ROLE OF COMMERCIAL BANKS
LENDING POLICIES
A considerable importance has been placed on the role of commercial banks by successive Governments in the development of the economy of our country. It is almost certain that a bank will be associated with every project of industry/trade or business irrespective of its size. The banks are now certainly catering to the credit needs of a large variety of projects, big or small, in all the sectors of economy including agriculture, trade, industry and services etc. Granting of short‑term finance for working capital requirements has always remained an area exclusively reserved for commercial banks. Banks have now assumed the role of a development institution in promoting small projects in all the sectors of economy besides increasing their presence even in big industrial projects
The lending policies of banks have also undergone a sea change‑with
the passage of time and there had been a few historical events which had an
important bearing on the general approach of a banker towards lending. It will
be of interest here to have a brief discussion on various approaches of banks
towards lending and their relative importance in the present settings. The
various approaches may broadly be categorised as under:
q
Security oriented approach.
q
Need oriented approach.
q
Project oriented approach.
q
Person oriented approach.
The banks before nationalisation were generally catering to the needs of
large industrial houses and big trade and laid a great emphasis on the safety
of their funds and insisted upon availability of good tangible security the
cover the advance. Offer of an acceptable form of good tangible security would
always have a very positive influence on the decision of a banker to grant
advance. This approach resulted in cornering out of scarce financial resources
available with banks by a small group of individuals and other users who had
necessary security to offer to the banks. The banks would grant advances to
only a class of borrowers who already owned large resources as the only
consideration was the availability of security. This process also resulted in
ignoring the genuine needs of other prospective borrowers who could not provide
any security though they had a good project in hand. This was truely an example
of class banking and was cited as an important reason for nationalisation of 14
major commercial banks in 1969 by Government of India. It was envisaged to
redistribute the financial resources available in the economy in a more
equitable manner and. to ensure that credit needs of all sectors of economy and
all sort of borrowers are adequately met. It was the first major step towards
our march to mass banking.
The advent of 'priority sector' in 1971 completely transformed the
security oriented approach of the bankers to more acceptable 'project
approach.' The banks were now required to invest in small projects in various
segments of priority sector and other projects and would look to cash
generation capacity of these projects as the main source of repayment rather
than the tangible security that might not be available in most of the cases.
The emphasis now shifted from security to 'project'. The Government, however,
simultaneously introduced credit guarantee facilities through Credit Guarantee
(Small Loans) Scheme, 1971 to cover the risks of banks in financing small
projects included in priority sector and the security was now replaced by
guarantee. The main beneficiaries of this transformation were the hitherto
neglected agriculture and small trade sectors.
Another phenomenon noted in 1973 in respect of large industrial advances
was that the needs of a particular borrower had no direct relationship with the
credit limits sanctioned by banks in his favour. This was also partly due to
more emphasis being placed on security and also due to the absence of any
acceptable technique for proper assessment of the credit requirements of the
borrower. In this process a substantial part of credit limits sanctioned by the
banks remained unutilised. The banks also did not care to match their
commitments (limits) with the resources available with them. This weakness in
the system was fully exposed during 1974‑1975 in the wake of rise in oil
prices and consequent general price rise when demand for banks' funds suddenly
increased and banking industry could not meet its commitments. The credit
limits to borrowers had to be frozen and it was felt that it would be necessary
to develop a system to fix need based credit limits in favour of the borrowers
and also to strike a proper balance between the credit limits sanctioned by the
banks and their resources. This added a new dimension to this lending approach
of bankers and the emphasis now shifted to assess the 'needs' of borrowers.
'Tandon Committee recommendations' as accepted by Reserve Bank of India formed
the basis of this approach and it also helped to develop an acceptable form to
assess the needs of working capital of an industrial borrower. The
recommendations of Tandon Committee were further modified by the
recommendations of 'Chore Committee' to bring in still stricter discipline in
planning credit needs of the large borrowers and also matching their
requirements/utilisation with actual operations.
With liberalisation process already set in banking, Reserve Bank of
India has since withdrawn the prescription of 'Maximum Permissible Bank
Finance' (MPBF) which has been the main concept for assessment of working
capital as per the recommendations of Tandon/Chore Committee and banks have been
given freedom to frame their own policies in this regard. It will nevertheless
be necessary that proper assessment of credit requirements is made by the bank
as per its own policy in all the cases.
A new dimension to the lending approach of banks was added by Government
when it was desired to extend banking credit to groups of people selected on
different eligibility criterion under various schemes formulated by Government.
Notable schemes under this category are IRDP scheme, self-employment scheme etc.
The approach now may be to identify the persons who could be the beneficiaries
of bank credit, formulate necessary projects that are suitable to be undertaken
by these identified persons, assess their requirement to implement those
projects and extend the credit without, of course, insisting on any security
other than the assets created by the loan. This is, in fact, complete
transformation of banking approach where security has been relegated to more
important factors of need and nature of project to be developed.
The latest development in lending policies of the commercial banks has
been their more active participation in large industrial projects. The banks
can now grant term loans upto Rs. 500 crores or Rs. 1000 crores for power
projects in a single project subject to such loans being within prudential
norms as applicable to each bank. This activity was hitherto confined to all
India Financial Institutions with limited share in term loans being offered to
commercial banks Full details of the liberalisation brought in the matter have
already been given in Chapter 3.
Reserve Bank of India, being central bank in the country, exercises a
great deal of control over all the functions of banks in India. Directives are
issued by Reserve Bank relating to credit planning, credit appraisal and other
related issues from time to time. These directives are almost compulsorily
followed by all the banks with the result that uniformity in the credit policy
and procedure has been achieved in the banking sector to a large extent. Loan
application forms for all categories of small borrowers have also been
standardised. The process of reversal has however, already been initiated and
controls are now being loosened in a phased manner. The banks are being given
more freedom/powers in almost every aspect of their functioning including
formation of their own credit policies and work in a more competitive
environment. The quantitative and qualitative controls being exercised by
Reserve Bank of India are as under
Reserve Bank's Control
__________________________________l______________________________
l l
Quantitative Qualitative
_______________________________________ _______________________________________
l l
l l l l
Availability
Allocation
Allocation Appraisal Credit Selective
Of lendable for priority for advances
techniques monitoring
Credit
Funds with sector under
DRI with special Arrangement
Control
Banks (CRR- Scheme and
emphasis on
SLR require- other
such working capital
Ments)
schemes assessment
The quantitative controls being exercised by Reserve Bank of India
though important for formulation of credit policies of the banks are not very
directly relevant to the borrowers. The quantitative controls of Reserve Bank
generally restrict the maximum amount of advance that can be made by the banks
under a given set of circumstances and fix targets of advances for the banks to
be made to various sectors. CRR/SLR requirements have been reduced considerably
over a period of time resulting in substantial release of lendable funds for
the banks.
