CORPORATE BANKING

a. Consortium Finance
b. Loan Syndication
c. Multiple Banking
d. Infrastructure Finance
e. Takeout Financing
CORPORATE BANKING
PROVIDES

Capital for
business
ventures Construction
activities

ON LONG
TERM BASIS
Products and services for corporate clients

Commercial Fee-based
credit Services
The key drivers of Corporate Banking
Client Relationship
Management
24*7Customer
service

Technology
CORPORATE
BANKING
Electronic/
Internet based
Internet based
Distribution
Distribution
Wide Range of
Products/services
Integrated
Cash Management
 LONG-TERM COMMERCIAL LOANS

A loan that is
structured and
supported

and a specific
specifically by
performance business
the operation
of or enterprise
 LONG-TERM COMMERCIAL LOANS

These loans
are based on

Proven successful/ Dependent

projected on the Of the specific
performance historical operation.
of the business profitability
 Purpose of long-term commercial Loan:

Purchase of major equipment Business expansion/

and plant & machinery acquisition cost

Commercial
Loan

In view of the long repayment period

Asset acquired serve as financing is usually done through
security for such loans CONSORTIUM FINANCE
 Consortium Finance
Under consortium financing, several banks (or
financial institutions) finance a single borrower with
common appraisal, common documentation, joint
supervision and follow-up exercises
This finance may be for working capital
requirements or fixed assets
Consortium loans are called Participation Loans in
US and are very popular
Participation loans mean joint finance by more than
one bank to the same party against a common
security
 Terms of Finance
The borrower will draw on his accounts
in the same proportion as the limit
sanctioned with respective banks
One of the concerned banks will be
responsible for the recovery of the entire
advance for the benefit of all
The loss if any will be shared between
the participating banks in the ratio of the
amounts sanctioned and disbursed
 Documentation
Separate Demand Provisionary Notes (DPN) in favour
of respective Banks for different limits
Hypothecation deed in respect of total combined limit,
executed in favour of banks on pro rata basis
Registration of Charge with Registrar of Companies
within 30 days
Negative lien in respect of unencumbered assets to
each bank, passed by Board
Balance Confirmation, Stock Statement, Insurance etc.
Authority for inspection, timely review
 Benefits of Consortium
It enables the banker to spread the risk with other
bankers who are members of the consortium
There is an advantage of having the collective
wisdom of banks in the consortium for appraisal of
credit of the borrower.
From the angle of profitability, smaller banks that
cannot finance huge credit requirements of the big
borrowers singly could join the consortium and
have the benefit of the borrower group
 Other benefits
Speed of transaction
Larger volume of a transaction
Reduced administration for the client - the
whole sum is drawn through one Agent bank.
 Positive publicity for the client.
Flexibility of draw down and repayment
schedule
 Role of lead bank of the Consortium
Appraisal of credit by the Lead Bank
Borrower moves through Lead Bank
Liaison with RBI by the Lead Bank
Credit Monitoring Arrangement by RBI
done through the Lead Bank
Overriding role among all members
Can give additional facilities, subject to
informing the members of their new share
 Exposure norms by RBI
a. Number of participating banks
b. Minimum share of the bank
c. Entry/exit from the consortium
d. Sanction of additional/ad hoc limit in emergency
situations/contingencies by the Lead Bank/other
banks
e. The fee to be charged by the lead bank for services
rendered by it
f. Grant of any facility to the borrower by the non-
member bank
g. Deciding time frame for sanctions/renewals
 LOAN SYNDICATION
Syndicated loans are loans made by two or more
lenders and administered by a common agent using
similar terms and conditions and common
documentation.
It is an alternative to consortium financing and
available for large established public limited
companies
It can be used to raise project finance and also for
working capital needs
It offers a good avenue to get the appropriate level of
credit as determined by requirements of the unit
Syndicated loans are most often for medium-term.
 Mechanics of Syndication
Loan syndication is done when a borrower wants to
raise a relatively large amount of money quickly and
conveniently.
Most loan syndications take the form of a direct-
lender relationship, in which the lead lender is the
agent for the other lenders in the origination and
administration of the loan, and the other lending
