CREDIT RISK RATING SYSTEMapgb.in/files/1_3_5098ef12a25a0.pdf · The Reserve Bank of India in its...

ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE : KADAPA

Circular No.248-2008-BC-CD Date:02.12.08

CREDIT RISK RATING SYSTEM

Attention of all the Branches / Regional Offices / Societies is drawn to the captioned subject.

The Reserve Bank of India in its guidelines issued on October 1999 advised all Banks to have a

comprehensive risk scoring / rating system that serves on a single point indicator of diverse risk

factors of counter part and for taking credit decisions in a consistent means. Sponsor Bank vide

ref.0023/PSCD/I/569/2238 dt.12.11.08 advised to introduce a rating system to all the borrowal

accounts as per the guidelines issued by RBI / Sponsor Bank.

Of the strategic measures employed in managing Credit Risk, credit risk rating occupies a

position of prominence, as it involves rating of the borrowal accounts from a risk perspective, for

the purpose of pricing and supervision. Credit risk rating though primarily used for the purpose

of pricing and supervision, has several other uses of strategic value such as

1) it can help in invidividual credit selection, wherein either a borrower or a particular

exposure is selected or turned down based on the rating arrived at.

2) A decision on the specific features or terms that can be offered on a credit facility can be

decided in terms of the rating earned.

3) The composition of the portfolio in terms of the share of each rating category reflecting

the health of the portfolio can be known by aggregating the ratings.

4) Support of surveillance, monitoring and MIS of borrowal accounts.

5) Understanding the aggregate risk profile for the Bank as a whole.

Taking into account guidelines contained in guidance note on Credit Risk Management issued

by Reserve Bank of India, the Sponsor Bank has developed an in-house model to rate all the

borrowal accounts and the same is being implemented in our Bank. The salient features of the

Credit Rating System are furnished in the ensuing paragraphs.

Contd....2

Circular No.248-2008-BC-CD Dt.02.12.08

: 2 :

Grading system for calibration of Credit Risk:

The grading system adopted for calibration of Credit Risk is as under:

Credit Risk Code

Risk Grade Interpretation of the grade

CR-01 Highest Safety Indicates an exceptionally high position of strength, very high degree of sustainability

CR-02 High Safety Indicates a very high degree of strength on a factor among the peer group.

CR-03 Safe Indicates a high degree of strength with positive outlook.

CR-04 Adequate Safety Indicates an adequate degree of strength with stability.

CR-05 Moderate Safety Indicates a moderate degree of strength at present. Stable outlook, but, economic conditions may affect the stability or marginally negative outlook.

CR-06 Inadequate Safety Indicates a fundamental weakness with regard to the factor. Likely to improve under normal circumstances.

Methods adopted for grading:

Following methods are adopted for grading and allotting Credit Risk Code to the individual

borrowal accounts.

i) Simple method ii) Scoring method

Simple method:

Simple method is applicable to following type of borrowal accounts classified as Standard

Assets:

a) Advances (irrespective of the size) against deposits, I.e., LD, ODD, OSL fully secured by term

deposits.

b) Advances (irrespective of the size) against gold ornaments I.e. Ag. JL, JL, OD against

Jewels.

c) Advances (irrespective of the size) against approved securities, viz., KVP, NSC, LIC policy

(surrender value only), RBI Relief Bond.

d) Advances (irrespective of the size) where submission of financial statements is not required,

eg. Agricultural advances granted to farmers, housing loans etc.

Contd....3


: 3 :

e) Other advance of below Rs.10.00 lakhs where financial statements are not available /

submitted.

Under the simple method, certain characteristics of the borrowal accounts, such as, availability

of high liquid security, regularity of the account, period of irregularity, coverage of primary /

collateral security are taken into account, for allotting Credit Risk Code.

Credit Risk code under simple method shall be allotted as under:

S. No.

Characteristic of the Credit Facility Credit Risk Code

1 Advances/OD/Non-fund based facility fully secured by deposits and staff loans (without any irregularity)

CR-01

2 Advances/OD/Non-fund based liability against gold and other liquefiable securities (without any irregularity) like NSC, KVP, LIC (surrender value), RBI relief bonds.