The qualitative controls are directly relevant for the borrowers as
limits to them will be sanctioned after taking into account various aspects as
specified by Reserve Bank of India. All these aspects have been discussed in
details in relevant chapters.
INTEREST RATES ON ADVANCES
The entire concept of rates of interest on advances to be charged by
commercial banks has been radically changed. The multiplicity and complexity in
interest rate structure has been minimised to a great extent and the most
important points that have emerged from these amendments are as under :
(1) The
rate of interest have been linked to the size of loan. The size of the loan
determined by aggregating term loan and working capital (fund based) limits
enjoyed by a borrower from the entire banking system.
(2) Sector‑specific and programme‑specific interest rates have been dispensed with except for advances under Differential Rate of Interest (DRI) scheme and Export Credit.
(3) Distinction
between short‑term credit and term loan has also been dispensed with for
the purpose of interest rates.
(4) Banks
have been given flexibility in determining the rates of interest in the
following cases
(a) Staff loans.
(b) Loans granted to other banks including cooperative banks.
(c) Loans granted against own deposits of the bank.
(d) Loans granted for
purchase of consumer durables.
(e) Loans to individuals against shares and debentures/bonds.
(f) Other non‑priority sector personal loans.
(5) Banks
have also been given discretion to determine the interest rate for all credit
limits over Rs. 2.00 lacs.
Reserve Bank of India has issued a Master Circular1 consolidating all its circulars and directives with regard to interest
rates on advances. The important points that have emerged from the guidelines
are as under :
(i) Interest
should be charged by the Banks on various credit facilities like loans,
advances, cash credits, overdrafts, discount usance bills or any other
financial accommodation provided or granted or renewed by them in accordance
with the directives on interest rates on advances issued by Reserve Bank of
India.
(ii) The
interest at the specified rates must be charged at monthly rates from April 1,
2002. There are other conditions also which are discussed later in this
chapter.
(iii) Term
loans and working capital advances should be clubbed by the Banks for the
purpose of determining the size of the loan and the applicable rate of
interest.
(iv) Prime Lending Rate (PLR)
Presently the banks have freedom to determine the rate of interest, on the loans above Rs. 2 lakhs, subject to PLR and spread guidelines. However, on loan up to Rs. 2 lakhs the rate of interest can not exceed PLR. The requirement of PLR being the floor rate. for loans above Rs. 2 lakhs has now been relaxed. Banks can now offer loans at below PLR rates to exporters or other creditworthy borrowers which includes public enterprises. However, these loans have to be provided on the lines of a transparent and objective policy approved by the respective boards. This will give more operational flexibility to commercial banks in deciding their lending rates. Banks will continue to declare the maximum spread of interest rates over PLR.
It has also been advised that these guidelines will not be applicable to
RRBs/LABs.
The Banks are also free to fix separate PLR for short‑term credit
and Prime Term Lending Rate (PTLR) for term loans of 3 years and above. Banks
should declare the PLR/PTLR fixed by them and they should also indicate the
maximum spread over the PLR for all advances other than consumer credit. The
Banks have freedom to prescribe separate PLR for loan component and cash credit
component. They are also free to prescribe separate spreads, for both.
Reserve Bank of India has further specified that the interest rate on
credit limits of Rs. 2 lakh and below shall not exceed the PLR which is
available to the best borrowers of the concerned bank. This restriction is,
however, not applicable to the consumer credit.
Reserve Bank of India has also instructed that PLR will be made
uniformly applicable at all branches of a bank.
Banks have been advised to take into consideration the following factors
while determining their benchmark PLR:
(a) actual cost of funds
(b) operating expenses and
(c) a
minimum margin to cover regulatory requirement of provisioning/capital charge
and profit margin.
The RBI in its mid‑term credit policy review for 2003‑04 has
clarified that since lending rates for working capital and term loans can be
determined with reference to the benchmark PLR by taking into account term
premia and or risk premia a need for multiple PLR may not be compelling.
Before 1.1.2004, Commercial Banks will have to implement new benchmark
PLR as per guidelines issued by the Indian Banks Association.1
(v) Tenor Linked
PLRs
Banks are free to have different PLRs for different maturities. Ibis is
subject to the condition that the Banks maintain transparency and uniformity of
treatment. Banks have been advised not to declare stand alone PLR in addition
to tenor linked PLRs. The Banks which have declared tenor‑linked PLRs
must indicate the specific tenor for which the declared PLR is applicable.
(vi) Fixed rate
of interest for loans
Banks are free to prescribe fixed or floating rates of interest on all
categories of loans, subject to conformity to Asset Liability Management (ALM)
guidelines. Banks have to ensure that the applicable PLR stipulations are
complied with. Banks should make clear, at the time of sanction of loan, the
nature of alignment with PLR i.e. whether it is at the time of sanction or
disbursement of the loan. Banks should make the stipulation of 'not exceeding
PLR (for relevant maturity) applicable for small loans up to Rs. 2 lakhs.
vii) Freedom to
Fix Lending Rates without reference to PLR
Banks are free to determine their lending rates without reference to
their own PLR in the following cases
(a) To its staff members.
(b) To any other banking
institution including a co‑operative bank.
(c) Loans which are covered
by refinance schemes of term lending institutions.
(d) Loans to intermediary
agencies including housing finance intermediary agencies.
(e) Bill discounting by
Banks.
(f) Advances
or overdraft against domestic or NRE or FCNR (B) deposits with the Bank. The
condition is that the deposit shall be in the name of the borrower or in the
name of the borrower jointly with another person.
(viii) Interest
to be charged at monthly rests
Banks were advised to follow the under noted system of charging monthly
interest on loans and advances w.e.f. 1.4.2002.
Banks had option to compound interest at monthly rests effective either
from April 1,2002, or July 1, 2002 or April 1, 2003.
With effect from quarter beginning July 1, 2002, banks should ensure
that the effective rate does not go up merely on account of the switchover to
the system of charging /compounding interest at monthly rests and increase the
burden on the borrowers.
