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Date : May 10 2012
Transfer of Borrowal Accounts from One Bank to Another

RBI/2011-12/551
DBOD.No.BP.BC-104/21.04.048/2011-12

May 10, 2012

The Chairman and Managing Director/
Chief Executive Officer of
All Scheduled Commercial Banks

Dear Sir,

Transfer of Borrowal Accounts from One Bank to Another

Please refer to our circular IECD.No.20/08.12.01/97-98 dated December 2, 1997, in terms of which banks were advised to incorporate the necessary safeguards to be observed in the case of transfer of borrowal accounts from one bank to another as a part of their lending policy/procedures.

2. However, of late we have been receiving references/complaints that critical information on the health of the borrowal accounts being taken over is not being shared by the transferor bank with the transferee bank, resulting in inadequate due diligence at the time of taking over of accounts.

3. Therefore, we advise that:

a) Banks should put in place a Board approved policy with regard to take-over of accounts from another bank. The policy may include norms relating to the nature of the accounts that may be taken over, authority levels for sanction of takeover, reporting of takeover to higher authorities, monitoring mechanism of taken over accounts, credit audit of taken over accounts, examination of staff accountability especially in case of quick mortality of such cases after takeover, periodic review of taken over accounts at Board /Board Committee level, Top Management level, etc.

b) In addition, before taking over an account, the transferee bank should obtain necessary credit information from the transferor bank as per the format prescribed in our circular DBOD.No.BP.BC.94/ 08.12.001/2008-09 dated December 8, 2008 on “Lending under Consortium Arrangement/Multiple Banking Arrangements”. The format is furnished in Annex. This would enable the transferee bank to be fully aware of the irregularities, if any, existing in the borrower's account(s) with the transferor bank. The transferor bank, on receipt of a request from the transferee bank, should share necessary credit information as per the prescribed format at the earliest.

Yours faithfully,

(Deepak Singhal)
Chief General Manager-in-Charge


Annex

Format for sharing credit information
at the time of transfer of borrowal accounts

Part - I

Bio Data of the Company

I.

Borrowing party's name and address

 

II.

Constitution

 

III.

Names of Directors / Partners

 

IV.

Business activity

 

*

Main

 

*

Allied

 

V.

Names of other financing Banks

 

VI.

Net worth of Directors / Partners

 

VII.

Group affiliation, if any

 

VIII.

Date on associate concerns, if banking with the same bank

 

IX.

Changes in shareholding and management from the previous report, if any

 

Part - II

Major Credit Quality Indicators

I.

IRAC Classification

 

II.

Internal Credit rating with narration

 

III.

External Credit rating, if any

 

IV.

Latest available Annual Report of the borrower

As on ---------------

Part - III

Exposure Details other than Derivatives

(Rs. in crore)

I.

Type of credit facilities, e.g. working capital loan / demand loan / term loan / short term loan / foreign currency loan, corporate loan / line of credit / Channel financing, contingent facilities like LC, BG & DPG (I & F) etc. Also, state L/C bills discounting / project wise finance availed).

 

II.

Purpose of loan

 

III.

Date of loan facilities (including temporary facilities)

 

IV.

Amount sanctioned (facility wise)

 

V.

Balance outstanding (facility wise)

 

VI.

Repayment terms

 

VII.

Security offered

 

*

Primary

 

*

Collateral

 

*

Personal / Corporate Guarantees

 

*

Extent of control over cash flow

 

VIII.

Defaults in term commitments / lease rentals / others

 

IX.

Any other special information like court cases, statutory dues, major defaults, adverse internal / external audit observations

 

Part - IV

Exposure Details - Derivatives Transactions

(Rs. in crore)

Sr.
No.

Nature of the Derivatives Transactions

Notional Amount of Contracts

Weighted - Average Maturity of Contracts

Amount of Positive MTM for the Bank (Not due for settle-
ment)

Amount of Contracts classified as NPA

Notional Amount of Out-
standing Contracts which have been restru-
ctured

Major Reasons for restru-
cturing (in brief)

A.