CR-02

3 Standard Assets / Non-fund based liability without any irregularity fully covered by primary / collaterals.

CR-03

4 i) Standard Assets with minor irregularity (I.e. interest / instalment is serviced within 10 days from the due dates) and fully covered by primary / collaterals.

CR-04

ii) Clean / Unsecured, partly secured advances / non-fund based liability without any irregularity

5 I) Irregular standard Assets, which are fully covered by primary / collaterals. CR-05

ii) Clean, unsecured, partly secured advances with minor irregularity (interest/instalment servicing is within 1 month) and non-fund based liability, where conduct is satisfactory.

6 Standard Assets / Non-fund based liability, with irregularity in payment of interest of instalment / shortage of primary / collaterals, which are not falling under CR 01 to CR 05

CR-06

Other guidelines applicable for simple method:

1) To determine the cut-off point of Rs.10.00 lakhs, the limit sanctioned in case of operative

limits (fund based and non-fund based) and balance outstanding in case of loans shall

be reckoned with. However, credit facilities fully secured by deposits, gold and approved

securities {NSC, KVP, LIC policy (surrender value) RBI Relief Bond} outstanding need

not be considered to arrive at the total limits.

2) The accounts partly secured by deposits and partly by other securities, shall be included

in general category and not under LD / ODD.

Contd....4


: 4 :

3) To determine the delay in servicing of accounts (eg. With 10 days, with one month etc.,)

the average of the last six months or from the date of release, whichever is later, shall be

taken into account.

4) In case the borrower with credit limits of less than Rs.10.00 lakhs, submits financial

statements, credit rating shall be done by preparing credit rating chart.

5) Rating allotted to the borrower shall be noted in each account on half yearly basis as at

the end of September and March every year. Any further upgradation of rating shall be

considered only in the next half year. However, down gradation to NPA, where

necessitated by scoring parameters, shall be considered on quarterly basis, for

the purpose of determining rate of interest.

6) In case of borrowers enjoying multiple facilities, all the outstanding accounts shall be

considered while allotting Rating and the lowest rating as applicable for any one of the

facilities shall be allotted to all the borrowal accounts of the party.

Scoring model:

This method is applicable to borrowers enjoying aggregate fund based (including term loans)

and non-fund based credit limits of Rs.10.00 lakhs and above under standard assets where

submission of financial statements is compulsory. Under scoring method, risks under the

following three components of Credit Risk are captured by allotting scores for qualitative and

quantitative parameters:

I) Management / Operational Risk

II) Market / Industry Risk

III) Financial Risk

For this purpose, different types of Rating Charts are prescribed.

Rating chart for allotting Credit Risk code for standard assets:

i) For sanctioning fresh working capital limits / short term advances / term loans / non-fund

base facility or renewal / enhancement thereof involving amount of Rs.10 lakhs and

above where financial statements are required, Credit Rating Chart shall form an integral

part of the process note / review note.

Contd....5


: 5 :

1. Different rating charts are prescribed for different category of borrowers under standard

assets, as under:

S. No.

Category of borrowers Rs. 10 lakhs and above

1 Non-SSI / Non-SSSBE RC-1

2 SSI / SSSBE RC-2

3 Trading RC-3

4 New Venture / Project (common chart) RC-4

Specimens of above rating charts are furnished in Annexures I, II, III & IV to this circular.

Allotting Credit Risk Code for credit limits of Rs.10.00 lakhs and above:

In the case of borrowers enjoying aggregate credit limits (fund based, including term loans and

non-fund based) of Rs.10.00 lakhs and above, Credit Rating shall be determined on the basis of

percentage of scores allotted as per Rating Chart, as under:

CR code Risk Grade Scoring band

CR-01 Highest Safety 90% and above

CR-02 Highest Safety 80% to 89%

CR-03 Safe 70% to 79%

CR-04 Adequate Safety 60% to 69%

CR-05 Moderate Safety 50% to 59%

CR-06 Inadequate Safety Upto 49%

Minimum score:

For overall rating of a borrower, the composition of Financial Risks, Market Risk and

Management risk and minimum score, will be as under:

S. No.

Nature of Risk Scoring Weightage out of 100

Existing Firms / Corporates New Ventures / Projects

Minimum Maximum Minimum Maximum

1 Management Risk 08 20 16 30

2 Market / Industry Risk 08 20 16 40

3 Financial Risk 24 60 08 30

Overall Score 50 100 50 100

Contd....6


: 6 :

A hurdle rate of 50% (CR 05) is suggested, below which, no exposure would normally be

undertaken in respect of new parties. This rule is not applicable for renewal of existing CR-06

rated accounts. However, no enhancement shall normally be considered in the case of existing

parties rated CR-6, except under following circumstances.

