RETAIL LENDING POLICY 2010-11

1.0 INTRODUCTION 1.1 Definition Retail lending is basically lending to individual persons .

1.2 Retail Banking Scenario In the back drop of the changing economic scenario, the focus of lending is increasingly getting shifted from industrial/commercial advances to a diversified portfolio of advance to retail, MSME and the core traditional sector i.e. Agriculture. Retail banking is one of the principal growth engines for the banks in India and retail advances have been widely accepted as the driver of the credit acceleration. Due to globalization, foreign banks and new generation of private and foreign banks have entered the market and have brought with them several technologically driven innovative products. In order to face the competition effectively, public sector banks are also becoming more technology savvy and customer oriented. Thus, non-traditional competition, market consolidation, new technology, and advent of Internet are changing the landscape of the retail banking industry. Now customers are easily switching banks whenever they find better services and products and are difficult to retain. Banks therefore, are finding ways & means to cross-sell various retail products to existing customers and keep their base intact. 1.3 Why Retail Banking? Banks today are concentrating on retail lending mainly due to following advantages: (1) Risk concentration is better taken care of. (2) Lower incidence of NPAs. (3) Growing market on account of consumerism and rising income levels. (4) Reasonable yields. (5) Focus on productivity and profitability. (6) Innovation of new products and services. (7) Lower risk weights for CRAR especially in Housing loan.

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2.0 2.1

RETAIL BANKING - CONTOURS OF LENDING Objective of Retail Lending Policy

A) To strengthen the credit delivery system for retail lending. B) To build up and maintain a well-diversified, healthy and high yielding retail portfolio. C) To set up an effective Risk Management System to address key issues like risk identification, risk measurement, risk monitoring and risk mitigation. D) To provide for adequate delegation of discretionary powers at all level. 2.2 Present Bouquet of products

The Retail Banking schemes of the bank are as under: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Dena Niwas Housing Finance Scheme. Dena Consumer Durables Loan Scheme Dena Vidya Laxmi Educational Loan Scheme Dena Suvidha Personal Loan Scheme Dena Trade Finance Scheme Dena Auto Finance Scheme Dena Senior Citizens (Pensioners') Loan Scheme Dena Rent Scheme Dena Mortgage Loan Scheme. Dena Doctor+ Scheme (under implementation) Dena Gold Loan Scheme (under implementation)

As per RBI guidelines, the interest is applied on Monthly rest basis. Repayment is by way of Equated Monthly Installments [except in case of Dena Trade Finance Scheme & Dena Mortgage OD Scheme]. Fixed and Floating interest rates are offered in respect of Housing Loans. Floating rate of interest are linked to BPLR. Customers who are risk averse are likely to go in for the loan at a fixed rate basis as it provides immunity from any fluctuations in interest rates. A fixed rate loan also enables better Asset-Liability Management as the income is fixed throughout the term of the loan. 2.3 Regulatory Compliances Fair Practice Code The basic tenets of the Fair Practice Code formulated under the Credit Policy shall be followed for retail lending also, as under: To provide professional, efficient, courteous, diligent and speedy services in the matter of retail lending. Not to discriminate on the basis of religion, caste, sex etc.

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 To be fair and honest in disclosures, dissemination of information and presentation while releasing information to public and marketing of Loan Products. To provide customers with accurate and timely disclosure of terms, costs, rights and liabilities as regards loan transactions. If sought, to render necessary assistance to customers applying for loans. To attempt with sincerity to resolve any disputes or differences with customers.

To comply with all regulatory requirements.

KYC Norms KYC guidelines must be followed for Credit risk mitigation. CIBIL Credit Information Report from CIBIL must compulsorily be used in all retail credit proposals for both borrower as well as guarantors.

The individual retail products of the Bank have been formulated with necessary prescription of maximum exposure on a customer. The concept of regulatory retail portfolio under the new capital adequacy framework of RBI based on exposure being up to Rs 5.00 crores shall be followed. The concept does not include retail advances alone but also includes wide category of other borrowers having exposure upto Rs 5.00 crore and excludes the loans/ advances under various retail schemes having exposure of more than Rs 5 crores. Regions shall continue to report to Head Office all the advances under retail loan schemes. For the purpose of segment reporting, Regions shall exclude the loans/ advances under retail loan schemes having exposure of more than Rs 5.00 crores from regulatory retail portfolio. 2.4 Treatment of Staff under Retail Banking o Loans under Retail Banking Schemes to employees of the Bank/ their family members strictly in conformity with the norms / terms of the schemes would be treated as advance to members of general public and not as staff related advances. However, reporting as required will be made to Management Committee / Board. o Competent Authority for sanctioning retail loans to employees of the Bank (within the discretionary powers delegated to them)
S.N Advances to Sanctioning authority

1 2 3 4

Staff members posted at Branch other than Branch Manager Staff posted at RO / Branch Manager

Branch Manager Regional Manager / Dy. Regional Manager GM (Gujarat Operations)

Staff posted at GMO (Gujarat)/ RMs under GMO (Gujarat) Advances to RMs except those posted GM (RBD) / ED under GMO (Gujarat), DGMs, AGMs & Departmental Heads at Head Office, Chairman RRBs. Other staff posted at Head Office and Concerned Departmental Staff on deputation to outside agencies. (AGM / DGM) General Managers
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Head

ED / CMD

In respect of proposals pertaining to staff posted at offices other than branches, the name of disbursing branch must invariably be mentioned while sanctioning such proposals. For reporting purpose, housing/ consumer/vehicle loans given to staff members under staff housing/staff consumer/staff vehicle loan schemes be reported under related schemes of retail lending. Besides, loan given to individuals (other than staff) for housing, auto, consumer and education loans also be reported in related schemes under retail credit. 2.5 Close relatives consists of: Spouse Father Mother (including step mother) Son (including step son) Sons wife Daughter ( including step daughter) Daughters husband Brother ( including step brother) Brothers wife Sister (including step-sister) Sisters husband Brother ( including step-brother) of the spouse Sister (including step-sister) of the spouse

