BANK OF INDIA HEAD OFFICE C. & I.C. DEPARTMENT Branch Circular No.98/233 Subject:Advances/C&IC/2004-05/39 REF.C&IC/GRR Date : 12.02.2005 THE ZONAL MANAGERS, ALL ZONES THE DEPUTY GENERAL MANAGER, THE ASSISTANT GENERAL MANAGER, THE CHIEF MANAGER/SENIOR BRANCH MANAGER, BRANCH MANAGER/MANAGER ALL INDIAN BRANCHES (FOREIGN BRANCHES FOR INFORMATION ONLY)

Taking over of advance accounts from other Banks and FIs Branch Circulars No. 97/142 dated 01.01.2004 and No. 98/203 dated 07.01.2005 -------------------------------------------------------------------------

Please refer to Branch Circular No. 97/142 dated 01.01.2004, whereby the

modified guidelines, as under, for take over of advance accounts from other Banks and FIs have been advised:

1. The account to be taken over should be a standard account with the existing

Bank. 2. Continuously profit making for at least last three years 3. Increasing trend in sales volume. 4. Maximum debt equity ratio of 3:1 in the case of Medium and large industries and

4:1 in the case of SSI units . 5. Minimum current ratio of 1.25:1 for accounts with limits up to Rs.5 crores

where Turn over method is applied for assessment and minimum of 1.30 :1 for others.

6. Minimum interest service coverage ratio of 1.75 7. If Term Loan is also proposed to be taken over the minimum DSCR should be

1.50 2. The take over of accounts was authorised to be permitted only by zonal Manager and above. We received representations from some zones that there are good accounts which though not in a position to comply with each of the above financial ratios are eligible for 'AA' risk rating and they may be permitted to be taken over from other banks. To facilitate take over of such good accounts, norms were relaxed and advised to branches vide Circular No. 98/203 dated 07.01.2005. Vide this circular delegatees at all levels have been authorised to take over accounts from other Banks and FIs provided the prospective borrowers comply with minimum requirement in respect of some important financial ratios like Current Ratio, Debt Equity Ratio and Interest Service Coverage Ratio and are eligible to be rated as ‘AA’ even if they do not fully comply with the other financial ratios. However, the authority to take over was one level higher than the authority under which the limits would fall for consideration. The liberalised norms are as under :

Accounts with overall risk rating of AA are eligible for take over provided

Minimum Current Ratio : 1.20 Maximum Debt Equity Ratio : 4:1 for SSI units

3:1 for others

Minimum ISCR : 1.50 3. Thus there are two types of borrowers namely one satisfying all the individual parameters as mentioned in para 1 above and other who though not satisfying all the individual parameters are eligible to be rated as 'AA' and also satisfy the minimum stipulated norms in respect of important financial ratios as mentioned in para 2 but the authority to take over the account was one level higher than the authority under which the limits would fall for consideration. To enable the branches to increase the credit portfolio it was felt that both the above types of prospective borrowers may be made eligible for taking over. Board of Directors in their meeting of 04.02.2005 have approved the dual arrangement for take over of accounts i.e. one with full compliance of take over norms as given in Para 1 and other with liberalised norms as given in para 2 but by one level higher delegated authority. Thus, the revised guidelines are given below for information of and compliance by branches.

⇒ Take over of accounts complying with all the detailed guidelines as mentioned

in Circular No. 97/142 dated 01.10.2004 can be authorised by the Zonal Manager and above only. (see paragraph 1 above)

⇒ If some prospective borrowers do not comply with each of the norms but

comply with the norms in respect of some important ratios as detailed in our Circular No. 98/203 dated 07.01.2005, and also are eligible to be rated as AA in the overall assessment, such accounts can be permitted to be taken over by a delegatee one level above that under which the limits fall for sanction.(see paragraph 2 above)

4. Branches are expected to take advantage of the flexibility that is made available for taking over of good accounts from other banks for increasing the credit business.

( A.C. MAHAJAN )

GENERAL MANAGER H:\COMMON\GRR\Brcir\takeover.doc