ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE : KADAPA

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1 ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE : KADAPA Circular No BC-CD Date: 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 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

2 Circular No BC-CD Dt : 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 : 3 : Circular No BC-CD Dt e) Other advance of below Rs 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 1 Advances/OD/Non-fund based facility fully secured by deposits and staff loans (without any irregularity) 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. 3 Standard Assets / Non-fund based liability without any irregularity fully covered by primary / collaterals. 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. ii) Clean / Unsecured, partly secured advances / non-fund based liability without any irregularity Credit Risk Code CR-01 CR-02 CR-03 CR-04 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 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 Circular No BC-CD Dt : 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 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 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 Circular No BC-CD Dt : 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 lakhs and above: In the case of borrowers enjoying aggregate credit limits (fund based, including term loans and non-fund based) of Rs 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 Market / Industry Risk Financial Risk Overall Score

6 Contd...6 Circular No BC-CD Dt : 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 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 Circular No BC-CD Dt : 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 1 st January, Clarifications required, if any, on this circular may be sought from Credit Department, Head Office, Kadapa. (M.JAI PRAKASH) CHAIRMAN

8 ANNEXURE-I to circular No BC-CD Dt ANDHRA PRAGATHI GRAMEENA BANK :: HEAD OFFICE :: KADAPA CREDIT DEPARTMENT NAME OF THE BRANCH / OFFICE : RC-1 BIC: RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR NON-SSI BORROWERS (for limits of Rs 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 I. Management & Operational Risk Assessment (RC-1) Score Allotted I) Management Quality / Competency Excellent 5 Good 3 Satisfactory 2 ii) Experience of the borrower / proprietor / partners / promoters / directors in business Well experienced Less 5 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

9 iv) Timely submission of Stock / book debts Statement and QIS statement, Renewal proposal financial statements etc. Occasionally Irregular 3 Irregular 0 TOTAL SCORE - Maximum 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 Iii) Expected change in Govt. Policy / other regulations affecting the business Uncertain 0 Favourable Change 5 No particular change 3 Unfavourable change iv) Technology and Quality control Excellent 5 0 Good 3 Satisfactory 2 Inadequate 0 TOTAL SCORE - Maximum 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

10 <50 0 Average : >=1.5 5 ii) Current ratio (For WC only) <1.50&>= a) Current ratio as on <1.33&>= Actual: <1.25&>= <1.17&>= < iii) Average DSCR (For Existing Term loans only) >=2 5 Not more than 3 previous years <2.00&>= iv) Average current ratio for last three years ended on (For WC only) <1.75&>= <1.60&>= <1.50&>= >=1.5 5 <1.50&>= Actual : Year 1. (Latest) <1.33&>= Year 2. <1.25&>= Year 3. <1.17&>= Average: < v. Terms of repayment (For Term loans only) <=36 months 5 >=36 &< 48 months 4 Actual : >=48 &< 60 months >=60 &< 84 months >=84 &<120 months > = 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

11 Actual : Year 1. (Latest) <6&>=4 3 Year 2. <8&>=6 2 Year 3. <10&>=8 1 Average: >=10 0 Vii) Debt / Equity Ratio: < a) Debt / Equity Ratio as on <2.00&>= Actual <2.25&>= <2.50&>= <3.00&>= Average: >= b) Average Debt / Equity ratio for last 3 years < <2.00&>= Actual : Year 1. (Latest) <2.25&>= Year 2. <2.50&>= Year 3. <3.00&>= Average: >= 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&< <=2.0&< <=1.5&< <=1.0&< Actual: <= TOTAL SCORE (Maximum) WC 60

12 *Suitably adjust the denominator to arrive at the %of financials. TL 60 Combined 70* S. No. Risk component Weightage Maximum Minimum Total Score allotted 1 Management / Operational 20% Market / Industry 20% Financial 60% 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)

13 ANNEXURE-II to circular No BC-CD Date: ANDHRA PRAGATHI GRAMEENA BANK :: HEAD OFFICE :: KADAPA CREDIT DEPARTMENT NAME OF THE BRANCH / OFFICE : RC-2 BIC: RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR SSI BORROWERS (for limits of Rs lac and above) NAME OF THE BORROWER: (This chart should form an integral part of the process note) 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 As on Marks % CR rating Risk category / Parameter Grading Score Prescribed I. Management & Operational Risk Assessment (RC-2) I) Management Quality / Competency Excellent 5 Score Allotted Good 3 ii) Experience of the borrower / proprietor / partners / promoters / directors in business Satisfactory 2 Well experienced 5 Less Experienced 3 Iii) Integrity and Character of the Management Acceptable / Timely servicing of accounts / compliance to terms and conditions. New to the field 0 Integrity is beyond doubt Good Integrity 3 5