Retail advances to close relatives of staff members can be sanctioned / entertained at any branch. However, information about name of staff member, his relation with the borrower & his posting should be invariably written in the loan appraisal/sanction note. Possibility of obtaining the personal guarantee of the concerned staff member is to be explored in such cases. 2.6 Non-applicability of Group Concept

Advances under Retail Banking Schemes are proposed to be kept out of the Group approach. Applications received for advances to partners / directors of companies in their individual capacities under various Retail Banking Schemes are considered as per the needs of the individuals, their repaying capacity and according to criteria laid down in the Scheme. The advances to partners / directors in their individual capacity under Retail Banking Schemes are to be kept outside the purview of the Group approach to ensure prompt servicing of the target group in view of the competitive market practices. This will however, be not applicable in case of loans for Dena Trade Finance, Dena Rent and under Dena Mortgage Schemes to firms and corporate. 2.7 Indirect Retail Finance

While the Bank would prefer direct lending for retail finance, as a part of its credit growth strategy. The Bank would continue entertaining Indirect Retail finance housing finance institutions, Housing Boards, public housing agencies etc.

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2.8 ALM angle for Maturity patterns and preference for EMI pattern Intense competition for business on the assets and liabilities sides coupled with increasing volatility in retail lending interest rates are putting pressure to maintain spreads, profitability and long term viability. To manage the interest rates efficiently & to mitigate the related risks the following actions would be taken: Review interest rates scenario and taking stance thereon periodically based on market conditions and keeping in view the banks future earnings. Reviewing policy for maturity pattern and preference for EMI Patterns for better funds management. Frequently reviewing various portfolios to arrive at desired composition / distribution across various retail products. The desired composition of direct retail credit shall be as follows.Sr. No 1 2 3 4 5 6 7 8 9 10 11 Retail Product Existing composition As of 31.01.2010 0.94% 0.22% 0.58% 8.90% 6.28% 56.67% 8.12% 8.44% 9.85% Under implementation Under implementation Revised composition 0.75% 0.20% 0.50% 8.90% 6.15% 56.70% 8.00% 8.40% 9.80% 0.50% **0.10%

Dena Suvidha personal loan Dena Senior Citizen Dena Consumer Durable Dena Auto Finance Dena Trade Finance Dena Niwas Dena Vidyalaxmi Dena Rent Dena Mortgage Dena Doctor+ Dena Gold

** The Scheme shall initially be implemented on pilot basis in branches specified. The revised composition is based on Capital adequacy norms, default probabilities, etc. Maximising Net Interest Margin. Mitigating interest rate risk to the extent possible by considering floating rates.

2.9

CRAR related issues Each retail banking scheme is assigned a risk weight (following certain norms laid down by RBI) as under and subject to change as per RBI norm. Association of risk weight to various retail lending schemes shall be as prescribed by RBI from time to time.

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2.10

Development of New Products

There is a need of constant innovation in retail banking. In bracing for tomorrow, a paradigm shift in bank financing through innovative products and mechanisms involving constant upgradation and revalidation of the banks internal systems and processes is called for. Banks now need to use retail as a growth trigger. This requires product development and differentiation, innovation and business process reengineering, micro-planning, marketing, prudent pricing, customisation, technological upgradation, home / electronic / mobile banking, cost reduction and finally cross-selling. Lending has become very competitive as customers are in the mode of shopping for loans. The bank would strive to continuously offer new financial products to customers. But as number of customers increase, the risk of increase in the number of defaulters prevails. Thus Bank has to do the balancing act. On one hand they strive to acquire more business by lending to more customers and on the other hand they have to lend to select customers so that the rate of delinquency is under control. The bank would introduce new products as a strategy to achieve goal envisaged in corporate plan. Bank would also modify existing schemes based on the feedback received from field functionaries. The Board has approved 2 new retail loan schemes a) Dena Gold Loan Scheme and b) Dena Doctor + Scheme. The detailed operational guidelines for both schemes are being issued by HO. a. The purpose of Dena Gold Loan scheme is to provide loans to individuals for personal and agricultural purposes against security of gold jewe lleries owned by them to meet urgent / unforeseen financial needs. It is proposed to introduce the scheme on pilot basis initially in select branches. The scheme will be implemented through branches having facility for safe keeping of gold jewellery. b. The purpose of Dena Doctor + scheme is to finance medical practitioners who may like to purchase medical equipments etc, set-up clinic / X-Ray Lab / pathological lab, expansion / renovation / modernisation of existing clinic, purchase of ambulance, etc. Considering the changing requirements of customers, Dena Trade Finance scheme h been revised as approved by the Board in its meeting held on as 27.11.2009 and advised to RO/branches vide HO circular no. 326/08/2009-10 dated 31/12/09. Following modifications have been introduced in Dena Niwas Scheme, Dena Rent Scheme, Dena Mortgage Scheme, Dena Auto Finance Scheme, Dena Vidya Laxmi Scheme, Dena Trade Finance Scheme, Dena Suvidha Scheme and Dena Consumer Durables Scheme.

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A) Dena Niwas Housing Finance Scheme Existing Modified 1) Maximum loan amount is Rs. Maximum loan amount is Rs. 200 lacs for 100 lacs for purchase of house purchase of house / flat . / flat . Maximum loan amount is Rs. 5 Maximum loan amount of Rs.10 lacs for lacs for repairs and repairs and renovations. renovations. 2) Process fees : 0.50% of Process fees : sanctioned amount For loans up to Rs. 50 lacs, 0.25% of sanctioned amount or Rs. 12,500/whichever is less. In case of loans above Rs. 50 lacs to Rs. 1 crore, 0.20% of sanctioned amount or Rs. 20,000/- whichever is less -. In case of loans above Rs. 1 crore to Rs. 5 crores, 0.15% of sanctioned amount or Rs. 75,000/- whichever is less In case of loans above Rs. 5 crores. 0.10% of the sanctioned amount or Rs 100,000/-, whichever is less. B) Dena Rent Scheme Existing 1) Maximum limit is Rs. 200 lacs 2) Where Dena Bank is not the tenant, maximum repayment period upto 7 years or residual lease period, whichever is less. Where Dena Bank is the tenant, maximum repayment period upto 10 years or residual lease period, whichever is less. 3) Landlords - Individuals (Indian citizens, including NRIs), Corporates, Trusts etc. who have given their properties on rental basis to Banks / FIs / PSUs / reputed Limited Companies (i.e. tenants of the property should be any of these entities only).