Application of interest on monthly rests shall be restricted to all
running accounts, e.g. Cash Credit, Overdraft, Export Packing Credit Accounts,
etc. At the time of changing over to monthly rests, banks may obtain consent
letter/supplemental agreement from the borrowers for the purpose of
documentation.
Interest at monthly rests shall be applied in case of all new and
existing term loans and other loans of longer/fixed tenor.
In the case of existing loans of longer /fixed tenor, banks shall move
over to application of interest at monthly rests at the time of review of terms
and conditions or renewal of such loan accounts or after obtaining consent from
the borrower.
Since instructions regarding switchover to the system of compounding
interest at monthly rests, were
effective from July 1, 2002, in case a bank had followed different system from
one explained therein in the quarter ended June 30, 2002, it was not required
to make adjustment for that quarter.
Instructions on charging interest at monthly rests shall not be
applicable to agricultural advances and banks shall continue to follow the
existing practice of charging/compounding of interest on agricultural advances
linked to crop seasons.
As regards other agricultural advances in respect of short duration crop
and allied agricultural activities such as dairy, fishery, piggery, poultry,
bee‑keeping, etc. banks, may take into consideration due dates fixed on
the, basis of fluidity with borrowers and harvesting/ marketing season while
charging interest and compounding same if the loan/ instalment becomes overdue.
(ix) Zero percent
interest finance schemes for consumer durables.
Banks have been advised to refrain from offering low/zero percent
interest rates on consumer durable advances to borrowers through adjustment of
discount provided by manufacturers and dealers of consumer goods.
(x) Loans under
consortium arrangement
It has been clarified that even under a consortium arrangement each bank
should charge rate of interest on the portion of the credit limits extended by
it to the borrower subject to its PLR. This rate need not be a uniform rate of
interest.
(xi) Interest rates
on advances
Interest rates structure for advances of commercial banks at present is
as under1 :
Size of limit |
All advances including term loan Rate of interest
(per cent per annum) |
|
1. (a) Up to and inclusive of Rs. 2
lakhs (b) Over Rs. 2 lakhs 2.
(i) Loans for purchase of
consumer durables (ii) Loans to individuals against shares and debentures/bonds (iii) Other non‑priority sector personal loans 3 Lending rate for commodities coming within the preview of Selective Credit Control (SCC) Loans / advances / Cash / Credit / Overdraft against commodities subject to SCC. 4.
Export Credit (1) Pre‑shipment Credit (a) (i) Upto to 180 days (ii) Beyond 180 days and up to 270 days (b) Against incentives receivable from Government covered by ECG Guarante (up to 90 days) (2) Post‑shipment Credit (a) On demand bills for
transit period (as specified by FEDAI) (b) Usance Bills (for total period comprising usance period of export bills, transit period as specified by FEDAI and grace period wherever applicable) (i)
Up to 90 days (ii)
Beyonds 90 days and up to 6 months from date of
shipment |
Not exceeding Prime Lending Rate (PLR) Free2 Free3 Free3 Free3 Free3 Effective from May 1, 2003 to April 30 20045 Not exceeding PLR minus 2.5 percentage points Free 4 Not exceeding PLR minus 2.5 percentage points Not exceeding PLR minus 2.5 percentage points Not exceeding PLR minus 2.5 percentage points Free 4 |
|
(c) Against incentives receivable from Government covered by ECGC Guarantee (up to 90 days) (d) Against undrawn balances (up to 90 days) (e) Against retention money (for supplies portion only)payable within one year from
the date of shipment (up to 90
days) (3) Deferred Credit Deferred
credit for the period beyond 180
days (4) Export Credit not otherwise specified
(ECNOS) (a)
Pre‑shipment credit (b)
Post‑shipment credit 5. Differential
Rate of Interest (DRI) Advance 6 (a) Advances /over drafts against domestic/ NIZE/FCIMR(B) deposits with the bank, provided that the deposit/s stands/stand either in the name(s) of the borrower himself/borrowers themselves, or in the names of the borrower jointly with another person (b) Finance granted to intermediary agencies
(excluding those of housing) for on lending to
ultimate beneficiaries and agencies providing
input support (c) Finance granted to housing finance intermediary
agencies for on lending to ultimate beneficiaries 7 Loans covered by
participation in refinancing schemes of term lending institutions 8. Discounting
of Bills |
Not exceeding PLR minus 2.5 percentage points Not exceeding PLR minus 2.5 percentage points Not exceeding PLR minus 2.5 percentage points Free1 Free1 Free1 4.0 Free to charge interest rates without reference to PLR Free to charge interest rates without reference to PLR Free to charge interest rates without reference to PLR Free to charge interest rates as per stipulations of the refinancing
agencies without reference to PLR Free to charge interest rates without reference to PLR |
Surcharge on Import Loans Withdrawn
Interest rate surcharge on import loans has been withdrawn w.e.f.
6.1.2001.
Fixation of Actual Rates of Interest
The banks have been given freedom to determine their own interest rate
for credit limits upto Rs. 2,00,000/‑ and this rate; may be fixed by the
bank which will be uniform for all the borrowers falling in this category and
will further be subject to the maximum of bank's prime lending rate.
The requirement of PLR being the floor rate for loans above Rs. 2 lakh
has now been relaxed. Commercial Banks can now offer loans to certain
categories of borrower (like exporters or other creditworthy borrowers) at below
PLR rate. Most of the banks have evolved a credit rating system to objectively
decide the loading of interest rate. There is however, no uniformity in this
regard but major factors which are generally taken into consideration in
determining the net rate of interest are as follows :
(1) Purpose of loan/Nature
of project/Location.
(2) Promoters/Group.
(3) Credit facilities
granted to other group concerns/companies and conduct of their accounts.
(4) Core
promoters contribution.
(5) Debt‑Equity ratio.
(6) DSCR
(7) Compliance with the
terms of conditions of earlier sanction including documentation
(8) Conduct & operation
of account
(9) Timely submission of
statements under QIS or any other system which is in vogue
(10) Timely submission of
Stock statements
(11) Timely submission of
renewal proposal/timely review and renewal of limits
(12) Estimates given at the
time of proposal/assessment of working capital limits vis‑a‑vis actual performance
(13) Current ratio
(14) Total indebtness
ratio/leverage ratio
(15) Availability of other
ancillary/non fund based business
The above list is not exhaustive and banks may give different weightage
to any of the above factors/other factors to arrive at credit rating of the
borrowers. It is, therefore, advisable that exact details of the system should
be obtained from the concerned bank and efforts be made to improve the credit
rating which will lead to cut in the interest rate chargeable by the bank.