I) Approved rehabilitation plans.

II) Availability of Government / Corporate guarantee.

III) Availability of collateral security like deposits, NSC/KVP/RBI Relief Bonds, SV of LIC

policy, mortgage of immovable properties.

In other cases prior approval of the next Higher sanctioning authority should be obtained to

consider enhancement. However, General Manager (Credit), Chairman may relax conditions for

limits falling within his/her powers for accounts having rating of CR-06.

Periodicity for Allotment of CR code under scoring model:

In the case of working capital limits / term loan / DPG of Rs.10.00 lakhs and above, the CR code

shall be allotted on yearly basis, based on Financial Statements (audited financial statements in

the case of limits of Rs.25 lakhs and above) at the time of fresh/adhoc sanction, enhancement /

renewal of limits. In exceptional cases, provisional financial statements may be considered for

Credit Rating. In such cases, the revised rating shall not result in higher rating of the borrower.

Similarly, in the case of borrowers enjoying only term loans, a review shall be conduced a yearly

basis, within 7 months from the closure of the financial year of the borrower. Credit risk rating

chart shall be independently prepared by the processing officials and shall be attached as on

integral part of the process note or review note for approval of the sanctioning authority.

Rating work Flow:

All ratings allotted by the sanctioning authority have to be confirmed by the next higher authority

independently. The sanctioning authority is the ‘appraiser’ who allots the rating and the

reviewing authority is the ‘assignor’ of rating. The reviewing authority shall independently review

all ratings and confirm or revise the rating if required.

Sanction by Branch:

The Branch will rate the account and allot the rating and send it to RO for assigning / review of

the rating.

Contd....7


: 7 :

Sanction by Regional Office:

The Regional Office will rate the account and allot the rating and send it to Head Office for

assigning / review of the rating.

Sanctions by Head Office:

In case of files falling within the sanctioning powers of General Manager, the respective

Department will undertake the credit rating and forward the rating to Chairman for approval. The

Chairman sanctions shall be put up to Board for approval.

These guidelines will come into force with effect from 1st January, 2009. Clarifications required,

if any, on this circular may be sought from Credit Department, Head Office, Kadapa.

(M.JAI PRAKASH)

CHAIRMAN

ANNEXURE-I to circular No.248-2008-BC-CD Dt.02.12.08

ANDHRA PRAGATHI GRAMEENA BANK :: HEAD OFFICE :: KADAPA

CREDIT DEPARTMENT

NAME OF THE BRANCH / OFFICE : BIC:

RC-1 RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR NON-SSI BORROWERS (for limits of Rs.10.00 lac and above)

(This chart should form an integral part of the process note) NAME OF THE BORROWER: Audited Financial results as on _________ Un audited Financial results as on ________ Un audited half yearly Financial results as on ____ Credit Rating allotted for last 5 years

As on Marks % CR rating

Risk category / Parameter Grading Score Prescribed

Score Allotted

I. Management & Operational Risk Assessment (RC-1)

I) Management Quality / Competency Excellent 5

Good 3

Satisfactory 2

ii) Experience of the borrower / proprietor / partners / promoters / directors in business

Well experienced

5

Less

Experienced 3

New to the field

0

Iii) Integrity and Character of the Management Acceptable / Timely servicing of accounts / compliance to terms and conditions.

Integrity is beyond doubt

5

Good Integrity 3

Acceptable

Integrity 2

Regular 5

iv) Timely submission of Stock / book debts Statement and QIS statement, Renewal proposal financial statements etc.