14 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 TOTAL SCORE - Maximum Market / Industry Risk Assessment (RC - 2) I) Competition Near Monopoly 5 Moderate 3 Tough 2 ii) Future of industry / business / economic prospects Very tough 0 Excellent 5 Good 3 Satisfactory 2 Iii) Expected change in Govt. Policy / other regulations affecting the business Uncertain 0 Favourable Change 5 No particular change 3 Unfavourable change iv) Technology and Quality control Excellent 5 Good 3 Satisfactory 2 Inadequate 0 TOTAL SCORE - Maximum Financial Risk Assessment (RC-2) I) Achievement of Projected Turnover (%) a) For the year ended on > = 80 5 Actual <80&>70 4 <70&>60 3 <60&>50 2 <50&>40 1 <40 0 0

15 b) Average achievement of projected turnover for last 3 years > = 80 5 Actual : Year 1. (Latest) <80&>70 4 Year 2. <70&>60 3 Year 3. <60&>50 2 <50&>40 1 <40 0 Average : >= ii) Current ratio (For WC only) <1.33&>= a) Current ratio as on <1.25&>= Actual: iii) Average DSCR (For Existing Term loans only) Not more than 3 previous years <1.20&>= <1.15&>= < >= <1.50&>= iv) Average current ratio for last three years (For WC only) <1.40&>= <1.20&>= <1.15&>= >= <1.33&>= Actual : Year 1. (Latest) <1.25&>= Year 2. <1.20&>= Year 3. <1.15&>= Average: < v. Terms of repayment (For Term loans only) <=36 months 5 >=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

16 Actual: <5&>=4 3 <7&>=5 2 <10&>=7 1 >=10 0 b) Average solvency ratio for last 3 years <3 5 <4&>=3 4 Actual : Year 1. (Latest) <5&>=4 3 Year 2. <7&>=5 2 Year 3. <10&>=7 1 Average: >=10 0 Vii) Debt / Equity Ratio: < a) Debt / Equity Ratio as on <2.00&>= Actual <2.25&>= <2.50&>= <3.00&>= Average: >= b) Average Debt / Equity Ratio for last 3 years < <2.00&>= Actual : Year 1. (Latest) <2.25&>= Year 2. <2.50&>= Year 3. <3.00&>= Average: >= Viii) Profitability Ratio PAT / Net sales (%) >=2.5 5 a) Profitability Ratio as on >=2.5& >=2.25&< >=2.00&< >=1.50&< Actual: >= b) Average Profitability Ratio for last 3 years >=2.5 5 Actual: Year 1. >=2.5& Year 2. >=2.25&< Year 3. >=2.00&< Average: >=1.50&< >= ix) Security coverage Ratio >=

17 <=1.5.0&< <=1.40&< <=1.35&< <=1.25&< Actual: <= 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% Market / Industry 20% Financial 60% 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

18 Remarks / Observation Signature of Assigner (Confirming authority) ANNEXURE-III to circular No BC-CD Dt ANDHRA PRAGATHI GRAMEENA BANK :: HEAD OFFICE :: KADAPA CREDIT DEPARTMENT NAME OF THE BRANCH / OFFICE : RC-3 BIC: RATING CHART FOR ALLOTTING CREDIT RISK CODE FOR TRADING BORROWERS (for limits of Rs lac and above) NAME OF THE BORROWER: (This chart should form an integral part of the process note) 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 As on Marks % CR rating Risk category / Parameter Grading Score Prescribed I.Management & Operational Risk Assessment (RC-3) I) Management Quality / Competency Excellent 5 Score Allotted Good 3 Satisfactory 2

19 ii) Experience of the borrower / proprietor / partners / promoters / directors in business Well experienced Less 5 Experienced 3 Iii) Integrity and Character of the Management Acceptable / Timely servicing of accounts / compliance to terms and conditions. New to the field 0 Integrity is beyond doubt 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 TOTAL SCORE - Maximum Market / Industry Risk Assessment (RC - 3) 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 Iii) Expected change in Govt. Policy / other regulations affecting the business Uncertain 0 Favourable Change 5 No particular change 3 Unfavourable change iv) Technology and Quality control Excellent 5 0 Good 3 Satisfactory 2 Inadequate 0 TOTAL SCORE - Maximum Financial Risk Assessment (RC-3)

20 I) Achievement of Projected Turnover (%) 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 Actual : Year 1. (Latest) <90&>80 4 Year 2. <80&>70 3 Year 3. <70&>60 2 <60&>50 1 <50 0 Average : ii) Current ratio (For WC only) >= a) Current ratio as on <1.33&>= Actual: <1.25&>= <1.20&>= <1.15&>= < iii) Average DSCR (For Existing Term loans only) >=2 5 <2.00&>= <1.75&>= <1.60&>= <1.50&>= iv) Average current ratio for last three years (For WC only) >= <1.33&>= Actual : Year 1. (Latest) <1.25&>= Year 2. <1.20&>= Year 3. <1.15&>= Average: < v. Terms of repayment (For Term loans only) <=36 months 5 >=36 &< 48 months 4 >=48 &< 60 months 3

