RBI/2008-2009/183
DBOD
No. BP. BC.46/ 08.12.001/2008-09 September 19, 2008 The
Chairman & Managing Directors /Chief Executive Officers
of All Scheduled
Commercial Banks (excluding RRBs and LABs) Dear Sir, Lending
under Consortium Arrangement/Multiple Banking Arrangements As
you are aware, various regulatory prescriptions regarding conduct of consortium
/ multiple banking / syndicate arrangements were withdrawn by Reserve Bank of
India in October 1996 with a view to introducing flexibility in the credit delivery
system and to facilitate smooth flow of credit. However, Central Vigilance Commission,
Government of India, in the light of frauds involving consortium/multiple banking
arrangements which have taken place recently, has expressed concerns on the working
of Consortium Lending and Multiple Banking Arrangements in the banking system.
The Commission has attributed the incidence of frauds mainly to the lack of effective
sharing of information about the credit history and the conduct of the account
of the borrowers among various banks. 2
. The matter has been examined by us in consultation with the Indian Banks Association
who are of the opinion that there is need for improving the sharing/dissemination
of information among the banks about the status of the borrowers enjoying credit
facilities from more than one bank. Accordingly, the banks are encouraged to strengthen
their information back-up about the borrowers enjoying credit facilities from
multiple banks as under: - At the time
of granting fresh facilities, banks may obtain declaration from the borrowers
about the credit facilities already enjoyed by them from other banks in Annex
1. In the case of existing lenders, all the banks may seek a declaration
from their existing borrowers availing sanctioned limits of Rs.5.00 crore and
above or wherever, it is in their knowledge that their borrowers are availing
credit facilities from other banks, and introduce a system of exchange of information
with other banks as indicated above.
- Subsequently, banks should
exchange information about the conduct of the borrowers' accounts with other banks
in the format given in Annex II at least at quarterly
intervals.
- Obtain regular certification by a professional,
preferably a Company Secretary, regarding compliance of various statutory prescriptions
that are in vogue, as per specimen given in Annex III.
- Make
greater use of credit reports available from CIBIL.
- The
banks should incorporate suitable clauses in the loan agreements in future (at
the time of next renewal in the case of existing facilities) regarding exchange
of credit information so as to address confidentiality issues.
Yours
faithfully, (Prashant Saran)
Chief General Manager-in-Charge
ANNEX
I MINIMUM INFORMATION TO BE
DECLARED BY BORROWEING ENTITIES TO BANKS WHILE APPROACHING FOR FINANCE UNDER MULTIPLE
BANKING ARRANGEMENTS A. Details of borrowing arrangements
from other banks (institution wise)
| I.
Name and address of bank/institution | |
| II.
Purpose for which borrowed | |
| III.
Limit sanctioned (full details to be given, e.g. working capital / 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) | |
| IV.
Date of sanction | |
| V.
Present outstanding | |
| VI.
Overdues position, if any | |
| VII.
Repayment terms (for demand loans,
term loans, corporate loans, project -
wise
finance) | |
| VIII.
Security offered (complete details of
security both primary and collateral
including
specific cash flows assigned
to project wise finance/loan raised &
personal/
corporate guarantee, to be
furnished) | |
| IX.
Requests for facilities which are under
process | |
[The information
to be given for domestic and overseas borrowings from commercial banks, Financial
Institutions and NBFCs] B. Miscellaneous Details
| i.
CPs raised during the year and
current outstanding | |
| ii.
Details of financing outside banking
system e.g. L/C Bills discounting | |
| iii.
Main and allied activities with
locations | |
| iv.
Territory of sales and market share | |
| v.
Details of financial aspects incl.
DSCR Projections wherever
applicable
as per requirement of bank –
Imp. Financial covenants, if any,
agreed to/accepted
with other lenders. | |
| vi.
CID A/cs, within/outside financing
Banks, being operated, if any | |
| vii.
Demands by statutory authorities/
current status thereof | |
| viii.
Pending litigations | |
| ix.
A declaration authorizing the bank
to share information with other
financing
banks | |
ANNEX
II REVISED FORMAT UNDER MULTIPLE
BANKING ARRANGEMENT
CREDIT INFORMATION EXCHANGE |
PART I (BIO DATA) | |
I. Borrowing party's name and
address | |
|
II. Constitution | |
|
III. Names of Directors / Partners | |
| IV.
Business activity | |
| V.
Names of other financing Banksp | |
| 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 (FINANCIAL) | |
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) |
| 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 (facilitywise) | |
| V.
Balance outstanding (facilitywise) | |
| 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 (EXPERIENCE)(*) | |
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 IV
(EXPERIENCE) OF THE CREDIT
INFORMATION REPORT
| |
GOOD |
SATISFACTORY |
BELOW PAR |
| I.
Conduct of funded
facilities | | | |
- Overdrawings
(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 | | | |
| | Upto
2 times | 3
to 4 times | Above
4 times |
- Average period of adjustment
|
Within 1 week |
Within 2 weeks |
Beyond 2 weeks | |
III. Compliance with
financial covenants | | | |
- Stock
statement / Financial data
|
Timely |
Delay upto 15 days |
Delay over 15 days | |
|
Prompt |
Delay upto 2 months |
Delay over 2 months | |
IV. Company's internal systems and procedures | | | |
| | Adequate
systems are in place | Adequate
systems are in place but not adhered |
Adequate systems are not in place |
| |
- do - |
- do - |
- do - | | |
- do - |
- do - |
- do - | | |
- do - |
- do - |
- do - | | V.