Plain Vanilla Contracts

 

 

 

 

 

 

1.

Forex Forward contracts

 

 

 

 

 

 

2.

Interest rate Swaps

 

 

 

 

 

 

3.

Foreign Currency Options

 

 

 

 

 

 

4.

Any other contracts (Please specify)

 

 

 

 

 

 

B.

Complex derivatives including various types of option combinations designed as cost reduction / zero cost structures

 

 

 

 

 

 

1.

Contracts involving only interest rate derivatives

 

 

 

 

 

 

2.

Other contracts including those involving foreign currency derivatives

 

 

 

 

 

 

3.

Any other contracts (Please specify)

 

 

 

 

 

 

Part - V

Un-hedged Foreign Currency Exposures of
the Borrower with Currency-wise Details

(Rs. in crore)

I

Short term exposures (less than one year)

 

(a)

Long positions

 

(b)

Short positions

 

(c)

Net short- term exposure (a-b)

 

II

Long term exposures (one year and beyond)

 

(a)

Long positions

 

(b)

Short positions

 

(c)

Net long-term exposure (a-b)

 

III

Overall Net Position (I -II) for each currency
(Please give Overall Net Position in this format for each currency)

 

IV

Overall Net Position across all
currencies

 

Part - VI

Experience with the Borrower

I.

Conduct of funded facilities (based on cash management / tendency to overdraw)

 

II.

Conduct of contingent facilities (based on payment history)

 

III.

Compliance with financial covenants

 

IV.

Company's internal systems & procedures

 

V.

Quality of management

 

VI.

Overall Assessment

 

(The above to be rated as good, satisfactory or below par only)

(*) Broad guidelines for incorporating comments under this head is furnished in the next page

Broad Guidelines for Incorporating Comments under Part - VI
(Experience) of the Credit Information Report

 

Good

Satisfactory

Below Par

I.

Conduct of funded facilities

*

Over-drawings (No. of times)

Upto 4 times

5 to 6 times

Above 6 times

*

Average period of adjustment

Within 1 month

Within 2 months

Beyond 2 months

*

Extent of overdrawings (% of limit)

Upto 10%

10 to 20%

Above 20%

II.

Conduct of contingent facilities (Other than Derivatives)

*

No. of Defaults

Upto 2 times

3 to 4 times

Above 4 times

*

Average period of adjustment

Within 1 week

Within 2 weeks

Beyond 2 weeks

III.

Conduct of Derivatives Transactions

*

No. of contracts where the positive MTM value due to the bank remained overdue for more than 30 days

<25% of total number of contracts

25-50% of total number of contracts

> 50% of total number of contracts

*

No. of contracts where the positive MTM value due to the bank remained overdue for more than 90 days and the account had to be classified as NPA (but later on regularized and is not NPA as on the date of exchange of information)
Note : All cases where any of the contracts has been classified as NPA and continues to be NPA as on the date of the exchange of information should be shown as Below Par)

<1% of total
number of
contracts

1-5% of total
number of
contracts

> 5% of total
number of
contracts

*

No. of contracts restructured during the relevant period

<25% of total number of contracts

25-50% of total number of contracts

> 50% of total number of contracts

IV.

Compliance with financial covenants

*

Stock statement / Financial data

Timely

Delay upto 15 days

Delay over 15 days

*

Creation of charge

Prompt

Delay upto 2
months

Delay over 2
months

V.

Company's internal systems and procedures

*

Inventory Management

Adequate systems are in place

Adequate
systems are
in place but
not adhered

Adequate systems are not in place

*

Receivables Management

- do -

- do -

- do -

*

Resource Allocation

- do -

- do -

- do -

*

Control over Information

- do -

- do -

- do -

VI.

Quality of management

*

Integrity

Reliable

Nothing adverse

Cannot be categorized in previous columns

*

Expertise Competence / Commitments

Professional & visionary

Have
necessary
experience

-do-

*

Tract Record

Timely

Executions /

-do-


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