Occasionally

Irregular 3

Irregular 0

TOTAL SCORE - Maximum 20

2. Market / Industry Risk Assessment (RC - 1)

I) Competition Near Monopoly 5

Moderate 3

Tough 2

Very tough 0

ii) Future of industry / business / economic prospects Excellent 5

Good 3

Satisfactory 2

Uncertain 0

Iii) Expected change in Govt. Policy / other regulations affecting the business

Favourable

Change 5

No particular change

3

Unfavourable change

0

iv) Technology and Quality control Excellent 5

Good 3

Satisfactory 2

Inadequate 0


3. Financial Risk Assessment (RC-1)

I) Achievement of Projected Turnover (%)

a) For the year ended on __________ > = 90 5

Actual ____________ <90&>80 4

<80&>70 3

<70&>60 2

<60&>50 1

<50 0

b) Average achievement of projected turnover for last 3 years > = 90 5

Actual : Year 1. __________(Latest) <90&>80 4

Year 2. __________ <80&>70 3

Year 3.___________ <70&>60 2

<60&>50 1

<50 0

Average :________________ >=1.5 5

ii) Current ratio (For WC only) <1.50&>=1.33 4

a) Current ratio as on _____________ Actual:______________

<1.33&>=1.25 3

<1.25&>=1.17 2

<1.17&>=1.10 1

<1.10 0

iii) Average DSCR (For Existing Term loans only) >=2 5

Not more than 3 previous years <2.00&>=1.75 4

<1.75&>=1.60 3

<1.60&>=1.50 2

<1.50&>=1.25 1

1.25 0

iv) Average current ratio for last three years ended on _______________ (For WC only)

>=1.5 5

<1.50&>=1.33 4

Actual : Year 1. __________(Latest) <1.33&>=1.25 3

Year 2. __________ <1.25&>=1.17 2

Year 3.___________ <1.17&>=1.10 1

Average:_________ <1.10 0

v. Terms of repayment (For Term loans only) <=36 months 5

Actual : _____________________

>=36 &< 48 months

4

>=48 &< 60 months

3

>=60 &< 84 months

2

>=84 &<120 months

1

> = 120 months 0

vi. Solvency Ratio (TOL / TNW) <2

a) Solvency ratio as on _____________ <4&>=2

<6&>=4

Actual:___________ <8&>=6

<10&>=8

>=10

b) Average solvency ratio for last 3 years <2 5

<4&>=2 4

Actual : Year 1. __________(Latest) <6&>=4 3

Year 2. __________ <8&>=6 2

Year 3.___________ <10&>=8 1

Average:________________ >=10 0

Vii) Debt / Equity Ratio: <1.50 5

a) Debt / Equity Ratio as on________ <2.00&>=1.50 4

Actual <2.25&>=2.00 3

<2.50&>=2.25 2

<3.00&>=2.50 1

Average:_____________ >=3.00 0

b) Average Debt / Equity ratio for last 3 years <1.50 5

<2.00&>=1.50 4


Year 2. __________ <2.50&>=2.25 2

Year 3.___________ <3.00&>=2.50 1

Average:________________ >=3.00 0

Viii) Profitability Ratio PAT / Net sales (%) >=3.0 5

a) Profitability Ratio as on __________ >=2.5&<3.0 4

>=2.0&<2.5 3

>=1.5&<2.0 2

>=1.0&<1.5 1

Actual: __________ >=1.0 0

b) Average Profitability Ratio for last 3 years >=3.0 5

Actual: Year 1. ________ >=2.5&<3.0 4

Year 2. _______ >=2.0&<2.5 3

Year 3.________ >=1.5&<2.0 2

Average: ___________ >=1.0&<1.5 1

>=1.0 0

ix) Security coverage Ratio >=2.0 10

<=2.0&<1.75 8

<=2.0&<1.50 6

<=1.5&<1.25 4

<=1.0&<1.20 2

Actual: _______________ <=1.20 0

TOTAL SCORE (Maximum) WC 60

TL 60

Combined 70*

*Suitably adjust the denominator to arrive at the %of financials.

