UNION BANK OF INDIA GOLD LOANS TO DOMESTIC JEWELLERY MANUFACTURERS Agenda Overview of Union Bank of India Products and services Bullion business Regulations on Metal loan Internal Guidelines Vision Statement “ To become the Bank of first choice in our chosen areas by building beneficial and lasting relationships with customers through a process of continuous improvement.” Overview of Union Bank of India • One of India’s leading commercial banks. 5th in Public Sector banks • Incorporated on November 11, 1919 , Nationalized on July 19, 1969 Promoter • 55.43% share holding by Government of India ,19.72 by FII & & History NRI, 8.95 by Banks & Mutual Funds as on 31.03.2007 • Head Office & Corporate Office : Mumbai • Initial Public Offer in 2002 and Follow-on Public Offer in 2006 • 2,202 branches in 25 states and 3 union territories • 1021 branches/Offices net worked , 902 ATM’s and 1200 alliance ATM “ Cash Tree”and with tie up with other banks Presence • Workforce of 27,536 people • 18 mn customers Overview of Union Bank of India • Cash Management Services • • Depository Services of Shares, Bonds in Electronic form • Distribution of Mutual Funds and Life and Non Life Business Insurance Products Initiatives • Government Tax collection and online payment • Utility Bill Payment Services • Online Equity Trading • Payment gateways to number of utility/Government Tax collection/Ticketing • Credit cards and Debit cards (Rs in Crore) Overview of Union Bank of India As on 31.03.2006 31.03.07 YOY GROWTH Key • Total Assets : 89,126 1,02,678 15.20 % Statistics • Total Deposits : 74,094 85,180 14.96 % • Total Advances : 54,644 63,658 16.50% As on March 06 March 07 As on March 06 March 07 • NIM: 3.03% 3.05% • Cost of Deposit: 4.75% 5.23% Key Ratios • RoNW: 16.55% 17.88% • EPS: Rs14.58 Rs16.74 • BV/Share: Rs 80.77 Rs93.60 • Net NPA 1.56% 0.96% As on March 06 March 07 YOY GROWTH Key Financials • Total Income: 6,358 8,069 26.91% • Net Profit: 675 845 25.19% Products and services • Export and Import finance in Foreign Currency as well as in Rupees • Term loans for the new projects, expansion and modernisations in Foreign Currency as well as in Rupees • Derivative Products for Hedging the exposures of currency and Interest rate risks • Financing and Services related to Overseas Investments in JV and WOS • Facilitation for buyers credit and External commercial borrowings Products and services • Opening ,advising and confirmation of Letters of credit • Standby LC for international trade • Advisory service on managing the exchange and interest risks • Approval for commodity hedging • Sale and loan of Bullion(Gold) for Exporters and Domestic Jewelers Products and services Internet banking time basis View of all operative accounts on real • Packing Credit/Operative accounts • L/C opened • Bill status • Setting up alerts for due dates of bills up to any period at the customers choice – Opening of Import L/C online – Online transfer of funds to any operative account in 1021 branches of the bank Products and services Treasury • Offers competitive exchange rate for all major currency and Gold • Active derivative desk for forwards, options and swaps • Handles large value payments of Corporate, PSU and Government • Merchant turnover Rs 72,777 Crore last year and Rs18,358 crore for first 3 months Bullion business • Bank is designated Agency for import of Gold • DGFT approval to import gold in 11 centres • Custom Bonded Warehouses in five branches • Operates in 11 centers and plans to add few more during the year • Bullion Trading Desk in at our Centralised Treasury at Mumbai. • Transactions carried out in Singapore, European and US markets Bullion business • DBOD.No.IBD.BC.3323.67.0012005-06 dated 05- 09-2005 of RBI permits nominated Banks to extend Metal Loans to Domestic Jewellery manufacturers. • Metal Loans Scheme envisages loans in metal(Gold) form to eligible domestic jewellers manufacturers who are not exporters of jewellery Regulations on Metal loan The Gold (Metal) Loans provided by banks will be subject to the following conditions: i. The tenor of the gold loan for the domestic jewellery manufacturers should not exceed 180 days.