Modified Maximum limit of Rs. 500 lacs In all cases, maximum repayment period upto 10 years or residual lease period, whichever is less.

Landlords - Individuals (Indian citizens, including NRIs), Corporates, Trusts etc. who have given their properties on rental basis to Banks / FIs / PSUs / reputed Limited Companies (i.e. tenants of the property should be any of these entities only). However, discounting of rentals of shopping malls should be discouraged and preference should be given for discounting of rent of office premises.

4) Process fees : 0.50% of Process fees : 0.50% of sanctioned sanctioned amount or Rs. 1 lac amount or Rs. 2.50 lac whichever is less whichever is less
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C) Dena Mortgage Scheme Existing 1) Maximum limit is Rs. 100 lacs. 2) Purpose / coverage - To offer a general purpose loan / Overdraft facility to all categories of individuals against the security of immovable property (i.e. for marriage, education, medical treatment, foreign travel etc.). 3) The property to be mortgaged should be free from all encumbrances.

Modified Maximum limit of Rs. 300 lacs. Purpose / coverage - To offer loan / Overdraft facility to all categories of individuals for specified purpose against the security of immovable property (i.e. for investment in business, marriage, education, medical treatment, foreign travel etc.). The property to be mortgaged should be free from all encumbrances. However, in case the property is already mortgaged to the Bank for any retail credit facility such as housing loan, educational loan, etc., Regional Manager may consider such property for security provided the proposed loan amount is not more than 50% of the residual distress sale value of the property

The applicants should have adequate repayment capacity and the existing loan account with our Bank should be at least 2 years old. The conduct of the existing account should be satisfactory. 4) Source of repayment : (not Source of repayment is to be specifically specifically incorporated) mentioned. (It is proposed in terms of RBI Circular no. DBOD.BP.BC.No. 42/ 08.12.015/ 2009-10 dated 09/09/2009 regarding Guidelines on Classification of Exposures as Commercial Real Estate (CRE) Exposures, where the exposure may not be directly linked to creation or acquisition of CRE but the repayment would come from the cash flows generated from CRE, the exposure should be classified as CRE. If the repayment primarily depends on other factors such as operating profit from business operations, quality of goods and services, tourist arrivals etc., the exposure would not be counted as Commercial Real Estate. The classification of the loan / OD is to be done accordingly.)

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D) Dena Auto Finance Scheme Existing 1) Process fees Two wheelers : Rs.250/Four wheelers : Rs.500/Modified Process fees Two wheelers : Rs. 500/Four wheelers : For loans upto Rs. 2.50 lacs, Rs. 1,000/-. In case of loans above Rs. 2.50 lacs to Rs. 7.50 lacs, Rs. 1,500/ For loans above Rs. 7.50 lacs, Rs. 2,500/-.

E) Dena Vidya Laxmi Educational Loan Scheme Existing 1) Reimbursement of course expenses incurred prior to sanction is not specified in scheme. Modified Reimbursement of course expenses incurred by applicant in case of emergency prior to sanction may be allowed by sanctioning authority. The expenditure should not be more than 3 months old and proof of payment such as receipts etc. should be produced to Bank for verification. Interest Rate : Loans upto Rs. 4 lacs Repayable in 3 years : BPLR 3.00% i.e. 9.50% p.a. Repayable in > 3 years : BPLR 3.00% + TP i.e. 10.00% p.a. Concessions in interest rate : In case of Loans above Rs. 4 lacs

2) Interest Rate : Loans upto Rs. 4 lacs Repayable in 3 years : BPLR 3.50% i.e. 9.00% p.a. Repayable in > 3 years : BPLR 3.50% + TP i.e. 9.50% p.a. 3) Concessions in interest rate : In case of Loans above Rs. 4 lacs A) Girl students As applicable in Dena Shakti presently 0.50 % p.a. B) Institutions with whom Bank has tie-up arrangements - As per arrangement C) IITs/ IIMs / ISB As applicable to general public

A) Girl students 1% p.a. including as applicable in Dena Shakti B) Institutions with whom Bank has tie-up arrangements - As per arrangement C) IIM / IIT / ISB (Indian School of Business, Hyderabad) students 1% p. a. Total concessions as above, excluding 1% interest concession for interest payment during moratorium period shall

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not exceed 2% and 3% in case of staff where 100% security is offered and lien is marked on terminal benefits of the staff and at the time of retirement of the staff, amount equivalent to the loan outstanding is kept as term deposit with the Bank and lien is marked on the same and TDR duly discharged by the holder is pledged with the Bank. F) Dena Trade Finance Scheme Existing 1) Commitment Charges : Nil Modified Commitment Charges as applicable for normal CC Hypothecation accounts as prescribed in Loan Policy.

G) Dena Suvidha Personal Loan Scheme Existing Modified 1) Minimum gross monthly Minimum gross monthly income should income should be Rs.5,000/be Rs.15,000/-

H) Dena Consumer D urables Loan Scheme Existing Modified 1) Gross income should be more Gross income should be more than than Rs.60,000/- p.a. Rs.75,000/- p.a.

2.11

Provisioning norms

Provisioning norms w.e.f. 15th November 2008 on Standard Assets under Retail Banking Scheme is 0.40 % as per current RBI guidelines.

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3.0

RETAIL BANKING ROAD MAP The Retail Lending Policy seeks to provide a suitable environment & support system to achieve the contours of retail policy. Retail lending would receive due focus & bank will endeavour to increase share of retail lending to 20% of total advances.