S. No.

Risk component Weightage Maximum Minimum Total Score allotted

1 Management / Operational 20% 20 8

2 Market / Industry 20% 20 8

3 Financial 60% 60 24

100 100 50

CREDIT RISK SCORE ALLOTTED CR ----

INTEREST RATE APPLICABLE WITH EFFECT FROM (DATE)_________

PLR + ___________= ________

Signature of Recommending Authority Signature of Appraiser (Sanctioning authority) Date: For use of Confirming Authority Remarks / Observation Signature of Assigner (Confirming authority)

ANNEXURE-II to circular No.248-2008-BC-CD Date:02.12.08


CREDIT DEPARTMENT


RC-2

RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR SSI BORROWERS (for limits of Rs.10.00 lac and above)

(This chart should form an integral part of the process note) NAME OF THE BORROWER: Audited Financial results as on _________ Un audited Financial results as on ________ Un augited half yearly Financial results as on ____ Credit Rating allotted for last 5 years


Risk category / Parameter Grading Score Prescribed

Score Allotted



Good 3

Satisfactory 2


Well experienced 5

Less

Experienced 3

New to the field 0



5

Good Integrity 3

Acceptable

Integrity 2

iv) Timely submission of Stock / book debts Statement and QIS statement, Renewal proposal financial statementsetc.

Regular 5

Occasionally

Irregular 3

Irregular 0




Moderate 3

Tough 2

Very tough 0

ii) Future of industry / business / economic prospects

Excellent 5

Good 3

Satisfactory 2

Uncertain 0


Favourable

Change 5

No particular change 3

Unfavourable change

0


Good 3

Satisfactory 2

Inadequate 0




a) For the year ended on __________ > = 80 5

Actual ____________ <80&>70 4

<70&>60 3

<60&>50 2

<50&>40 1

<40 0

b) Average achievement of projected turnover for last 3 years

> = 80 5


Year 2. __________ <70&>60 3

Year 3.___________ <60&>50 2

<50&>40 1

<40 0

Average :________________ >=1.33 5

ii) Current ratio (For WC only) <1.33&>=1.25 4


<1.25&>=1.20 3

<1.20&>=1.15 2

<1.15&>=1.10 1

<1.10 0

iii) Average DSCR (For Existing Term loans only) Not more than 3 previous years

>=1.50 5

<1.50&>=1.40 4

<1.40&>=1.20 3

<1.20&>=1.15 2

<1.15&>=1.10 1

1.10 0

iv) Average current ratio for last three years (For WC only)

>=1.33 5

<1.33&>=1.25 4


Year 2. __________ <1.20&>=1.15 2

Year 3.___________ <1.15&>=1.10 1

Average:_________ <1.10 0


>=36 &< 48 months 4

>=48 &< 60 months 3

>=60 &< 84 months 2

>=84 &<120 months 1

> = 120 months 0

vi. Solvency Ratio (TOL / TNW)

a) Solvency ratio as on _____________ <3 5

<4&>=3 4

Actual:___________ <5&>=4 3

<7&>=5 2

<10&>=7 1

>=10 0


<4&>=3 4


Year 2. __________ <7&>=5 2

Year 3.___________ <10&>=7 1

Average:________________ >=10 0


a) Debt / Equity Ratio as on________ <2.00&>=1.75 4

Actual <2.25&>=2.00 3

<2.50&>=2.25 2

<3.00&>=2.50 1

Average:_____________ >=3.00 0

b) Average Debt / Equity Ratio for last 3 years <1.75 5

<2.00&>=1.75 4


Year 2. __________ <2.50&>=2.25 2

Year 3.___________ <3.00&>=2.50 1

Average:________________ >=3.00 0

Viii) Profitability Ratio PAT / Net sales (%) >=2.5 5

a) Profitability Ratio as on __________ >=2.5&2.2.25 4

>=2.25&<2.00 3

>=2.00&<1.50 2

>=1.50&<1.00 1

Actual: __________ >=1.00 0

b) Average Profitability Ratio for last 3 years >=2.5 5

Actual: Year 1. ________ >=2.5&2.2.25 4

Year 2. _______ >=2.25&<2.00 3

Year 3.________ >=2.00&<1.50 2

Average: ___________ >=1.50&<1.00 1

>=1.00 0


<=1.5.0&<1.40 8

<=1.40&<1.35 6

<=1.35&<1.25 4

<=1.25&<1.20 2

Actual: _______________ <=1.20 0


TL 60

Combined 70*

*Suitably adjust the denominator to arrive at the % of financials.