21 >=60 &< 84 months >=84 &<120 months 2 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 b) Average solvency ratio for last 3 years <3 5 <4&>=3 4 Actual : Year 1. (Latest) <5&>=4 3 Year 2. <7&>=5 2 Year 3. <10&>=7 1 Average: >=10 0 Vii) Debt / Equity Ratio: < a) Debt / Equity Ratio as on <1.70>= Actual <2.00>= <2.50>= <3.00>= Average: >= b) Average Debt / Equity Ratio for last 3 years < <1.70>= Actual : Year 1. (Latest) <2.00>= Year 2. <2.50>= Year 3. <3.00>= Average: >= Viii) Profitability Ratio PAT / Net sales (%) > a) Profitability Ratio as on <4.00>= <2.25>= <2.00>= <1.50>=1.00 1

22 Actual: < b) Average Profitability Ratio for last 3 years > Actual: Year 1. <4.00>= Year 2. <2.25>= Year 3. <2.00>= Average: <1.50>= < ix) Security coverage Ratio >= <=2.0.0&>= <=1.75&>= <=1.50&>= <=1.25&>= Actual: < TOTAL SCORE (Maximum) WC 60 TL 60 Combined 70* *Suitably adjust the denominator to arrive at the %of financials. SUMMARY S. No. Risk component Weightage Maximum Minimum Total Score allotted 1 Management / Operational 20% Market / Industry 20% Financial 60% CREDIT RISK SCORE ALLOTTED CR ---- INTEREST RATE APPLICABLE WITH EFFECT FROM (DATE) PLR + =

23 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 BC-CD Dt ANDHRA PRAGATHI GRAMEENA BANK :: HEAD OFFICE :: KADAPA CREDIT DEPARTMENT NAME OF THE BRANCH / OFFICE : RC-4 BIC: Rating Chart for borrowal accounts (Rs lac and above) for new parties where financials are not available even for one year. NAME OF THE BORROWER: Risk category / Parameter Grading Score Prescribed I. Management & Operational Risk Assessment (RC-1) Score Allotted I) Management Quality / Competency Excellent 10 Good 6 ii) Experience of the borrower / proprietor / partners / promoters / directors in business Satisfactory 4 Well experienced 10 Less experienced 6

24 Iii) Integrity and Character of the Management Acceptable / Timely servicing of accounts / compliance to terms and Conditions. New to the field 0 Integrity is beyond doubt 10 Good Integrity 6 Acceptable integrity TOTAL SCORE - Maximum Market / Industry Risk Assessment I) Competition Near Monopoly 10 Moderate 6 Tough 4 Very tough 0 ii) Future of industry / business / economic prospects Excellent 10 Good 6 Satisfactory 4 4 Iii) Expected change in Govt. Policy / other regulations affecting the business Uncertain 0 Favourable change 10 No particular change 6 Unfavourable change iv) Technology and Quality control Excellent 10 Good 6 Satisfactory 4 Inadequate 0 TOTAL SCORE - Maximum Financial Risk Assessment (based on projections) I) Projected Current ratio (For WC only) >= a) Current ratio as on Actual: <1.50&>= <1.33&>= <1.25&>= <1.15&>= < OR in case of Term loans, Projected average DSCR >= <2.00&>= <1.80&>= <1.70&>=

25 <1.60&>= < ii) Projected Debt / Equity Ratio > <1.70&>= <2.00&>= <2.50&>= <3.00&>= >= Iii) Projected PBDIT / Interest (Number of times) > <4.00&>= <3.00&>= <2.50&>= <2.00&>= <= iv) Projected PAT / Net Sales (%) >= <2.50&>= <2.25&>= <2.00&>= <1.50&>= < v) Projected PAT / TNW (%) >= <10.00&>= <8.00&>= <6.000&>= <4.00&>= < vi) Projected TOL / TNW > <4.00&>= <6.00&>= <8.00&>= <10.00&>= Vii) (Inventory + Receivables) x 360 Net sales >= <

26 (for working capital limits only) (Number of days assuming 360 days in a year) <150&>= <180&>= >= 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&>= <1.75&>= <1.50&>= <1.25&>= <1.20&>= < TOTAL MARKS - Maximum SUMMARY S. No. Risk component Weightage Maximum Minimum Total Score allotted 1 Management / Operational 20% Market / Industry 20% Financial 60% Overall score CREDIT RISK SCORE ALLOTTED CR Date: Signature of Signature of Appraiser Recommending Authority (Sanctioning authority) (For use of Confirming Authority)

27 Remarks / Observations: Signature of Assignor (Confirming Authority) ^^^^^

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