THE GUNTUR CO. OPERATIVE URBAN BANK LTD., GUNTUR
Administrative Office, 3/2, Brodipet, Guntur
Agenda No: 25
Date of meeting : 18th May 2023
MEMORANDUM TO THE MANAGING COMMITTEE OF THE BANK
Sub: Review of Credit Policy of the Bank
We are placing the Credit Policy before Board for review and approval.
We request the Board to review and approve the Credit Policy of the Bank. The policy is valid from 1st June 2023 to 31st May 2024.
Govindaraju Sadanand
Chief Executive Officer
Date : 15.05.2023
THE GUNTUR COOPERATIVE URBAN BANK LTD
Administrative Office, 3/2, Brodipet, Guntur
Credit Policy from 01.06.2023 to 31.05.2024
Chapter 1
Preamble : Credit deployment in any organization is must and important to achieve the set profit goals. Credit is the back bone, which enables a stream of income flow for sustenance. It involves greater risk in lending from entry point to recovery and one has to initiate measures to mitigate the risk involved. Every Bank has to write a credit policy for approval of respective Boards for implementation at each branch. The policy has to include the various guidelines/instructions given by RBI in respect of exposure norms and other restrictions. In view of above, A credit policy is for the period from 01.06.2023 and upto 31.05.2024 for approval of the Board.
The concept of Urban Coop Banks is to serve the members of the Mutually Aided Cooperative Society. Hence, the loans generally will be sanctioned to the members of the society. Hence the branches have to ensure that the enrollment of membership is must for sanctioning any limits including Gold Loans under priority sector advances.
Objectives:
- Rationale :The credit policy of the bank needs to be revised at frequent intervals, to suit the bank’s requirements and to accommodate the changing scenario in the market demand. The policy requires to comply with the directives and suggestion of RBI to ensure a healthy credit portfolio.
- Ensure credit expansion to productive sectors with emphasis on ASSET QUALITY.
- Thrust on priority sector lending, with emphasis on credit expansion for agriculture, weaker sections, women, minorities and MSME.
- Price sensitive approach to add fresh business under commercial sector for increased profitability.
- Streamline the retail credit Portfolio in general and Gold Loan portfolio in particular, for better asset quality and reduction in risk element.
- Prepare and introduce a separate and perfect MSME portfolio, to encourage small ticket loans covering manufacturing and service sectors.
- Encourage each branch separately and individually for diversified credit portfolio to encourage proper credit mix for commercial and priority sectors, depending on the local potentialities.
- Focus on special monitoring of overdue accounts/ potential NPAs on a month to month basis with an intention to avoid slippage of assets to NPA.
- Sensitize the branch level staff on the art of credit processing and empower them with details of our bank retail products.
- Make use of the business relations of the staff to market bank’s products with emphasis on securing high yielding quality credit proposals.
- Expand customer base.
- Comply with the regulatory norms issued by RBI/GOI.
Chapter 2
Qualitative Credit Expansion – Strategies
The personnel involved in credit must not only have the required knowledge levels for proper assessment of credit proposals but also have the zeal to sustain the quality during currency of the loan account. The bank shall have well defined strategy for qualitative credit management.
Empowering the Staff:
The knowledge levels and capabilities of the staff for handling credit need to be improved through.
- Issuing job cards in simple terms to handle front desk enquiries and to attend the day to day routine.
- Releasing clear and detailed credit policy for the bank.
- Arranging training programs to enrich the knowledge levels of staff handling credit.
Market Intelligence:
It encompasses various issues requiring the bank to constantly update the happenings in its area of operation.
- Branches have to carefully study its command area for its potentialities, nature of activities, attitude of the people and backward and forward linkages
- Study the nature and cost economics of various major activities separately and maintain a record for reference.
- Gather information about various merchant/ community organizations in the locality which are involved in business/ production/ service activity and secure their confidence through frequent and regular interaction for business development.
- Keep a constant watch on the price fluctuations of major commodities like metals, grains and various other products concerned to our credit activity, for ensuring required margins and adequate security.
- The information about our credit clientele shall be gathered through discreet enquires from the market, confidential opinion from other banks if any with whom the client is dealing and by regularly visiting the business premises/ residence. Enquiries may also be made with the suppliers of the goods/ purchasers of goods from our clientele.