4.0

RETAIL BANKING STRATEGIES Presently, Branches/ Finmarts / Retail Asset Branches (RABs) are the only delivery channels to cater to the need of customers. Retail Asset Branches primarily centralize the credit appraisal, sanction, disbursement and monitoring functions thereby leading to faster disposal of proposals with better expertise. RAB will function as specialized branch which will take care of all processes of retail credit. Presently, 12 RABs are functioning- 2 in Mumbai Suburban Region, one each in Pune, New Delhi, Lucknow, Bhopal, Kolkata , Ahmedabad, Surat, Hyderabad, Bangalore and Chennai.

Once the model implemented at these branches is stabilised, more RABs at other multi-branch locations will be opened. Schematic Approach: The Bank would endeavour to expand retail credit by adopting schematic approach wherever possible. Credit under various retail schemes for financing housing, vehicles, consumer durables, personal loan and educational loans would be preferably extended to groups of borrowers who are employees of good corporate, Government organisations, public sector units, educational & medical institutions etc by entering into suitable tie-ups for recovery of loan installments / interest. In case of housing, preference would be given to approving projects of established reputed builders and loans given to purchasers of houses / flats in such projects subject to their individual eligibility. With a view to have better supervision and control, the branches should restrict extension of retail credit within a manageable distance. The bank will explore and adopt innovative / improved delivery system for efficient and speedy credit delivery. Policy related to Functioning of Retail Asset Branch : Concept : RAB is set up based on Hub & Spoke model. Retail Asset Branch will handle applications under retail schemes emanating from local branches / FinMart & those generated by the Marketing staff attached to RAB. Retail Asset Branches will carry out all the functions relating to retail advance right from business procurement, credit appraisal, documentation, disbursement and follow-up. RAB will be functioning as specialized unit which takes care of all the processes of Retail Credit. RAB will consist of following internal sections viz.: 1. 2. 3. 4. Marketing & Verification Section. Processing & Documentation Section Loan Operation Section. Recovery Section.
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RABs shall consider loan applications under : (i) Dena Niwas Hsg. Finance (ii) Dena Mortgage (iii) Dena Rent (iv) Dena Vidyalaxmi Education Loans (above Rs.2.00 lacs) (v)Dena Auto Finance (above Rs.2.50 lakhs). (vi) Bulk business proposals / group proposals including those under other retail schemes like Dena Suvidha, Consumer Durables Finance, Auto Finance, etc Branches at the Centre, where RABs are located, shall handle loan applications under Dena Suvidha, Consumer Durables Finance, Dena Senior Citizen, Dena Vidyalaxmi (up to Rs 2.00 lacs), Dena Auto Finance (up to Rs 2.50 lac) and Dena Trade Finance and shall aggressively generate Leads for advances under Schemes centralised for handling at RABs RABs will process applications under retail schemes assigned to them on the basis of Leads emanating from branches under their jurisdiction. Retail Asset Branches will carry out all the functions relating to retail advance right from processing, documentation, disbursement and account maintenance till disbursement. After disbursement is complete, the account will be transferred (in Finacle CBS system) from RAB to lead generating branch or branch convenient to the customer. RAB will advise the concerned branch regarding transfer of the account and send a copy of the sanction note along with copies of documents executed as the same may be required at the transferee branch for reference by auditors. All the original papers and documents will be kept at RABs only . In cases where post-dated cheques have been obtained, the PDCs will also be kept at RAB and the RAB shall present them in clearing on due dates. Post-disbursement monitoring and follow-up will be the primary responsibility of the account-holding branch. The concerned branch shall make all efforts to ensure that the account does not slip to NPA. The concerned branch should also alert RAB regarding default so that RAB may also provide support for follow up for recovery of overdue amount. The Branch officials generating leads shall also ensure compliance of KYC norms. If rephasement/ restructuring is required in any such account, the same shall be done at RABs only at the recommendation of parent branch FIN MARTS 48 Fin Marts had been established as exclusive retail banking centres within selected branches to serve as speedy delivery channels for retail credit. Out of 48 Fin Marts, 20 Finmarts where the growth of advances had stagnated and was generally below Rs.10 crores have been merged with their parent branches after taking into consideration the non-availability of adequate manpower and the need to monitor the existing accounts. The functioning of Fin Marts shall be reviewed every year and necessary modifications shall be carried out.
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OTHER CHANNELS

Besides Branches/Fin Marts/RAB, other delivery channels i.e. 1. DSA/Call Centres, Web technology etc. would also be explored in due course of time as per prevailing market scenario.
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MARKETING EFFORTS

A comprehensive marketing setup will be established at regions with special focus on retail lending. The marketing set up of the bank will be headed by a General Manager under the direct supervision of Chairman & Managing Director and Executive Director. The marketing set up will be responsible for transforming the Bank into a marketing oriented organisation.
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TAKE OVER OF RETAIL LOANS

The Bank is also financing for takeover of loans, wherein selective clients fulfilling all the criteria, are sanctioned loan so as to takeover the finance granted by other bank/ financial institutions. This is subject to overall takeover policy of the Bank as per the Bank Loan Policy. 5.0 CREDIT APPROVAL PROCESS

Retail lending schemes are well devised and all criteria for sanctioning of loan i.e. eligibility criteria, limits, type of loan, rate of interest, purpose for which loan has to be granted, appraisal / assessment, the delegation of powers, scheme wise credit scoring models etc. are clearly laid down in circulars issued by Retail Banking Department. The specially designed Application Forms for each product to capture all information at one place are prescribed. Schemewise discretionary powers are vested to various credit approving authorities. Presently, work related to credit approval such as lead generation, File Preparation, processing as per check list, document verification, credit decision and limit determination, legal verification is being done by Branch Managers/Head of Fin Marts/RABs. The competent authority as per their discretionary powers approves the loan.
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CREDIT SCORING MODELS