Quality of management | | | |
| |
Reliable |
Nothing adverse |
Cannot be categorized in previous columns |
- Expertise
Competence/ Commitments
|
Professional & visionary |
Have necessary experience |
-do- | |
|
Timely |
Executions / |
-do- |
ANNEX– III Part :
I
| DILIGENCE
REPORT To, The
Manager, ___________________ (Name of the Bank) I/We
have examined the registers, records, books and papers of ____________ Limited
(the Company) as required to be maintained under the Companies Act, 1956 (the
Act) and the rules made thereunder , the provisions of various statutes, wherever
applicable, the provisions contained in the Memorandum and Articles of Association
of the Company as well as the provisions contained in the Listing Agreement/s,
if any, entered into by the Company with the recognized stock exchange/s, as may
be applicable for the half year ended on ____________ . In my/our opinion and
to the best of my/our information and according to the examination carried out
by me/us and explanations furnished to me/us by the Company, its officers and
agents. I/We report that in respect of the aforesaid period: - the
management of the Company is carried out by the Board of Directors comprising
the following persons :
During the period under review
the following changes took place : - the shareholding
pattern of the company is as under :
During the period
under review the following changes took place : - the
company has altered the following provisions of
(i)
the Memorandum of Association during the period under review and has complied
with the provisions of the Act. (ii) the following Articles
of Association during the period under review and has complied with the provisions
of the Act.
- the company has during the period
under review, entered into the following transactions with business entities in
which directors are interested.
- the company has during
the period under review, advanced loans, given guarantees and provided securities
amounting to Rs. ____________ to its directors and/or persons or firms or companies
in which directors are interested.
- the Company has
during the period under review, made loans and investments; or given guarantees
or provided securities to other business entities as under:
- the
amount borrowed by the Company from directors, members, public, financial institutions,
banks and others during the period under review is/are within the borrowing limits
of the Company. The break up of the company's borrowings are as under:
- the
Company has during the period under review, not defaulted in the repayment of
any public deposits or unsecured loans and the Company or its Directors are not
under the Defaulter's list of Reserve Bank of India or in the Specific Approval
List of ECGC.
- the Company has during the period under
review, created, modified or satisfied charges on the assets of the company as
under:
- the Forex exposure and Overseas Borrowings of
the company are as under'
- the Company has issued, offered
and allotted all the securities to the persons entitled thereto and has also issued
letters, coupons, warrants and certificates thereof to the concerned persons and
also redeemed its preference shares/debentures and bought back its shares (wherever
applicable) in compliance with the specified procedures and within the stipulated
time.
- the Company has insured all its secured assets.
- the
Company has complied with the terms and conditions, set forth by the lending institution
at the time of availing the facility and also during the currency of the loan
and has utilized the funds for the purposes for which these were borrowed.
- the
Company has declared and paid dividends to its shareholders as per the provisions
of the Companies Act, 1956.
- the Company has insured
fully all its assets.
- the Company / Directors are not
in the willful defaulters' list of RBI.
- the Company
/ Directors are not in the Specific Approval List of ECGC.
- the
Company has paid all its Statutory dues and that there are no arrears.
- the
Company has complied with the terms and conditions, set forth by the lending institution
at the time of availing any facility and also during the currency of the loan.
- the
Company has used the funds for the purpose for which it borrowed.
- the
Company has declared and paid dividends to its shareholders, as per the provisions
of the Companies Act.
- the Company has complied with
the provisions stipulated in Section 372 A of the Companies Act in respect of
its Inter Corporate loans and Investments.
- the Company
has complied with the applicable and mandatory Accounting Standards issued by
the Institute of Chartered Accountants of India.
- the
Company has credited and paid to the Investor Education and Protection Fund all
the unpaid dividends and other amounts required to be so credited.
- a
list of prosecutions initiated against or show cause notices received by the Company
for alleged offences under the Act and also the fines and penalties or any other
punishment imposed on the Company in such cases is attached.
- the
Company has complied with the various clauses of the Listing Agreement, if applicable.
- the
Company has deposited both Employees' and Employer's contribution to Provident
Fund with the prescribed authorities.
Note
: The qualification, reservation or adverse remarks, if any, may be stated
at the relevant place(s). Place:
Date: Signature:
&nb
sp;
Name of Company Secretary: C.P. No.: |
Part II
| CERTIFICATIONS
OF BORROWAL COMPANIES
BY CHARTERED ACCOUNTANTS / COMPANY SECRETARIES
- Terms of reference for stock audit are to be spelt out
clearly by the Banks, so that the Chartered Accountants can give focused attention
to such areas.
- End-use verification of funds lent,
if certified by Statutory Auditors, will be a good comfort to the Banks.
- As
Banks quite often deal with unlisted companies, disclosure requirements for such
companies above a specific turnover may be made akin to those for listed companies,
viz. consolidated balance sheet, segmental reporting etc. Information on large
shareholding also will be useful.
- Further, the following
additional certification either from Chartered Accountant or Company Secretary
may also be thought of :-
(a) Company
Directors not figuring in defaulters list (RBI/ECGC)/willful defaulters list etc.) (b)
Details of litigation above a specified cut off limit. (c) A
specific certificate, probably from the Company Secretary, regarding compliance
with Sec. 372 (a) of the Companies Act. (d) Details of creation/
modification/ satisfaction of charges on the assets of the company, position regarding
insurance, show cause notices received, finds and penalties awarded.
- As
regards rotation of Auditors, for the sake of operational convenience, it is suggested
they may be changed once every 5 years instead of every 3 years.
- In
order to avoid concentration, group companies may have different Statutory / Internal
Auditors in case group turnover exceeds Rs.100 crores.
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