is structured, borrower need not be rated Margin Minimum 10% on Lease rentals pertaining to loan tenor, and Minimum 20% on market value of property, whichever is higher in absolute terms General Lease rent amount less TDS would be considered. Guidelines Reasonable maintenance charges would be reduced from lease rental, based on lease terms. Future lease rentals would be discounted at the interest rate at which loan is proposed. If lessor has taken any refundable deposit from lessee, such deposit should be reduced from loan amount. Assessment of loan will be primarily on the comfort of lease rentals, unless there are any specific negative points to be addressed in a particular proposal. Therefore, detailed appraisal as required for loans and advances need not be carried out. This product can be used only if (a) the premises are ready for occupation at the time of the proposal or within 3 months (b) lessee has been identified and lease terms have been finalised. The loan can be released only after the lease rental agreement is executed and all other documentation is completed. Rent should generally be routed through the Bank. Other Amount of loan under this product is linked to (a) lease rental guidelines amount, (b) period of the loan and (c) interest rate. Maximum period of the loan (for exposures over Rs.2 crores) shall not exceed 7 years or 3 times the lock-in period, whichever is lower.

Lease Rental Discounting Structured Term Loan, which is repayable from future lease rentals.

Product Product Description Credit enhancement

Securitisation of receivables (or other structured exposures) Structured Term Loan, which is repayable from securitised receivables of underlying Retail assets such as Personal Loans, Housing Loans, and Vehicle Loans. Credit enhancement is offered through the following. o Subordination of Excess Interest Spread (EIS). EIS is equal to Interest earned on the underlying assets less Interest offered for the securitised exposure o Cash Collateral for securitised receivables o Charge off, which means buyback of overdue assets (say for more than 90 days) from the surplus in the pool. These exposures are hybrid in nature and hence will not fall under one category. Our risk primarily depends on the underlying retail assets and hence these are not corporate exposures. The diversification benefit available for retail assets is available for this exposure too. However, our risk is much lower than that associated directly with underlying retail assets, on account of the credit enhancement explained above. Issue is preferably rated by an external credit rating agency, (No internal rating). Minimum rating A (Adequate safety) Exposure is without recourse to originator Exposure under this product will not be governed by INTERNAL Single borrower exposure norms stipulated in Credit Risk Policy. Total exposure under this product, including all categories of underlying retail assets of all the originators, should not exceed normally 40% of the total fund based advances of the Bank. RBI guidelines contained in circular DBOD No. BP.BC.60/21.04.048/2005-06 dated 01.02.06, will be adhered to. Loans against securitisation of receivables in respect of retail assets should be sanctioned by an authority not below the level of Joint Managing Director

Nature of risk

Rating

General Guidelines Maximum exposure

RBI regulations Other guidelines

Product

Bridge Loans Product Bridge Loans are normally sought by corporates pending receipt of Description proceeds from issues of equity shares and / or pending disbursement of loans by banks / FIs. This is sought to avoid delays in implementation of projects. Purpose For financing projects under implementation Utility of the Enables financing projects for short term, backed by an assurance that product to us the loan will be repaid out of the equity and/or debt sanctioned by other banks or FIs. RBI RBI guidelines issued from time to time will be followed. Specific regulations guidelines in this regard are listed below: Banks should not grant bridge loans to any category of NonBanking Financial Companies (NBFCs). Bridge loans against expected equity flows/issues: Period of bridge loans should not exceed one year. Such loans should be included within the ceiling of 5 per cent of the banks total outstanding advances (including Commercial Paper) as on March 31 of the previous year prescribed for total exposure including both fund based and non-fund based to capital market in all forms. Banks may also extend bridge loans against expected proceeds of Non-Convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/or funds in the nature of Foreign Direct Investments, provided banks are satisfied that borrowing company has already made firm arrangements for raising aforesaid resources/funds. In case of Bridge loans against Term loans sanctioned by other banks / FI: Should obtain prior approval of the other bank / FI, which has sanctioned the term loan Should also obtain an irrevocable commitment from other bank / FI that the latter would directly remit the amount of term loan to it at the time of disbursement Period of such bridge loan/interim finance should not exceed 4 months. Under no circumstances, should banks allow extension of time for repayment of bridge loan/interim finance; and Banks should ensure that bridge loan/interim finance sanctioned and disbursed is utilised strictly for the purpose for which term loan has been sanctioned by another bank/FI.