banks are signatories to the loan agreement
A prospective borrower intending to raise resources
through this method awards a mandate to a bank
commonly known as the ‘Lead Manager’ as against
the nomenclature of ‘Lead Banker’ used for the leader
of the consortium.
Loan syndication Process
 Advantages of the Syndicated loan
Syndicated loans bring the borrower greater visibility in the open
market
Flexibility in structure and pricing. Borrowers have a variety of
options in shaping their syndicated loan, including multicurrency
options, risk management techniques, and repayment rights without
penalty
Syndicated facilities bring businesses the best prices in aggregate
and spare companies the time and effort of negotiating individually
with each bank
Loan terms can be abbreviated
Allows the borrower to access from a diverse group of financial
institutions
 Multiple Banking
In multiple banking, different banks provide
finance and different banking facilities to a single
borrower without having a common arrangement
and understanding between the lenders
The borrower borrows from a number of banks
under separate agreements and securities are
charged to them separately
Banks get pari passu charge
 Infrastructure Finance
Any credit facility in whatever form extended by lenders (i.e.
banks, FIs or NBFCs) to an infrastructure facility as specified
below falls within the definition of “infrastructure lending”.
In other words, a credit facility provided to a borrower
company engaged in:
• developing or
• operating and maintaining, or
• developing, operating and maintaining
Example:- a road, a port, airport, water supply,
telecommunication, distribution of power, etc.
Types of Infrastructure
Finance
Banks may extend credit facility by way of working capital
finance, term loan, project loan, subscription to bonds and
debentures/ preference shares/ equity shares acquired as a
part of the project finance package which is treated as
"deemed advance” and any other form of funded or non
funded facility
Banks may also enter into takeout financing arrangement
with Infrastructure Development Finance Corporation
(IDFC)/ other financial institutions or avail of liquidity support
from IDFC/ other FIs
Credit Exposure
Credit exposure to borrowers belonging to a group may
exceed the exposure norm of 40 per cent of the bank's
capital funds by an additional 10 per cent (i.e up to 50 per
cent), provided the additional credit exposure is on account
of extension of credit to infrastructure projects.
Credit exposure to single borrower may exceed the
exposure norm of 15 per cent of the bank's capital funds by
an additional 5 per cent (i.e. up to 20 per cent) provided the
additional credit exposure is on account of infrastructure
 Takeout Financing
Take-out financing structure is essentially a mechanism designed
to enable banks to avoid asset-liability maturity mismatches that may
arise out of extending long tenor loans to infrastructure projects
Banks financing the infrastructure projects will have an
arrangement with Infrastructure Development Finance
Corporation(IDFC) or any other financial institution for transferring to
the latter the outstandings in their books on a pre-determined basis
IDFC and SBI have devised different take-out financing structures
to suit the requirements of various banks, addressing issues such as
liquidity, asset-liability mismatches, limited availability of project
appraisal skills, etc.
Types of Takeout Financing

There are several variants of the Take-out finance but

basically they are either in the nature of unconditional take-out
finance or
conditional take-out finance though it may involve assuming
full credit risk or part of the same
The take-out finance products will involve three parties-
the project company,
taking over institution and
the lending banks/FI
Recent Developments
RBI classifies IDFC as infrastructure finance company:- would allow
it mobilize funds at lower cost and get flexibility in the infrastructure lending
The Infrastructure Development Finance Corporation (IDFC) has entered
into a Rs 400-crore take-out financing agreement with the State Bank of
India, whereby a liquidity support will be given to the commercial bank for
the long-term core sector projects
SBI tops loan syndication chart in Asia Pacific region:- The public
sector bank has topped the league table for the third consecutive year in
the Asia Pacific egion beating Chinese and other foreign banks such as
Bank of China, ANZ Banking Group and HSBC.
In 2009, SBI syndicated rupee and dollar loans amounting to $27.94
billion in about 67 issues, capturing 12.3 per cent of the loan syndication
market.
Thank You For Your Attention