It may be stated here that banks have to declare maximum spread over
their 'Prime Lending Rate' to be fixed by their 'Board of Directors' and that
would be the Maximum Lending Rate of the concerned bank.
Banks have freedom to fix different 'Prime Lending Rate' and spread for
'demand loan' and 'cash credit' components of working capital and some banks
have already put this system in place. The rate available on 'demand loan'
component, is generally lower than on 'cash credit' component.
Withdrawal of Interest tax
No interest tax is leviable in respect of any chargeable interest
accruing or arising after 31.3.2000. Prior to this interest tax @ 2% on the
gross amount of income by way of interest (including commitment charges and
discount on promissory notes and bills of exchange) earned by the bank was
payable to the Government of India but the incidence of interest tax was passed
on by the banks to the borrowers.
However, no interest tax was payable on advances granted to credit
institutions/financial companies and Export Credit advances (excluding advances
to sub‑suppliers of raw material and components to export order holder).
Freedom to Banks in charging Penal Rate of Interest
All credit facilities by the banks are disbursed on specified terms and
conditions and the borrowers have to carry operations in the Accounts so as to
conform to these conditions. In case of irregularities such as default in
repayment of loans, over drawings in cash credit accounts etc., the banks may
charge penal rate of interest, at the rates to be decided by them. It is
charged by enhancing the normal rate of interest as per the sanction, by a few
percentage points.
Earlier, guidelines issued by Reserve Bank of India advised banks about
the overall penal/additional interest to be charged by them. Such penal rate
was not to exceed 2 per cent over and above the rate of interest applicable/
normally charged to the respective borrowers. Certain categories of advances
like priority sector advances upto Rs. 25,000 were totally exempt while loans
above Rs. 25,000 and upto Rs. 1,00,000 in this category attracted 1% as penal
rate of interest. However, vide Circular BP. BC. 31121.04.048100‑01 dt.
10th October, 2000, RBI has left the decision of deciding penal rate to the
respective banks so as to give them further operational autonomy. The banks are
permitted to formulate transparent policy for charging penal interest rates
with the approval of their Boards. However, in case of loans to borrowers under
priority sector no penal interest should be charged for loans up to Rs. 25,000.
However, the policy should be governed by well‑accepted principles of
transparency, fairness, incentive to service the debt and due regard to genuine
difficulties of customers.
The list of irregularities in different types of facilities that may attract
levying of penal rate of interest is given below
Term Loan A/cs
(i) Where loans/instalments and interest etc. are not paid on due date.
(ii) Where covenants contingent to sanctioning of loans are not
observed. These covenants may relate to diversion of funds, diversification of activities, taking up of new project, other
borrowing arrangements etc. All these covenants are specified in the term loan
agreement.
Deferred Payment Guarantees/Co‑acceptance
Facility
Where pronote/bill/instalment etc. due under the deferred payment
guarantee is not paid on due date resulting in devolvement on banks to meet the
liability.
Cash Credit A/cs
(i) Excess drawings in relation to sanctioned limit or available drawing
power.
(ii) Non‑submission of stock statements
(iii) Non‑submission of statements under Quarterly Information
System. Even the delay in submission of these statements attracts the provision
of penal interest.
Bills Purchase/Discount Facility
Non‑payment/non‑acceptance of demand/usance bills of
exchange on presentation/due date.
The above list is not necessarily exhaustive and a reference to various
covenants, hypothecation/other agreements executed by the borrowers will be
necessary to avoid incidence of penal rate of interest.
Commitment
charge on unutilised portion of credit limits
Banks may recover a commitment charge of one per cent per annum on the
unutilised portion of the working capital limits sanctioned to the borrower.
This provision is applicable to borrowers enjoying working capital limits of
Rs. 1 crore and above from the entire banking system. The important features of
levy of the commitment charge are enumerated below:
(i) The
charge will be levied only in respect of the 'unutilised portion' of the
working capital limits involving outlay of funds subject to a tolerance level
of 15 per cent of the quarterly operative limit.
(ii) The
operative limit shall be determined in the usual manner on the basis of Form 1
under Quarterly Information System submitted by the borrower. If operative
limit is not fixed due to non‑submission of Form I, the commitment charge
will be levied on the basis of sanctioned limit. Full information on fixation
of operative limit and Quarterly Information System (QIS) is given in a
separate chapter.
In case of sugar, tea etc. manufacturing units, the operative limit is
fixed on the basis of monthly cash budget and commitment charge will be levied
accordingly.
(iii) The
'unutilised portion' of operative/sanctioned limit shall be ascertained by
calculating the average utilisation during the quarter after excluding there
from utilisation in excess of the operative/sanctioned limit. The difference
between the average utilisation determined as above and the
operative/sanctioned limit represents the unutilised portion.
(iv) Wherever
'unutilised portion' exceeds the tolerance level of 15 per cent, the commitment
charge is to be levied on the entire unutilised portion of the
operative/sanctioned limit and not only on the portion in excess of the
tolerance level.
(v) In
consortium advances, the operative/sanctioned limit is allocated by the lead
bank. The commitment charge as stated above shall be levied by each member bank
of consortium on the basis of allocation of limit vis‑a‑vis
utilisation thereof. In multiple banking arrangements, the charge is determined
by each bank based on the limits sanctioned by it.
(vi) The
commitment charge is not to be levied in respect of drawings in excess of the
operative limit.
(vii) The
commitment charge is in addition to overall ceiling of 2 per cent of
penal/additional interest as discussed under the head 'Penal Interest' in
preceding paragraphs.
Exemption front levy of commitment charge
The following types of limits have been exempted from levy of commitment
charge :
(i) Working capital limits
sanctioned to sick/weak units.
(ii) Limits
sanctioned for export credit (both preshipment and post‑shipment) as well
as against export incentives viz, duty drawback etc.
(iii) Inland
bill limits, extended by way of bills purchased/discounted or overdraft/cash
credit limit/sub‑ limit against bills for collections.
(iv)
Credit limits granted to commercial banks,
financial institutions and co. operative banks including land development banks
.
