SBI JIBO CRASH COURSE NOTES

MODULE 1 — OVERVIEW OF SBI LOAN POLICY

Meaning of Loan Policy

Loan policy is the formal framework governing sanction, monitoring, and management of loans and advances in the bank.

Objectives:

• Maintain sound credit portfolio

• Ensure risk-controlled lending

• Maintain prudential exposure limits

• Align with RBI regulatory norms

• Maintain ethical lending practices

The loan policy provides the overall framework for management of the bank’s loan portfolio and product creation.

Important Points for Exam

Loan policy:

• Reviewed annually by Board
• Implemented through Credit Policy & Procedures Committee (CPPC)
• Applies to domestic and international operations

MODULE 2 — SBI BUSINESS VERTICALS

SBI uses a segmented credit management structure.

Major Vertical Groups

These vertical structures help manage credit risk and specialized lending segments.

High Probability Question

Which group handles stressed assets?

Answer: SARG

MODULE 3 — EXPOSURE NORMS

Definition

Exposure = Total credit risk the bank has on a borrower.

Includes:

• Fund based credit

• Non-fund based credit

• Investments

• Derivative exposure

Defined under Exposure Norms and Credit Risk Concentration.

Types of Exposure

Fund Based

Examples:

• Term loans

• Cash credit

• Overdraft

Non Fund Based

Examples:

• Bank guarantee

• Letter of credit

• Derivative exposure

MODULE 4 — LARGE EXPOSURE FRAMEWORK (RBI)

Exposure Limits

These limits prevent excessive credit concentration.

Key Concept

Large borrower exposure is defined when total exposure ≥10% of Tier-1 capital.

MODULE 5 — BORROWER EXPOSURE LIMITS

Internal exposure ceilings also apply.

These limits ensure diversification of credit risk.

MODULE 6 — CREDIT APPRAISAL PROCESS

Credit appraisal is the process of evaluating creditworthiness of borrower before sanction.

Appraisal Steps

1. Promoter evaluation

2. Financial analysis

3. Industry analysis

4. Security evaluation

5. Risk assessment

6. Compliance verification

Creditworthiness is assessed after considering promoter background, group exposure, industry risk, financial strength, and collateral coverage.

Key Elements in Appraisal

• Integrity of borrower

• Technical feasibility

• Economic viability

• Financial viability

• Repayment capacity

MODULE 7 — WORKING CAPITAL ASSESSMENT

Methods Used

1 Turnover Method

Working capital requirement:

25% of projected turnover

Bank finance:

20%

Borrower contribution:

5%

2 Projected Balance Sheet Method

Used for larger borrowers.

Assessment based on:

• Current assets

• Current liabilities

• Net working capital

3 Cash Budget Method

Used for:

• Seasonal industries

• Agriculture related sectors

MODULE 8 — CREDIT RISK ASSESSMENT (CRA)

SBI uses CRA model to evaluate borrower risk.

CRA considers:

• Financial risk

• Industry risk

• Business risk

• Management risk

• External environment

CRA Rating Scale

CRA rating helps determine sanction decision and pricing.

MODULE 9 — EXTERNAL CREDIT RATING (ECR)

Borrowers with exposure above ₹50 crore must obtain rating from accredited agencies such as:

• CRISIL

• ICRA

• CARE

• India Ratings

MODULE 10 — REVIEW AND RENEWAL OF ADVANCES

Working Capital Limits

Validity:

✔ 12 months

Renewal required annually.

If Not Renewed

Account may become irregular or NPA.

Adhoc Limits

Validity:

✔ 90 days

Maximum extension:

✔ 180 days

MODULE 11 — TERM LOANS

Term loans finance long-term capital investments.

Examples:

• Plant & machinery

• Infrastructure

• Housing loans

• Education loans

Tenure

Maximum tenure:

✔ 30 years

Moratorium

Minimum moratorium:

✔ 15% of project life

MODULE 12 — DUE DILIGENCE

Before sanctioning credit, bank must verify:

• KYC compliance

• Promoter background

• Credit bureau report

• Defaulter list

• CIBIL history

• Financial statements

The loan proposal must be supported by request letter/application from borrower and proper documentation.

MODULE 13 — RESTRICTIONS ON LENDING

Bank cannot grant loans for:

• Speculative purposes

• Shell companies

• Purchase of own shares

• Illegal activities

• Certain sensitive commodities

MODULE 14 — LOANS TO DIRECTORS

Under Banking Regulation Act:

Bank cannot grant loans to directors or entities where they have substantial interest without approval.

MODULE 15 — SENSITIVE COMMODITIES

Bank must exercise caution while lending against:

• Sugar

• Food grains

• Oilseeds

• Cotton

Margins may be prescribed depending on market risk.

MODULE 16 — NPA MANAGEMENT

Account becomes NPA when overdue exceeds 90 days.

Types of NPAs:

MODULE 17 — MONITORING OF ADVANCES

Monitoring includes:

• Stock statements

• Financial statements

• Inspection reports

• Early warning signals

• Risk rating review

MODULE 18 — DIGITAL LENDING

Digital loan products include:

• Instant personal loans

• Pre-approved retail loans

These follow automated business rule engines and digital monitoring systems.

MODULE 19 — IMPORTANT COMMITTEES

Key committees involved in credit decisions:

Credit Policy & Procedures Committee (CPPC)

Responsible for:

• framing loan policy

• product approval

• credit guidelines

Corporate Centre Credit Committee (CCCC)

Approves large credit proposals.

Executive Committee of Central Board (ECCB)

Approves very large loans and deviations.

MODULE 20 — IMPORTANT NUMBERS (VERY IMPORTANT FOR EXAM)

MODULE 21 — QUICK EXAM REVISION

Memorize the following:

5 Key Credit Risks

1 Industry risk
2 Financial risk
3 Management risk
4 Market risk
5 Operational risk

5 Steps of Credit Appraisal

1 Promoter check
2 Financial analysis
3 Industry analysis
4 Security valuation
5 Compliance verification

MODULE 22 — MOST LIKELY QUESTIONS

1

Working capital under turnover method?

Answer: 25% of projected turnover

2

Exposure limit to single borrower?

Answer: 20% of Tier 1 capital

3

Validity of working capital limit?

Answer: 12 months

4

Account becomes NPA after?

Answer: 90 days overdue

5

Which group handles stressed assets?

Answer: SARG