- ii. Interest charged to the borrowers should be linked to the international gold interest rate. iii. The gold borrowings will be subject to normal reserve requirements. iv. The loan will be subject to capital adequacy and other prudential requirements. v. Banks should ensure end-use of gold loans to jewellery manufacturers and adhere to KYC guidelines. vi. Any mismatch arising out of the gold borrowings and lending should be within the prudential risk limits approved by the nominated banks Board. vii. The banks should carefully assess the overall risks on granting gold loans and lay down a detailed lending policy with the approval of the Board Regulations on Metal loan customers of other scheduled commercial banks, can avail loan by giving stand-by letter of credit or bank guarantee issued by their bankers in favour of the nominated banks subject to authorised banks' own norms for lending and other conditions stipulated by RBI. The stand-by LC / BG shall be extended only on behalf of domestic jewelry manufacturers and shall cover at all times the full value of the quantity of gold borrowed by these entities. The stand-by LC/BG shall be issued by scheduled commercial banks in favour of a nominated bank only and not to any other entity which may otherwise be having permission to import gold Regulations on Metal loan The bank issuing the stand-by LC / BG (only inland letter of credit / bank guarantee) should do so only after carrying out proper credit appraisal. The bank should ensure that adequate margin is available to it at all times consistent with the volatility of the gold prices. The stand-by LC / BG facilities will be denominated in Indian Rupees and not in foreign currency. Stand-by LC / BG issued by the non-nominated banks will be subject to extant capital adequacy and prudential norms. The banks issuing stand-by LC / BG should also carefully assess the overall risks on granting these facilities and lay down a detailed lending policy with the approval of their Board. ADVANTAGES TO JEWELERS Currently the exiting stock of Jewelry and in process are subject to pricing risk The jewelers are now able to obtain Gold with out price risk Gold Loan helps jewelers to price the Gold procured around the time of sale of jewelry and hence no price risk. As the Metal Loan rate is linked to international lease/LIBOR rates , the cost of carry is also lower. Internal Guidelines ELIGIBLITY A. Customers having rating of up to Credit Rating CR 4 under the Bank’s Credit rating system B. Others offering sufficient cash margin / Bank Guarantee subject to KYC compliance The applicants should have a valid business license as Jeweller (Trade or Manufacture) Borrowers should have good track record for a minimum period of 3 years in gold jewellery A. However this stipulation relaxed if the loan is backed by good securities as collateral B. The minimum track record of 3 years won’t be insisted upon where the loan is backed by Bank Guarantees / cash Margin. Internal Guidelines SECURITY A. In case of Customers, Metal (Gold) Loans can be sanctioned separately or as sub-limit carved out of overall Working Capital limits covered by securities as under: 1. Cash margin for part value of the notional cost of gold lent 2. Hypothecation of Gold purchased from bank or jewellery manufactured as primary security 3. Adequate tangible collateral security, especially in respect of those borrowers for whom “minimum track record” stipulation has been reduced or waived. 4. Personal Guarantee of partners / directors as applicable B. Where the Loan is sanctioned as a stand alone facility 1. Cash margin including lien on fixed deposits to cover the notional cost of gold lent OR 2. A Bank guarantee acceptable to us for the notional cost of gold lent Internal Guidelines QUANTUM OF LOAN Bank has set up per party limits for loans against LC/LG exposure apart from limit to the counter party banks Loan to customers will be as per requirement based on the projected sales and other financials The minimum quantity for each drawl of loan shall be 1Kg Loan period- Not to exceed 180 days Internal Guidelines REPAYMENT Interest recovered monthly, in metal Repayment period may be decided depending on the operating cycle. Borrower to indicate due date for payment , maximum period of 180 days. On maturity the borrower will pay the loan in rupee at the prevailing rate on the date of maturity (OR) at the contracted rate in case a forward contract is booked. Prepayment before due date is permissible with certain conditions. Pricing of metal at any time during the loan by Gold forward Exchange rate can be fixed at any time after GOFO Visit us at : www.unionbankofindia.com -Thank you !
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