Product

Bridge Loans

Product Product Description

Inter-Bank Participation Certificate (IBPC)

A bank, which has originated loans from its clients, issues IBPCs that are subscribed by other banks. On due dates of the IBPC, the issuing bank repays the amount to the participating banks. Such participation can be with or without risk sharing. The risk for participating banks is on underlying clients, if IBPC is with risk sharing. The risk will be on the issuing bank, if the IBPC is without risk sharing. Purpose Issuing banks issue IBPC to manage their portfolio risk in terms of concentration and capital requirements. Utility of the We can issue and/ or subscribe IBPC. product to us We may issue for managing portfolio risk in terms of concentration and capital requirements. We may participate in IBPC with or without risk. This would enable building quality portfolio without undergoing marketing rigours. The product will also be useful for managing short-term liquidity. Concerns in the Usually IBPC is resorted for short-term purposes. It may not lead to product relationship with Corporates, as the arrangement is between two banks. RBI guidelines issued from time to time will be followed (DBOD RBI guidelines circular No. BP.BC.57/62-88 dated 31.12.1988 contains guidelines and IBA has prepared uniform code for participations which includes documentation). Specific guidelines in this regard are listed below: 1. Exposure with risk sharing Period : Minimum 91 days and maximum 180 days Amount of participation : Maximum of 40% of outstanding in said account. Only in respect of standard accounts 2.Exposure without risk sharing Period : Not exceeding 90 days Sanctioning authority All IBPCs will require to be approved by COD/BOD

Product

Inter-Bank Participation Certificate (IBPC)

Product RBI Restriction

Loans against the guarantees issued by other banks / Financial Institutions RBI guidelines issued from time to time, latest being master circular No.DBOD.Dir.BC.32/13.03.00/2005-06 dated September 05, 2005 will be followed. Specific guidelines are reproduced below : Exposure against guarantee of another bank/FI will be deemed as an exposure on guaranteeing bank/FI. Exposures assumed by way of credit facilities extended against guarantees issued by other banks should be reckoned within the inter bank exposure limits prescribed by Board of Directors. Since exposure assumed by bank against guarantee of another bank/FI will be for a fairly longer term than those assumed on account of other inter-bank dealings in money market, foreign exchange market and securities market, Board of Directors should fix an appropriate sub-limit for longer term exposures since these exposures attract greater risk. Banks should monitor the exposure assumed on guaranteeing bank/FI, on a continuous basis and ensure strict compliance with prudential limits/sub limits prescribed by Board for banks and prudential single borrower limits prescribed by RBI for FIs. Banks should comply with the recommendations of Ghosh Committee and other internal requirements relating to acceptance of guarantees of other banks to obviate possibility of frauds in this area. 25% of exposure limit on counter party exposure limit as per Bank Risk policy or Rs.25 crores, whichever is lower

Sub limit these exposures Product

for

Loans against Deposits / Certificate of Deposits Guidelines for loans against deposits are issued separately and are outside the purview of this policy.

RBI Restriction

Product

Loans against Deposits / Certificate of Deposits However, in terms of RBI guidelines, banks are prohibited from granting advances against the deposits of other banks. Further, in terms of RBI guidelines, banks are prohibited from granting advances against Certificate of Deposits also.

Evaluation & Conclusion

As per the study, I find that Corporate Credit deals with the industry financing and servicing part of the banking operations. The bank provides various kinds of services to its corporate clients. Corporate credit plays a large contributory role towards the income of bank. It is most important and profitable product of the bank. IndusInd Bank Limited plays important role towards the society i.e.

Industry, Agriculture, Trade, Small business houses, etc. by providing credit at reasonable rates and for longer tenure. It provides a large range of credit facilities under its corporate credit structure to attract different corporate clients.

Bank offers Fund Based services which form the largest part of the banking business. Though the margins and profits in these services are getting squeezed in recent times, they still remain the primary business of the banks. The NonFund Based Services or Fee- based services, is the high growth and high profit part of the commercial banks. These services comprise of standard trade products (like bill discounting) and other services like LCs, etc. banks also offer to their clients Specialized Services which are very innovative and special kind of services. These are essentially non-fund based and deliver superior value to the customers.

References and Sources

Books and Journals: 1. Banking Laws and Practice By P.N. Varshney 2. Banking and Foreign Trade By Niti Soni 3. Banking Theory and Practice

By K.C.Shekhar

Newsletter and Journals:

1. Newsletter and Journals as provided by IndusInd Bank Limited, Mall Road,

Amritsar.

2. Leaflets of different credit schemes.

Other Sources: 1. Internet Sites

http://www.indusind.com http://www.hindujagroup.com http://www.hamldubai.com/corporate finance.html http://en.wikipedia.org/wiki/corporate_finance http://en.wikipedia.org/wiki/banking_in_india 2. Library