It shall, however, be noted that while the limits indicated in
paragraphs (ii) & (iii) above are exempt for the purpose of levy of
commitment charges, these are to be included for the purpose of arriving at the
total fund‑based working capital limits enjoyed by a borrower from the
entire banking system. The cut off point of Rs. 1.00 crore for levy of
commitment charge will, thus, be determined after including such limits.
Reserve Bank of India has already withdrawn its directive under which
charging of commitment fee was mandatory. The banks have freedom to determine
their own policy in this matter and also have powers to waive the commitment
charge in their own discretion.
BANK CHARGES
Earlier, Indian Banks Association (IBA)‑apex body representing all
commercial banks operating in the country‑used to finalise rates of
commission for various services and these rates were uniformly applicable to
all the banks. However, vide Circular No. DBOD. Dir. BC. 86/13.10.00/992000 dt.
7.9.1999, RBI has discontinued the practice of IBA fixing the benchmark service
charges on behalf of member banks. Accordingly, the decision to prescribe
service charges shall be left to the individual banks. However, while fixing
service charges for various types of services like charges for cheque collection
etc., banks should ensure that the charges are reasonable and are not out of
line with the average cost of providing these services. Further, care should
also be taken to ensure that customers with low volume of activities are not
penalised.
The borrowers, before dealing with any particular bank must ensure that
the charges are on lower side in comparison to other banks.
Disclosure
of Information Regarding Defaulters to Banks and Financial Institutions
Reserve Bank of India introduced a scheme of disclosure of information
regarding defaulters to banks and FIs in April 1994. The salient features of
the Scheme are as under:
(i) The
banks and financial institutions are required to submit to the Reserve Bank of
India, by 15th of. April and October every year, the details of the borrowal
accounts which have been classified as "Doubtful" or "Loss"
and also Suit filed accounts with outstanding (both under funded and non‑funded)
aggregating Rs. 1 crore and above.
(ii) The
Reserve Bank of India will circulate to the banks and financial institutions
the information on the defaulters (i.e., advances classified as Doubtful or
Loss or where suits have been filed). The banks and financial institutions may
make use of the information while considering, on merits, the requests for new
or additional credit limits by existing and new constituents.
(iii) Based
on the information submitted by banks and F1s, Reserve Bank of India will be
publishing in a booklet form, the list of suit filed accounts as on 31st March
every year. 1[No half‑yearly updates will be prepared.]
Clarifications
(i) The
banks and financial institutions may make use of the information while
considering on merits the request for new or additional credit limits by the
defaulting borrowing units and also proprietor, partners, directors, etc.,
named in the list either in their own names or in the names of other units with
which they are associated. The banks and financial institutions should make
inquiry, if any, about the defaulters from the reporting banks/financial
institutions and not from the defaulters'/ other directors/chairman directly.
(ii) While
submitting appraisal notes to higher authorities for sanction/renewal/enhancement
of credit facilities to borrowers a mention may be made therein regarding the
appearance or otherwise of the names of the concerned borrowers/directors in
the defaulters' list circulated by the Reserve Bank.
(iii) The
nominee directors or professional directors cannot be equated with the elected
directors for the purpose of the defaulters' list. The banks and financial
institutions should invariably indicate the names of such directors separately
in the defaulters' list furnished to the Reserve Bank. In other words, status
of directors such as professional directors, nominee directors of Central/State
Government, banks/ financial institutions, etc., may be indicated in brackets
in the list.
(iv) The
banks should not deny credit facilities to constituents merely on the ground
that any of their director happens to be the professional director on the board
of a defaulting company. The banks/financial institutions while taking credit
decisions should make appropriate enquiries from the borrowing companies to
ensure that the credit facilities are not denied to them only for the reasons
that any of their directors, being professional happen to be on the Boards of
certain defaulting companies also but who are not in any way connected with the
day‑to‑day management of the
affairs of the defaulting companies.
(v) The
banks/financial institutions should check the list of defaulters to ensure that
the names of Chairmen/Managing Directors/Executive Directors/Directors, etc., indicated therein are current ones,
i.e., they were holding such position as on date of submission of the list to
the Reserve Bank. The same instructions should be followed by bank/ financial
institution while reporting list of defaulters on Floppy diskettes as well
while submitting the list of suit filed accounts. 1[In the case of Govt. undertaking, instead of giving names of Chairmen,
Directors, etc., the legend such as "Govt. of... Undertaking" only
need be mentioned.
2[(vi) Before submitting the
list of defaulters to RBI, the banks/financial institutions should seek
clarification from the concerned directors, etc. Further, banks/financial
institutions should advise such directors, etc., that as per information
available on its records, their names appear as a director, etc., of the
concerned company which has been identified as defaulter for reporting to RBI
and in case there is any change in their position, they may inform the bank/
financial institution immediately.' They should also be cautioned by the
bank/financial institution that in case they do not reply to the bank/financial
institution within 10 days from the date of the letter, their names would be
included as directors, etc., of the defaulting company/organisation for reporting
to RBI.
After the finalisation of the names, the lists should be submitted to RBI within the stipulated period together with a certificate signed by a sufficiently senior official of the bank/financial institution stating that the list of defaulters has been correctly compiled after duly verifying the details thereof and RBI's instructions have been strictly followed.]
1[(vii) In addition to reporting the names of current directors, it is necessary to furnish information about directors excluding nominee directors of the Government, banks, F1s) who were associated with the company at the time the account was classified as defaulter, to put the other banks and financial institutions on guard.
(viii) Banks and FIs may also ensure the facts about current directors, wherever possible, by checking with Registrar of Companies.
(ix) Professional
directors such as Chartered Accountants unless they have any interest or stake
in the company or are otherwise involved in day to‑day management of the
company cannot be equated with the promoter directors or directors who are
promoters' family members/ relatives or those who are involved with the day‑to‑day
management of the company. Therefore, against the name of such professional
directors, banks should clearly mention 'professional director'.]
[(x) The above Scheme of disclosure of information was put in place to
alert banks and put them on guard against the defaulters to other lending
institutions. It was reported that a company was granted fund based facility by
a bank, despite the fact that another bank had already initiated winding up
petition against it and a petition was also filed with the Company Law Board.
In order to ensure that such cases do not recur, it has since been decided that
banks/FIs may henceforth ensure that the application for credit facility should
contain a column to enquire about all litigations the borrowers or their
partners/directors, etc., are facing which have been initiated by another
financier including banks. This would facilitate to cross check the information
furnished by the borrower.]