- Cross selling of the bank’s products be the buzz word for marketing.
Chapter
Focus Sectors: The area of operation of Guntur Coop Urban Bank Ltd is restricted to the Guntur, Krishna, Prakasam Districts only. The command area is predominantly depending on agricultural economy. Agriculture and allied activities lead the potentiality, followed by industries depending on agriculture and trade.
Sectors to be focused
- Gold loans (– agriculture)
- Gold loans ( loans and overdrafts) – personal, SME segments
- Vehicle Loans (Two Wheeler, Car Loans, Truck Finance)
- Retail trade and services (MSME loans)
- Personal loans, including loans against securities ( Postal Saving Certificates/LIC Policies)
- Wholesale trade (includes loans against CWC and SWHC Receipts)
- Mortgage Loans
- Project Finance
- Urban Short Term Loan
- Education loan for higher studies with in India and Abroad
- Self Help Groups ( SHGs)
- Joint Liability Groups (JLGs)
- Housing Loans under Urban Swagruha scheme
Restricted Sectors
- Loans against commodities named in the selective credit control commodities, by RBI
- Capital market exposures
- Loans for speculation
Prohibited Sectors:
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- Loans against Bank’s own Shares
- Loans to Directors of the Bank and to the relatives of the Directors.
- Any other loans as per RBI Guidelines.
Chapter 4;
Entertaining the Customers of other Banks:
The existing business scenario and the pressure on banks for credit expansion has created certain unhealthy practices in the market, thereby forcing the banks to compromise on certain basic parameters and also take over of accounts of other banks through pouching. It is a necessity to comply with certain basic norms while entertaining the customers of other banks:
- Take over of good credit accounts from other banks needs a careful decision, for no lender would normally wish to lose a good borrowal account. Due care and diligence as per policy shall be ensured.
- Confidential opinion of the previous lender in respect of the borrower and guarantors shall be obtained. If it cannot be obtained due to strategic reasons, additional care shall be taken on the following lines.
- Obtain and study the statement of account for the past one year in case of working capital and in case of term loan since the date of sanction
- Copies of earlier sanction letters, with amendments, if any
- Discreet enquiries with the existing banker and other available channels of information, opinion report from existing banker.
- Specific reason for shifting to our bank. Examine critically and make a clear mention in the appraisal note
- Ensure that the loan accounts with the previous bank were never in default
- Takeover can be in total or partial. Examine the utility and usefulness of the account if it is a partial take over. Normally, partial take over of the account is discouraged.
- None of the group accounts and/or the partners/directors have ever defaulted to our bank
- The unit must be improving in performance, year after year in sales, quality in functioning and profitability
- The future projections must also be convincing and progressive
- The credit requirements must be properly and carefully arrived at, for the shift to another bank, may be for enhanced limits/amounts, as the previous bank must have rejected it
- Ensure proper takeover of securities also. Careful study of the title to the properties to be mortgaged, perfect valuation through approved valuer, marketability and liquidity of the securities.
- The ratios under financial analysis shall be constantly improving for the last 2 years
- To the extent possible, branches have to insist on additional securities in the form of LIC policies (S.V shall be adequate), NSC and other liquid instruments. Generally the traders invest in LIC, NSC ets., for reducing tax liabilities and hence it is advisable to insist on such additional collaterals
- Verify whether the unit has got all the required permissions and licenses. Check whether the statutory dues/ arrears like IT/ST/Excise duty, PF remittances are paid up to date
Chapter 5:
General guidelines for credit appraisal:
The credit appraisal is both an art and technique. The capability for a qualitative appraisal can be built up through improvement in relevant knowledge, study and practice. The credit officer/manager shall have the inquisitiveness to learn and develop the art of observation of market trend. However, an attempt is made to provide basic guidelines through this credit policy, for clarity in day to day functioning.
- The relevant application form should only be used for entertaining the proposals
- The client shall have either a SB a/c or Current a/c as the case may be, fully complying with the KYC norms
- CIBIL report of the applicant borrower and co-obligants to be obtained and scrutinized while considering the proposal.
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- CIBIL Score of 700 and above of the applicant borrower , property holder and other co-applicants is acceptable for considering the proposal.
- CIBIL score of less than 700 can be considered with justifications