There are several benefits of credit scoring. It takes in to account various factors such as age of the applicant, education level, income, dependents, margin, availability of guarantor etc that constitute to the risk profile of an applicant. Further, the borrower must score a minimum score of 60 to be eligible for loan under Dena Niwas, Dena Vidyalaxmi and Dena Mortgage schemes. This helps in checking the credit risk and promotes greater efficiency and time saving in the loan sanction process. Credit scoring reduces subjectivity in the sanction process. Credit scoring methods sharply reduce the cost of credit evaluation and to cap it all improves the consistency, speed and accuracy of credit decisions. They would be used at the appraisal stage. A full-bodied scoring system leads to efficient and profitable lending practices. Suitable scoring models have already been devised for Dena Niwas, Dena Vidyalaxmi and Dena Mortgage schemes and form an integral part of Credit Appraisal.
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FORMATS FOR PRE-SANCTION KYC, ASSET & INCOME VERIFICATIONS : The department has devised various formats for preparing reports with regard to presanction visit, asset, income, employer verification, etc. to prevent NPAs arising due to reasons like borrower not traceable, asset not available, over-valuation of assets, submission of fraudulent income proof etc. The report submitted by the verification officials along with their recommendation will form part of the process note. In case of rejections too, the reason for rejection will be mentioned in the verification report of the concerned official.
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FORMAT FOR APPROVAL OF PROJECTS BY RMs FOR BULK FINANCE UNDER DENA NIWAS HSG. FINANCE SCHEME : On analysis of fraud cases / NPA accounts where bank had financed number of borrowers from the same project / builder / developer, some of the reasons for the fraud / account becoming NPA is multiple financing, chain of documents not available with regard to security, no approved plans for construction, full loan disbursement where the construction is not yet completed, financing builder / developer under housing loan, inflating the loan amount by adding disproportionately high extra amenities. It is also observed that some builders / developers had created fictitious borrowers for availing finance under housing loan from the Bank instead of availing project finance. To avoid such incidents in future, in case of bulk finance for financing purchasers of flats in a particular project or from a particular builder / developer, the Regional Managers may approve the project / builder after collecting detailed information about the builder / project as per format already circulated.
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GUIDELINES / METHODOLOGY FOR ASSESSMENT OF LOAN QUANTUM & REPAYMENT CAPACITY

Retail lending being a schematic finance, has its own set of operational guidelines, credit risk appraisal mechanism & procedures and the same shall be reviewed, amended and communicated from time to time. The Reserve Bank of India in terms of their letter No. DBOD.Dir.BC.No. 43/08.12.01/2006-07 dated 17th November, 2006 has issued the following guidelin es formulated by the Monitoring Committee constituted by the Honble High Court of Delhi regarding unauthorised construction, misuse of properties & encroachment on public land. These guidelines will form the part of Banks Retail Lending Policy. Housing Loan for building construction o In case where the applicant owns a plot/land and approaches the branch for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained before sanctioning the home loan. o An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executant to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and authority to recall the entire loan with interest, costs and other usual bank charges.
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o An Architect appointed by the bank must also certify at various stages of construction of building that the construction of building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained. Housing Loan for purchase of constructed property/built up property o In case where the applicant approaches the bank for a credit facility to purchase built up house / flat, it is mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and / or building bye-laws and as far as possible has a completion certificate also. o An Architect appointed by the bank must also certify before disbursement of the loan that the builtup property is strictly as per sanctioned plan and/or building bye-laws. o No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid. o No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purpose and declare so while applying for loan.

In the wake of increasing number of frauds being reported by Banks under housing loans, RBI has been time and again emphasising the need for a robust mechanism for prevention of such frauds and vide circular No. DBS.FrMC. No. 15600/23.04.001/2005-06 dated 3rd May 2006 had listed out some of the Best Practices to prevent frauds in housing loans which have been circulated to branches vide H.O. circulars No.61/3/06 dated 27.5.2006 and 420/20/2006 dated 31.3.2006. Further, the Department has also issued circular nos. 125/02/2007-08 dated 16/06/2007, HO:RBD:401:2007 dated 28/11/2007 and Circular no. 356/10/2007-08 dated 14/01/2008. The field functionaries are required to scrupulously adhere to the guidelines issued by the bank from time to time in this regard and observed following precautions while dealing with housing loans / accounts of builders etc: o To carry out due diligence of builders by verifying their credentials independently or through their bankers, before disbursement of loans and issuing cheques / pay-orders in their name with Bank name and account number mentioned on it. o Making purposeful pre-sanction visit to the site, that should invariably include discreet inquiries on the physical existence/clear demarcation and identification/ownership/possession of the property proposed to be financed, in all cases. o Observance of know your customer (KYC) norms particularly while collecting cheques / pay orders etc on behalf of builders.
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TURN AROUND TIME FOR DISPOSAL OF APPLICATIONS

The bank will endeavour to dispose all credit applications by its operational units in respect of Retail Banking Schemes expeditiously. Introduction of new delivery channels and setting up of RABs at prominent places across the country coupled with rational credit approval process will further reduce turnaround time for disposal of application considerably. 6.0 DISCIPLINE ON REPORTING & NOTING OF SANCTIONS

Branch / FinMart / RAB / RO must regularly submit control returns for the retail loan sanctioned by them, as per existing norms. No delegatee at the level of Regional Office/Branch/RAB (irrespective of the category of the branch or the cadre of the delegatee) shall exercise the powers vested in him/her for according credit approvals if the submission of Control Returns are in arrears for more than 60 days beyond the prescribed due date/s. 7.0 PROCESS FEE

In order to bring in only committed borrowers in its fold, Bank may require the prospective borrowers to pay upfront the prescribed processing fee on the indented amount. The exact processing fees to be charged would be as stipulated in the schemes. The process fee stipulated will be one-time and is not to be charged every year on review/renewal except in case of Dena Trade Finance Scheme.