3[Banks and Financial Institutions must ensure to include a clause in the
loan agreement as well as in the renewal documents the consent of the borrowers
to disclose their names in the event of the borrowers committing default in
payment of their dues.
The concerned clause is to be included only in agreements to be executed
after 21‑10‑1999 for fresh sanctions/enhancements/renewals.
Decision to publicise the names of borrowers who have defaulted in the
repayment of loans after inclusion of the above clause should be taken with the
approval of the Board and after giving notice of 30 days to the borrower
company of Bank's intention to make public the information, unless the borrower
rectifies the default within such period. The names of borrowers
with out standings aggregating Rs. 1 crore and above, whose accounts
have become non‑performing and from whom documents containing their
consent for disclosure of names in the event of default in payment of dues have
been obtained, may henceforward be furnished to RBI on separate floppy
diskettes as on 30th June and 31 st December within one month from the date to
which it relates. The first statement to be submitted to RBI may relate to the
period ending 30th June, 2001.]
1[Banks and financial institutions which have not yet put the system of
obtaining the consent of the borrowers, are advised to complete the process by
September 2001, and confirm compliance by RBI by 31 st October, 2001.]
(xi) Information relating to
the guarantors to the accounts also should be reported.
(xii) Information
on written‑off accounts should be reported if the accounts are still
outstanding in the books of the banks and efforts for their recovery are
continued.
(xiii)
For calculating the cut‑off point of Rs.
1 crore, the unapplied interest, if any, should also be included. In the case
of suit‑filed accounts, the cut off point will relate to the amount for
which the suits have been filed.
Reporting System
(i) Information
as on 31 st March and 30th September every year should be supplied to the
Reserve Bank of India in a consolidated form by Central/Head Offices of
commercial banks and FIs, principal offices of foreign banks.
(ii) Information
should be furnished on floppy diskettes to the Chief General Manager, Reserve
Bank of India, Department of Banking Operations and Development, Central
Office, Centre 1, World Trade Centre, Cuffe Parade, Mumbai ‑ 400005.
(iii)
The information about suit‑filed accounts
should also be furnished separately in a statement in duplicate as on 31 st
March every year. The names of the borrowers
should be arranged alphabetically in the statement for the sake of
uniformity in reporting.
2[Collection and
dissemination of information on cases of wilful default of Rs. 25 lakh and
above
(i) The
scheme has been introduced with effect from 1stApril, 1999. Banks and financial
institutions should report to RBI all cases of wilful defaults which occurred
or are detected after 31st March, 1999 on quarterly basis.
(ii) The
scheme covers all non‑performing borrowal accounts with outstandings
(funded facilities and such non‑funded facilities which are converted
into funded facilities) aggregating Rs. 25 lakhs and above.
Identification of the wilful default
(i) Wilful default will
broadly cover the following :
(a) Deliberate
non‑payment of the dues despite adequate cash flow and good net worth.
(b) Siphoning‑off of
funds to the detriment of the defaulting unit.
(c) Assets
financed have either not been purchased or have been sold and proceeds have
been misutilised.
(d) Misrepresentation/falsification
of records.
(e)
Disposal/removal of securities without bank's
knowledge.
(f)
Fraudulent transactions by the borrower.
(ii) The
identification of the wilful default should be made keeping in view the track
record of the borrowers and should not be decided on the basis of isolated
transactions/incidents. The default to be categorised as wilful must be
intentional, deliberate and calculated.
(iii) The
banks/FIs should form a Committee consisting of three GMs/ DGMs or equivalent
to GMs/DGMs for identifying the cases of wilful default.
Fresh limit/renewal/enhancement to
wilful defaulters
In the case of wilful defaulters, only the Board of Directors, should
consider any fresh limit/renewal/enhancement on merits of each case.
Reporting
(i) The
first return on wilful default should contain cases for the quarter 1st April
to 30th June, 1999. Returns for the subsequent quarters should contain fresh
cases as well as those reported in the earlier returns excluding those cases
which have been regularised subsequently. Banks should submit the information
on wilful default on floppy diskettes, as per the proforma within a month from
the quarter to which it relates.
(ii) If there are no cases
to report, a nil statement should be submitted.
(iii) Cases
of wilful defaults at overseas branches should. also be reported if such
disclosure is permitted under the laws of the host country.
(iv) The
names of directors who are stakeholders only should be reported and the names
of professional directors and nominee directors of FIs, Central/State
Governments need not be reported.
(v) In
case of consortium/multiple lending, banks and FIs should report wilful
defaults to other participating/financing banks also.]
1 [Disclosure of information about Defaulters of Rs. 1 crore
and above List of suit‑filed accounts Quarterly
up‑dation
Vide Circular DBOD No. BC.CIS(D) 135/20.16.002/95‑96, dated 24th
November, 1995 banks and FIs are required to report details of borrowal
accounts of Rs. 1 crore and above against which suits have been filed for
recovery of dues as on 31 st March every year.
It has since been decided to prepare a quarterly up‑date as on
30th June, 30th September and 31st December every year indicating the
particulars of (i) accounts reported in the list as on 31 st March but closed
subsequently and (ii) accounts where suit has been filed after 31 st March.
Accordingly, banks are requested to submit the following statements
effective from the quarter ended 30th June, 1999.
(i) List of suit‑filed accounts of Rs. 1 crore and above which
were reported as on 31 st March but closed subsequently (as per proforma)
(ii) List of accounts of Rs. 1 crore and above against which suits have
been filed after 31 st March (as per proforma).
Banks and FIs will continue to submit the annual list as on 31 st March
every year as hitherto. The lists have to be submitted within a period of 15
days from the end of the quarter to which they relate.]
1[Guidelines on
Fairs Practices Code for Lenders
On the basis of the recommendations of the Working Group on Lenders'
Liability Laws Constituted by the Government of India, RBI have examined, in consultation
with Government, select banks and financial institutions, the feasibility of
introducing the Fair Practices Code for Lenders. The guidelines have since been
finalised and banks/all India Financial Institutions are advised to adopt the
following broad guidelines and frame the Fair Practices Code duly approved by
their Board of Directors.
(i) Applications for loans and their processing
(a) Loan
application forms in respect of priority sector advances up to Rs. 2.00 lakhs
should be comprehensive. It should include information about the fees/charges,
if any, payable for processing, the amount of such fees refundable in the case
of non‑acceptance of application, pre‑payment options and any other
matter which affects the interest of the borrower, so that a meaningful
comparison with that of other banks can be made and informed decision can be
taken by the borrower.