S. No.





100 100 50



PLR + ___________= ________

Signature of Recommending Authority Signature of Appraiser (Sanctioning authority) Date: For use of Confirming Authority

Remarks / Observation Signature of Assigner (Confirming authority) ANNEXURE-III to circular No.248-2008-BC-CD Dt.02.12.08


CREDIT DEPARTMENT


RC-3

RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR TRADING BORROWERS (for limits of Rs.10.00 lac and above)

(This chart should form an integral part of the process note) NAME OF THE BORROWER: Audited Financial results as on _________ Un audited Financial results as on ________ Un augited half yearly Financial results as on ____ Credit Rating allotted for last 5 years


Risk category / Parameter Grading Score Prescrib-

ed

Score Allotted

I.Management & Operational Risk Assessment (RC-3)


Good 3

Satisfactory 2


Well experienced

Less 5

Experienced 3

New to the field 0



5

Good Integrity 3

Acceptable

Integrity 2

iv) Timely submission of Stock / book debts Statement and QIS statement, Renewal proposal financial statements etc.

Regular 5

Occasionally

Irregular 3

Irregular 0




Moderate 3

Tough 2

Very tough 0


Good 3

Satisfactory 2

Uncertain 0


Favourable

Change 5


3

Unfavourable change

0


Good 3

Satisfactory 2

Inadequate 0




a) Achievement of projected Turnover as on__________ > = 90 5

Actual ____________ <90&>80 4

<80&>70 3

<70&>60 2

<60&>50 1

<50 0

b) Average of projected turnover for last 3 years > = 90 5


Year 2. __________ <80&>70 3

Year 3.___________ <70&>60 2

<60&>50 1

<50 0

Average :________________

ii) Current ratio (For WC only) >=1.33 5


<1.33&>=1.25 4

<1.25&>=1.20 3

<1.20&>=1.15 2

<1.15&>=1.10 1

<1.10 0

iii) Average DSCR (For Existing Term loans only)

>=2 5

<2.00&>=1.75 4

<1.75&>=1.60 3

<1.60&>=1.50 2

<1.50&>=1.25 1

1.25 0

iv) Average current ratio for last three years (For WC only) >=1.33 5

<1.33&>=1.25 4


Year 2. __________ <1.20&>=1.15 2

Year 3.___________ <1.15&>=1.10 1

Average:_________ <1.10 0


>=36 &< 48 months

4

>=48 &< 60 months

3

>=60 &< 84 months

2

>=84 &<120 months

1

> = 120 months 0

vi. Solvency Ratio (TOL / TNW)

a) Solvency ratio as on _____________ <3 5

<4&>=3 4

Actual:___________ <5&>=4 3

<7&>=5 2

<10&>=7 1

>=10 0


<4&>=3 4


Year 2. __________ <7&>=5 2

Year 3.___________ <10&>=7 1

Average:________________ >=10 0


a) Debt / Equity Ratio as on________ <1.70>=1.50 4

Actual <2.00>=1.70 3

<2.50>=2.00 2

<3.00>=2.50 1

Average:_____________ >=3.00 0

b) Average Debt / Equity Ratio for last 3 years <1.50 5

<1.70>=1.50 4

Actual : Year 1. __________(Latest) <2.00>=1.70 3

Year 2. __________ <2.50>=2.00 2

Year 3.___________ <3.00>=2.50 1

Average:________________ >=3.00 0

Viii) Profitability Ratio PAT / Net sales (%) >4.00 5

a) Profitability Ratio as on __________ <4.00>=.2.25 4

<2.25>=2.00 3

<2.00>=1.50 2

<1.50>=1.00 1

Actual: __________ <1.00 0

b) Average Profitability Ratio for last 3 years >4.00 5

Actual: Year 1. ________ <4.00>=.2.25 4

Year 2. _______ <2.25>=2.00 3

Year 3.________ <2.00>=1.50 2

Average: ___________ <1.50>=1.00 1

<1.00 0


<=2.0.0&>=1.75 8

<=1.75&>=1.50 6

<=1.50&>=1.25 4

<=1.25&>=1.20 2

Actual: _______________ <1.20 0


TL 60

Combined 70*

*Suitably adjust the denominator to arrive at the %of financials.

