Consortium Loans Introduction Consortium loan is an advance made by a group of banks to a single borrower.

Generally one bank is appointed as lead bank. Such kind of arrangement is beneficial for both the borrower and banks as the risks are shared and exposure limits for banks are also met. I. The PBF method applicable to working capital finance granted by our bank to a borrower irrespective of the fact that whether he / she is in sole banking or in multiple banking or in consortium banking arrangements. In multiple banking or consortium banking, there may be a situation where other banks are following a different method of working capital finance. In such a case:A. If our bank is leader or holding the highest share in total working capital finance (i.e., total of funded and non funded finance), our bank shall adopt the proposed PBF-method and other banks shall be requested to accept the same though other banks shall be free to follow their own system also. IN OTHER WORDS, our banks extant guidelines in respect of consortium lending are to be followed B. If our bank is not a leader (in consortium) in total working capital finance (i.e., total of funded and non-funded finance), our bank may accept the assessment done by the consortium leader. However, in case of multiple banking, irrespective of our banks percentage share in total Working Capital finance, the assessment of Working Capital finance by our bank shall be done according to the guidelines of the bank, yet, only exceptionally and not as a general practice, wherever in case of multiple banking, the sanctioning authority is of the specific opinion that separate assessment by our bank as per new PBF method can be waived in meritorious conditions and circumstances, it may be done after recording in detail justifications for the same; and, such justifications may include, subject to case-specific merits, the following:i. Financials of the company are excellent; ii. The appraisal is done by a bank, having highest share, is of wide repute; iii. The security coverage for our banks exposure is quite adequate; iv. The dealings of the borrower with our bank have been quite satisfactory with no major inspection irregularity and credit rating is not below `A.

Our banks extant guidelines in respect of lending under multiple banking arrangements are to be followed, i.e., in a multiple banking system, the concept of leader bank is not applicable. As per the prevailing guidelines, under the multiple banking systems, each bank is to carry out its own assessment of Working Capital limits to be sanctioned by it as per the methods applicable in each bank. It is, however, suggested that, in case of multiple banking, first, the PBF may be assessed as per our banks relevant method; then, the total of Working Capital finance, provided by all other banks, should be deducted from the aforesaid PBF; and, thereafter, Working Capital finance from our bank may be considered, on merits, only up to the residual portion, OR, up to the request by the borrower, whichever is less.