8.0

RETAIL BANKING - MONITORING 1. All necessary steps shall be taken to ensure compliance of terms and conditions of sanction of loans. 2. Pre/Post sanction inspection would be carried out invariably. Any discrepancies and irregularities in value of security should be rectified immediately. 3. Proper execution of Documentation including timely registration of charge (wherever applicable) with the Competent Authority would be ensured in accordance with the guidelines given in Manual of Instructions. Role of Regional Office - Regional Offices play a vital and crucial role in monitoring of retail advances made by branches / Finmarts / RAB under their jurisdiction as well as in recovery of NPAs. RO will keep close watch and monitor the growth in retail credit, take up random inspection of branches / Finmart, form recovery teams at RO to help branches in recovery of Retail NPAs, form a Task Force at RO headed by Regional Manager / Dy. Regional Manager to review at regular intervals the quality & quantity of retail credit growth and take corrective steps as required.

4.

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MONITORING END-USE OF FUNDS

The end use of funds would be monitored at the branch level. The Branch officials would satisfy themselves regarding antecedents of the suppliers before disbursement of the loan and the same should be recorded at the branch for verification purpose. During post-sanction visit branch to ensure proper end use of fund and creation of asset. BM/Branch official must submit his report and observations and any shortcoming noticed shall be informed to the BM/RM for initiating corrective actions immediately.
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MONITORING MECHANISM FOR REGULAR/STANDARD ASSETS

Monitoring of Regular/Standard assets is to be done by Branch Managers/Heads of Fin Marts and any default/ slippage must be closely followed up by them. Remedial measures will be taken by the operational units at the sight of first signal in the change of health of the borrower account, which would be easily identified either through the conduct of the account at the operational level or non compliance of certain critical terms of sanction or if there is overdue in the account for more than 30 days, the account must be classified and reported as standard "B" and plan of action for recovery of overdue must be clearly mentioned.
q

STEPS TO PREVENT OVERDUES ARISING DUE TO REASONS BEYOND THE CONTROL OF BORROWER

Normally whenever there is increase in BPLR and consequent increase in rate of interest in retail lending schemes, the amount of EMI is accordingly adjusted so as to recover the loan within the stipulated repayment period. However, in the last 2-3 years, BPLR has been revised frequently, resulting in modification in rate of interest in the floating interest category of housing loans. In case of hike in BPLR, there could be some cases where the borrowers are not in a position to pay the increased EMI every month due to their limited repayment capacity. In such cases, there would be likelihood that increased EMI could lead to defaults in repayment, overdue in loan accounts and the accounts slipping to NPA. In such circumstances, an account-wise review shall be carried out by the branches and one of the following 3 options may be exercised to ensure that the borrower is not put to additional burden and is able to repay the EMI comfortably and the account does not slip to NPA: a) Borrower may be asked to make lump-sum part repayment of the loan amount so that the effect of the increased rate of interest is nullified / diluted and the EMI continues as before. b) Increase EMI to ensure that the loan is repaid with revised rate of interest within the stipulated repayment period. It should however, be ensured that the borrower has sufficient and regular income to repay increased EMI. c) Wherever it is not possible for the borrowers to exercise either options mentioned above, the branch may consider extending the repayment period to the required extent (not exceeding 25 years in any case) so that the EMI remains as before.
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Further, there could be situations wherein the borrower has suffered on account of natural / personal calamity which has hampered his repayment capacity severely. In such cases also, the repayment may be rescheduled on merits of individual case so that the account does not slip to NPA for reasons beyond the control of the borrower.

RESTRUCTURING OF RETAIL ADVANCES (RBI Master Circular No. DBOD.No.BP.Bc.17/21.04.048/2009-10 dated 01.07.2009 Prudential Norms in Income Recognition, Asset Classification & Provisioning pertaining to Advances) A restructured account is one where the bank, for economic or legal reasons relating to the borrower's financial difficulty, grants to the borrower concessions that the bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount/ the amount of instalments / rate of interest (due to reasons other than competitive reasons). However, extension in repayment tenor of a floating rate loan on re-set of interest rate, so as to keep the EMI unchanged provided it is applied to a class of accounts uniformly, will not render the account to be classified as Restructured account. In other words, extension or deferment of EMIs to individual borrowers as against to an entire class, would render the accounts to be classified as 'restructured accounts. The accounts classified as 'standard assets' should be immediately re- classified as 'sub-standard assets' upon restructuring. In genuine cases, Bank shall continue restructuring of retail advances on case to case basis in terms of RBI guidelines.

MONITORING OF IRREGULAR ACCOUNTS

With a view to safeguard interest of the Bank, irregularities in borrowal accounts including Standard B account shall be reported to concerned Regional Manager immediately on detection of irregularities with the reasons therefor and appropriate measures to be initiated in consultation with Regional Manager / Competent Authority. The guidelines as given in Recovery Policy of the Bank in this regard shall be adhered to. Restructured accounts as per RBI guidelines are to be closely monitored.

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9.0

RISK MITIGATION

The Bank will use multiple techniques for credit risk mitigation purposes that help to avoid undesirable credit i.e. adherence to KYC norms, portfolio review at regular intervals, due care taken while formulating budget of each year and reduce risk in exposures etc. For this purpose, the Bank will continue to define target markets, risk acceptance criteria, credit approval authority, credit origination/ maintenance procedures etc. Margin requirements as specified in the respective retail schemes should be maintained. At present, the margin requirements under various schemes are as underScheme Dena Niwas Housing Loan Dena Vidya Laxmi Education Loan -upto Rs 4 lacs -Above Rs 4 lacs Studies in India Studies abroad Dena Auto Loan Dena Rent Dena Mortgage Dena Suvidha Personal Loan Dena Senior Citizen Dena Trade Finance Minimum margin 20% Targeted LTV Ratio 80%

Nil 5% 15% 20% 10% of present value of net rentals 50% Nil Nil 25% on stock 50% on book debts 20% -10% Upto Rs 10 lacs -25% above Rs 10 lacs -33.33% in case of acquisition of clinic premises irrespective of the loan amount 30%

N.A N.A. N.A. 80% 90% 50% N.A. N.A. 75% on stock 50% on Book Debts 80% -90% upto Rs 10 lacs -75% above Rs 10 lacs -67.67% in case of acquisition of clinic premises irrespective of the loan amount 70%