SUMMARY

S. No.





100 100 50



PLR + ___________= ________

Signature of Recommending Authority Signature of Appraiser (Sanctioning authority) Date: For use of Confirming Authority Remarks / Observation Signature of Assigner (Confirming authority)

ANNEXURE-IV to circular No.248-2008-BC-CD Dt.02.12.08


CREDIT DEPARTMENT


RC-4

Rating Chart for borrowal accounts (Rs.10.00 lac and above) for new parties where financials are not available even for one year. NAME OF THE BORROWER:

Risk category / Parameter Grading Score Prescrib-

ed

Score Allotted

1 2 3 4



Good 6

Satisfactory 4


Well experienced 10

Less experienced 6

New to the field 0

Iii) Integrity and Character of the Management Acceptable / Timely servicing of accounts / compliance to terms and Conditions.


10

Good Integrity 6

Acceptable integrity

4


2. Market / Industry Risk Assessment


Moderate 6

Tough 4

Very tough 0


Good 6

Satisfactory 4

Uncertain 0


Favourable change 10


6

Unfavourable change

0


Good 6

Satisfactory 4

Inadequate 0


3. Financial Risk Assessment (based on projections)

I) Projected Current ratio (For WC only) >=1.50 3.00


<1.50&>=1.33 2.50

<1.33&>=1.25 2.00

<1.25&>=1.15 1.50

<1.15&>=1.10 1.00

<1.10 0.00

OR in case of Term loans, Projected average DSCR >=2.00 3.00

<2.00&>=1.80 2.50

<1.80&>=1.70 2.00

<1.70&>=1.60 1.50

<1.60&>=1.50 1.00

<1.50 0.00

ii) Projected Debt / Equity Ratio >1.50 3.00

<1.70&>=1.50 2.50

<2.00&>=1.70 2.00

<2.50&>=2.00 1.50

<3.00&>=2.50 1.00

>=3.00 0.00

Iii) Projected PBDIT / Interest (Number of times) >4 3.00

<4.00&>=3.00 2.50

<3.00&>=2.50 2.00

<2.50&>=2.00 1.50

<2.00&>=1.50 1.00

<=1.50 0.00

iv) Projected PAT / Net Sales (%) >=2.50 3.00

<2.50&>=2.25 2.50

<2.25&>=2.00 2.00

<2.00&>=1.50 1.50

<1.50&>=1.00 1.00

<1.00 0.00

v) Projected PAT / TNW (%) >=10.00 3.00

<10.00&>=8.00 2.50

<8.00&>=6.00 2.00

<6.000&>=4.00 1.50

<4.00&>=3.00 1.00

<3.00 0.00

vi) Projected TOL / TNW >2.00 3.00

<4.00&>=2.00 2.50

<6.00&>=4.00 2.00

<8.00&>=6.00 1.50

<10.00&>=8.00 1.00

>=10.00 0.00

Vii) (Inventory + Receivables) x 360 Net sales

<120 2.00

(for working capital limits only)

(Number of days assuming 360 days in a year) <150&>=120.00 1.50

<180&>=150.00 1.00

>=180.00 0.00

Viii) Or in case of Term loans, terms of repayment <36 months 2.00

>36&>=60 months 1.50

>60&>=84 months 1.00

>84 months 0.00

ix) Projected security coverage >2.00 10.00

<2.00&>=1.75 8.00

<1.75&>=1.50 6.00

<1.50&>=1.25 4.00

<1.25&>=1.20 2.00

<1.20&>=1.00 1.00

<1.00 0.00

TOTAL MARKS - Maximum 30.00

SUMMARY

S. No.





Overall score 100 100 50

CREDIT RISK SCORE ALLOTTED CR

Date: Signature of Signature of Appraiser Recommending Authority (Sanctioning authority)

(For use of Confirming Authority)

Remarks / Observations: Signature of Assignor (Confirming Authority)

^^^^^

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