(b) Banks
and Financial institutions should devise a system of giving acknowledgement for
receipt of all loan applications. Time frame within which loan applications up
to Rs. 2 lakhs will be disposed of should also be indicated in acknowledgement
of such applications.
(c) Banks/financial
institutions should verify the loan applications within reasonable period of
time. If additional details/documents are required, they should intimate the
borrowers immediately.
(d) In the
case of small borrowers seeking loans up to Rs. 2 lakhs the lenders should
convey in writing, the main reason/reasons which, in the opinion of the bank
after due consideration, have led to rejection of the loan applications within
stipulated time.
(ii) Loan appraisal and terms/conditions
(a) Lenders
should ensure that there is proper assessment of credit application by
borrowers. They should not use margin and security stipulation as a substitute
for due diligence on credit‑ worthiness of the borrower.
(b) The
lender should convey to the borrower the credit limit along with the terms and
conditions thereof and keep the borrower's acceptance of these terms and
conditions given with his full knowledge on record.
(c) Terms
and conditions and other caveats governing credit facilities given by
banks/financial institutions arrived at after negotiable by lending
institution and the borrower should be reduced in writing and duly certified by
the authorised official. A copy of the loan agreement along with a copy each of
all enclosures quoted in the loan agreement should be furnished to the
borrower.
(d) As far
as possible, the loan agreement should clearly stipulate credit facilities that
are solely at the discretion of lenders. These may include approval or
disallowance of facilities, such as, drawings beyond the sanctioned limits,
honouring cheques issued for the purpose other than specifically agreed to in
the credit sanction, and disallowing, drawing on a borrowal account on its
classification as a non‑performing asset or on account of non compliance
with the terms of sanction. It may also be specifically stated that the lender
does not have an obligation to meet further requirements of the borrowers on
account of growth in business, etc, without proper review of credit limits.
(e) In the
case of lending under consortium arrangement, the participating lenders should
evolve procedures to complete appraisal of proposals in the time bound manner
to the extent feasible, and communicate their decisions on financing or
otherwise within a reasonable time.
(iii)
Disbursement
of loans including changes in terms and conditions –
Lenders should ensure timely disbursement of loans sanctioned in conformity
with the terms and conditions governing such sanction. Lenders should give
notice of any change in the terms and conditions including interest rates,
service charges, etc. Lenders should also ensure that changes in interest rates
and charges are effected only prospectively.
(iv) Post
disbursement supervision
(a) Post
disbursement supervision by lenders, particularly in respect of loans upto Rs.
2 lakhs, should be constructive with a view to taking care of any "lender‑related"
genuine difficulty that the borrower may face.
(b) Before
taking a decision to recall/accelerate payment or performance under the
agreement or seeking additional securities, lenders should give notice to
borrowers, as specified in the loan agreement or a reasonable period, if no such
condition exits in the loan agreement.
(c) Lender
should release all securities on receiving payment of loan or realisation of
loan subject to any legitimate right or lien for any other claim lenders may
have against borrowers. If such right of set off is to be exercised, borrowers
shall be given notice about the same with full particulars about the remaining
claims and the documents under which lenders are entitled to retain the
securities till the relevant claim is settled/paid.
(v) General
(a) Lenders
should restrain from interference in the affairs of the borrowers except for
what is provided in the terms and conditions of the loan sanction documents
(unless new information, not earlier disclosed by the borrower, has come to the
notice of the lender).
(b) Lenders
must not discriminate on grounds of sex, caste and religion in the matter of
lending. However, this does not preclude lenders from participating in credit‑linked
schemes framed for weaker sections of the society.
(c) In the
matter of recovery of loans, the lenders should not resort to undue harassment,
viz., persistently bothering the borrowers at odd hours, use of muscle power
for recovery of loans, etc.
(d) In
case of receipt of request for transfer of borrowal account, either from the
borrower or from a bank/financial institution, which proposes to take‑over
the account, the consent or otherwise, i.e., objection of the lender, if any,
should be conveyed within 21 days from the date of receipt of request.
2. Fair‑Practices
Code based on the guidelines outlined above should be put in place in respect
of all lending prospectively, but not later than 1 August, 2003. Banks and
Financial institutions will have the freedom of drafting the Fair Practices
Code, enhancing the scope of the guidelines but in no way sacrificing the
spirit underlying the above guidelines. For this purpose, the Boards of banks
and financial institutions should lay down a clear policy.
3. The
Board of Directors should also lay down the appropriate grievance redressal mechanism
within the organization to resolve disputes arising in this regard. Such a
mechanism should ensure that all disputes arising out of the decisions of
lending institutions' functionaries are heard and disposed of at least at the
next higher level. The Board of Directors should also provide for periodical
review of the compliance of the Fair Practices Code and the functioning of the
grievances redressal mechanism at various levels of controlling offices. A
consolidated report of such reviews may be submitted to the Board at regular
intervals, as may be prescribed by it.
4. The
adoption of the Code, printing of necessary loan application forms and
circulation thereof among the branches and controlling offices should also be
completed latest by end of June 2003, The Fair Practices Code, which may be
adopted by banks and financial institutions, should also be put on their
website and given wide publicity. A copy may also be forwarded to the Reserve
Bank of India.]
FOREIGN EXCHANGE DEALERS ASSOCIATION OF INDIA (FEDAI)
FEDAI is an association of banks who are the authorised dealers in
foreign exchange. The foreign exchange business rules framed by FEDA1 are
mandatory in character and are, uniformly applicable to all banks. However, in the past, a number of rules have been deleted, thus giving freedom
to member banks to determine their own charges for various types of forex
transactions.
FACILITIES AVAILABLE FROM BANKS
Banks provide a large variety of credit facilities to meet all types of
needs of their customers. Development banks help to construct a project but it
is the commercial banks who run the project. Various types of facilities that
are generally available from the banks are given in the chart on next page.
Salient features of these facilities are discussed in brief hereunder:
Fund Based Facilities
Term Loans : Term loan is an instalment credit repayable over a period of time in
monthly/quarterly/half‑yearly or yearly instalments. Term loan is
generally granted for creation of fixed assets required for long‑term use
by the unit. Commercial banks grant term loans for small projects falling under
priority sector, small‑scale sector and big units. Banks have now been
permitted to sanction term loan for big projects as well without the
association of financial institutions. Even infrastructure projects like power,
telecommunications, roads, ports etc., which entail huge financing can be
considered by banks for financing. The procedural aspects including appraisal
techniques of term loan proposals by banks are almost the same as of other term
lending institutions. Term loans are further classified in three categories
depending upon the period of repayment as under:
·
Short‑term loan repayable in less than 3
years.