Dena Consumer durable Dena Doctor+

Dena Gold Loan

The margins as above have been prescribed keeping in view the targeted LTV ratio. The individual retail products of the Bank hav been formulated with necessary prescription of maximum exposure / limits on each customer and the same should be adhered to. Compliance with KYC (Know Your Customer) guidelines will be the main plank for credit risk mitigation.
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 The Bank shall make an independent assessment of the credit requirements of the borrower by calling for complete relevant information relating to the credit requirement, personal information of the applicant, production of financial / sales data as also latest annual accounts of the applicant [wherever applicable]. Record of rejected applications along with reasons for rejection to be must be maintained by RO and common deficiencies noticed to be circulated among branches. Banks lien must be marked on assets offered as security. In case of housing loan, undertaking from builder/Housing society not to allow sale/transfer of flat without Banks consent must be obtained. In case of education loan, the sanctioning authority shall exercise his/her discretion keeping in view the terms/provisions of the scheme, market standing/ reputation of the educational institution and prospects of the students getting gainful employment or the professional occupation for liquidating the loan after completion of the course. Obtaining eligible financial collaterals are easier in case of retail lending. An emphasis may be given on obtaining such collaterals. Optimum use of CIBIL Database Being a member of CIBIL, all branches / delivery channels under retail lending must compulsorily use Credit information report for processing new credit applications. Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit providers. It is quite helpful for assuring quality borrowers at application stage itself. Under Basel II, Bank is required to compute the default probabilities across scoring bands, keeping in view the long term and complex impact of growth of retail assets, particularly under Dena Niwas and Dena Mortgage schemes, on Banks future earnings and capital. Bank shall devise credit rating models for retail lending and capture internal rating scores under Dena Niwas and Dena Mortgage schemes in D2K system so as to compile data for computing the default probabilities across required scoring bands. Registration with NSDL for online PAN verification by RABs The Income Tax Department has authorized National Securities Depository Ltd. (NSDL) to provide the facility for online verification of PAN numbers of applicants This facility will help the branches to cross check the validity of PAN numbers of applicants and reduce the risk of applicant providing forged PAN details to the Bank. RABs are advised to register with NSDL for utilizing the Screen based Verification facility. The subscription may initially be taken for one year. Request for renewal may be sent to Head Office two months before due date for renewal along with details of total number of PAN verifications done during last 10 months .
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10.0

POLICY ON PRIME & COLLATERAL SECURITIES

The Bank's policy with regard to security against credit will be one of obtaining a charge (by way of charge/lien/mortgage as the case may be) on the assets created out of Bank credit / owned by the borrower. The Bank will prefer to have its credit exposure covered by tangible security (either primary or collateral) to the full extent of its liability unless there is a provision in the scheme obviating the need for obtaining such security. In any case, assets to be acquired out of credit exposure must, as a general rule be charged to the Bank by way of first charge. Collateral Security will be obtained, wherever required, for additional comfort in case of existing borrowers and in the case of new borrowers. Eligible collaterals as enlisted in the Banks Credit Risk Management & Collateral Management Policy or collateral in the form of suitable immovable property can be obtained after proper valuation & title search.

11.0

RETAIL BANKING - RECOVERY POLICY

Recovery in Retail Banking will follow the principles enunciated in the Bank's Recovery Policy and shall be an integral part of recovery in retail lending schemes also. PDCs for all the installments will be obtained by the disbursing branch as stipulated by Sanctioning Authority and guidelines issued from time to time. Wherever. ECS facility is available; the same should be actively made use of. In genuine cases where the default in repayment has occurred on account of genuine circumstances beyond the control of borrower, the bank may consider rescheduling / extension of repayment period (including extension beyond the normal repayment period stipulated under respective schemes) strictly on the merits of the individual case. Recovery Agents: Wherever required Recovery agencies shall be appointed as per norms approved by the Bank and their services shall be utilized for recovery of retail loans. Recovery under SARFAESI Act : In order to recover NPA loans wherever security is available, recovery mechanism as per SARFAESI Act shall be initiated and vigorously pursued for prompt recovery of loan including by way of disposal of assets under the Act.

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12.0

DEVIATION FROM / REVISION OF POLICY

This policy contains necessary provisions indicating the authority that is authorised to permit deviations from various parameters in respective scheme. The General Manager (Retail Banking) at Head Office/General Manager (Gujarat Operations), within their discretionary powers for general advances, are authorized to permit deviations with regard to the followinga) Deviation in age criteria may be allowed provided the maximum age of the borrowers on maturity of loan is not more than 70 years in case of salaried individuals & 75 years in case of self employed persons and subject to continuation of assured regular income. At the time of sanction of loan, the borrowers should not be suffering from any major ailment which may result in reduced life expectancy and repayment capacity. If the borrower is suffering from any major ailment, his legal heirs shall also be made coborrowers/ guarantors. To comply this condition, a medical checkup report, not older than 3 months, should be submitted. Relaxation in income criteria may be permitted based on the increase in future income with proper justifications for the accepted level of increase and Step Up EMIs may be fixed accordingly. Relaxation in eligibility criteria, margins , repayment schedule and security norms may be permitted keeping in view the value of the account, prospects of future income generation and the valuation of available securities-primary/collateral. Disbursement by way of reimbursement may be permitted on the basis of verification of end-use of expenses to be reimbursed by way of loan and obtaining proof of payment to the satisfaction of competent authority. Relaxation in age of building may be permitted to the extent the repayment schedule is covered within 50% of the residual life of building as per valuer on approved panel / architect appointed by the Bank .

b)

c)

d)

e)