·
Medium‑term loans repayable in a period
ranging from 3 years to 7 years.
·
Long‑term loans repayable in a period
over 7 years.
Cash Credit
Facility : A major part of working
capital requirement of any industrial project would consist of maintenance of
inventory of raw material, semi‑finished and finished goods, stores and
spares etc. Even in trading concerns, the requirement of funds will be to
maintain adequate stocks in trade. Finance against such inventories by banks is
generally granted in the shape of cash credit facility where drawings will be
permitted against stocks of goods. It is a running account facility where
deposits and withdrawals are permitted as frequently as required. Overdrawals
are, however, restricted to an agreed limit and are further subject to
availability of drawing power in the account. This facility is very convenient
inasmuch as the drawings in the account by the borrower may relate to his
actual requirement & any particular point of time. This helps to reduce
outlay on interest as no idle funds may be kept by the borrower at any time.
The drawings are secured against the stocks of goods and a periodical statement
(generally every month) of stock is required to be submitted. The bank will
determine the drawing power in the account after deducting the agreed margin
from the value of goods as per stock statement. The customer would then be
allowed to draw in his cash credit account upto the drawing power. A part of
this facility is now required to be availed as working capital demand loan.
Full details in this regard are given in a separate Chapter.
BANK FACILITIES
_______________________________________________________
Fund based Non
fund based
________________
_______________________________________
Term loans Working capital Guarantees Letters of Credit Deferred payment
finance (Performance/Financial) guarantees and
co‑acceptances
____________________________________________________________________________
Cash credit Overdrafts Bill finance Export finance Working
Capital
Demand Loan
________________ _______________ _________________ _____________________
Hypothe‑ Pledge Clean Secured Clean Docu‑ Preship‑ Post
cation (Purchase mentary ment shipment
of cheques/
drafts/
hundies
etc.)
_________________________________________
Bill Bill Overdrafts
purchase discount against bills sent
for
collection
The cash credit facility is of two types (depending upon the type of
charge on goods taken as security by the bank) as under:
Cash Credit
(Pledge): When the possession of the goods is with the bank
and drawings in the account are linked with actual movement of goods from/to
the possession of the bank. The physical control of goods in such facilities is
exercised by the bank and the borrower may face some operational difficulties
in such accounts. The charge of the bank in such cases is on specific goods
pledged to the bank.
Cash Credit
(Hypothecation): When the possession of the goods remains with
the borrower and a floating charge over the stocks is created in favour of the
bank. The borrower has complete control over the goods and the drawings in the
account are, permitted on the basis of stock statement submitted by the
borrower. The charge of bank in such cases is not on any specific goods but
extends to all the stocks available at a particular point of time. The
operations in such accounts are very convenient and offer a good deal of
freedom to the borrower to manage his inventory.
It will be interesting to note that as an extension of pledge facility,
banks may some time grant 'Trust a/c or 'Trust Receipt' facility under which
the pledged goods may be released to the borrower for carrying out a specific
activity. In such cases, the borrowers hold such goods or proceeds thereof 'in
trust' on behalf of the bank. Such type of facility provides extra flexibility
to the borrower in dealing with goods as the possession/physical control can be
temporarily exercised by him for a specific purpose. This facility is generally
sanctioned as a 'sub‑limit' of pledge facility.
Overdraft
facility: Overdrawing permitted by the bank in current account is termed as an
'overdraft' facility which for all operational purposes is equivalent to a cash
credit facility except for the security available to the bank. The deposits and
withdrawals in the account are permitted as per the convenience and requirement
of the borrower.
Overdrafts may be permitted without any security as 'clean overdrafts'
for temporary periods to enable the borrower to tide over some emergent
financial difficulty. On formal basis, overdrafts are also required to be
secured by some tangible securities such as fixed deposit receipts of banks,
national savings certificates and such other securities etc. Overdraft may
sometimes be permitted against book debts as well.
Bill finance : The physical inventory, as discussed, is financed by extending cash credit
facility whereas the sales are either financed by granting facilities against
bills or against book debts. The banks, however, discourage advances against
book debts and prefer to grant bills finance which provides an excellent medium
for settlement of a trade transaction.
Export finance : It is the endeavour of
Government of India to give all possible encouragement for promoting exports
from the country. Apart from other benefits offered by Government of India,
banks grant export credit on very liberal terms to meet all the financial
requirements of exporters. The bank credit for exports can broadly be divided
in two groups as under.
1. Pre‑shipment advances/packing credit advances. Financial assistance sanctioned to exporters to enable them to
msanufacture/procure goods meant for exports and arrange for their eventual
shipment to foreign countries is termed as 'Pre‑shipment/packing credit
advanced In fact all facilities granted to an exporter upto the shipment stage
will be grouped under this category. Banks now provide packing credit in
foreign currency as well.
2. Post‑shipment Advance. After completion of shipment of goods for export, the exporter in almost
all cases is required to draw a bill on the foreign buyer‑for submission
to his banker for collection. The bill purchase/discount facility granted to
the exporter is grouped as 'post‑shipment advance'. The exporter has to
raise his claim of duty drawbacks etc. on various Government agencies after
completion of export and may approach his banker to make advances against such
claims. Such an advance is another example of post shipment advance.
Detailed discussion on various types of advances granted to exporters is
given in a separate chapter.
Non‑fund
based facilities
Credit facilities which do not involve actual deployment of funds by
banks but help the obligations to obtain certain facilities from third parties
are termed as non‑fund based facilities. These facilities include
issuance of letters of credit which has become an ideal method of settlement of
payment of a trade transaction and helps the obligants to make purchases from
anywhere in the world. Other important facility included in the above category
is 'guarantees' issued by banks. Reserve Bank of India has issued various
guidelines to banks in this regard.
Risk to the bank for granting such facilities is almost the same as for
granting loans and advances and banks employ the same appraisal techniques
while granting these facilities. In fact, non‑fund based facilities are
generally not granted in isolation and are linked with other facilities granted
to a customer. Procedural details in respect of these facilities are discussed
in separate chapters.