Such deviations are to be approved only on case to case basis, based on merits and value of account. As regards loan amount, as per the repayment capacity, GM (Retail Banking) / General Manager (Gujarat) may sanction loans up to their discretionary power for general credit. In other words, the GM (Retail Banking) / GM (Gujarat Operations) in deserving cases can sanction loans under Retail Lending Schemes exceeding the scheme-wise ceiling limits up to their discretionary power for general limit. Although Retail Lending in general is lending to individuals, however in case of proposals under Dena Mortgage scheme where the security is owned by directors of the company or the company itself and the income generated by the company is considered, Bank may permit deviation for sanction of loan to company jointly with the directors of the company. Such deviation shall be approved only at Head Office level by ED /CMD.
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 Where any special offer is received under any scheme for loans to employees of any Corporate / Institution under special tie up for bulk business which requires deviations, CMD / ED have been authorized by the Board to permit deviations. The Retail Banking Schemes have to be constantly upgraded in tune with market conditions and customers expectations, Chairman & Managing Director/ Executive Director are authorised to approve modifications in any/all Retail banking Schemes. After the deviation is approved by GM (Retail) / GM (Gujarat) / ED/ CMD / Management Committee / BOARD, the competent authority, as per the discretionary power delegated may sanction the loan. In cases where deviations are approved by higher authorities or wherever the loans are sanctioned at Head Office but due to repayment the outstanding in the loan are lower, the competent authority as per discretionary power may periodically review such cases at their level if the outstanding in loan is within their discretionary power. CMD / ED may permit deviations including rate of interest & process fees in individual cases. Permitting Regional Manager to approve following deviation in respect of loans to be sanctioned under Dena Niwas Scheme: 1. Reimbursement of amount raised from other sources as well as own source (subject to ceiling of Rs.10 lacs or 50 % of registered sale agreement value whichever is less) for making payment towards purchase of house subject to documentary evidence. Borrowing older than three months cannot be considered for reimbursement. 2. Relaxation up to 5 years in maximum age at loan maturity of principal borrower in whose name property is purchased (presently 60 years in case of salaried and 65 years in case of business man) may be allowed subject to continuation of assured regular income of borrower / Co-borrower for the entire loan period. The repayment period should not be more than 20 years. The relaxations should be used by RMs as exceptions based on the merits of individual cases and not as a general relaxation. In no case relaxation should dilute basic lending norms.

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13.0

DELEGATION OF DISCRETIONARY POWERS FOR SANCTION:

The discretionary powers for retail credit [scheme-wise] shall be as under: Figures in ( ) indicate existing discretionary power if there is a revision. : [Rs. in lacs] Scheme GM DGM AGM Scale Scale Scale Scale IV III II I 50.00 20.00 10.00 5.00 ** 200.00 100.00 Dena Niwas (100.00) (75.00) (including Step up Scheme)
Dena Suvidha (+) Senior Citizen

** ** ** ** ** **

1.00 0.50

1.00 0.50

1.00 0.50

1.00 0.50

0.75 0.50

0.50 0.50

Trade Finance (-) Dena Rent Cons. Durable (+) Auto Finance: 2 wheeler 4 wheeler

200.00
(100.00)

150.00
(100.00)

100.00
(60.00)

50.00
(40.00)

10.00
(10.00)

3.00
(5.00)

500.00
(200.00)

150.00
(100.00)

50.00 1.00

25.00 1.00

5.00 0.75

2.00 0.50

1.00

1.00

0.50 NC

0.50 NC 20.00

0.50 8.00 20.00 20.00

0.50 6.00 7.50 10.00

0.50 4.00 4.00 5.00

0.50 2.50 2.00 NIL NIL NIL

Dena Vidyalaxmi Dena Mortgage* Dena Doctor Dena Gold

** ** ** **

20.00

300.00
(100.00)

100.00
(75.00)

200.00 5.00

100.00 3.00

50.00 1.00

20.00 0.50

10.00 0.25

** GM (RBD) / GM (Gujarat) may sanction loans up to their discretionary power for general credit NC = No Ceiling.

(-) As per CAD Circular no. 20/02/2009-10 dated 15/04/09 for secured WC limits. In case of
Dena Trade Finance Scheme, discretionary powers will be as per discretionary powers under general credit. (+) Currently, in view of the NPA being on the higher side in Dena Suvidha and Consumer Durable Loan Scheme, it has been decided that in respect of proposals under Dena Suvidha (Personal Loan) and Dena Consumer Durables Finance Schemes, the concerned Regional Manager will be the competent authority to sanction the same. ROs / Branches are advised to adhere to our existing guidelines in terms of Circular no. 260/14/2008-09 dated 26/11/08. Branches may, however, sanction proposals under Special Schemes of Dena Suvidha and Dena Consumer Durables Finance Scheme, as per discretionary powers mentioned above, provided the competent authority at H.O has granted them specific permission.
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(*) Currently, there is restriction on finance under Dena Mortgage Scheme. Only Regional Managers and higher authorities shall consider fresh Term Loan proposals repayable within 7 years as per their discretionary powers as delegated to them under Dena Mortgage Scheme. No Overdraft proposal to be considered. In case of exceptional high business value proposals (Term Loan & OD), Branches may refer the same to Head Office through their respective Regional Offices. ROs / Branches are advised to adhere to our existing guidelines in terms of Circular no. 219/07/2007-08 dated 29/08/07.

RAB In-Charge shall exercise discretionary powers of one scale higher than the scale of RAB In-Charge where RAB In-Charge is below Scale IV .

14.0

POLICY REVIEW AND AMENDMENTS

Retail Lending Policy will be reviewed regularly from time to time depending on the market conditions and competition, suggestions received from the operational units etc with a view to make our products more customer friendly and competitive.

15.0

AUTHORITY TO AMEND POLICY

The Board of Directors or any other Committee of Directors authorized by the Board of Directors on its behalf shall be the competent authority to revise or amend or modify or annul any or all of the provisions contained in this policy at any time.

16.0

CONCLUDING REMARKS

The contours of the Retail Lending Policy of the Bank have been stated in this document. For those aspects, which are not specifically covered under this policy, the broad framework of Banks Credit Policy, Recovery Policy & policies in respective areas will form the basis for retail credit. Operating instructions / guidelines arising out of the Retail Lending Policy stated herein will be issued from time to time by the Bank. ---xxxxx----

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