CitiFinancial

As mentioned earlier, Citicorp Finance offers loans to commercial businesses which are broadly of four types. Below is the brief outline of each loan and its sub-divisions, if any, for a better understanding:

Commercial Vehicles

Loan under this category is given so that corporates and businesses can purchase a vehicle for commercial use. The vehicle purchased can be a new one or a pre-owned one. There are two sub-categories in this loan for new and pre-owned vehicles which are:

• New Commercial Vehicle Financing –this loan is for purchasing a new commercial vehicle and the rate of interest is competitive. The loan caters to the requirements of transport operators and by providing them with the required finance, it enables them to buy any model of the vehicle required to run their business smoothly.
• Used Commercial Vehicle Financing – this loan is utilized in purchasing a second-hand vehicle which should have been manufactured by leading companies. The rate of interest is not very high and the terms of the loan are flexible. The condition underlying the loan is that the old vehicle should not be more than 8 years old and the repayment tenure is 1 year to 4 years.

Construction Equipment

Equipment required for the factory can be purchased by using this loan. This loan also has two variants for new and used equipment. The sub-types are:

• New Construction Equipment Financing – this loan provides financing for purchase of new equipment and machinery. Construction equipment used for infrastructure or building is financed through this loan
• Used Construction Equipment Financing – this type of finance is used for buying used construction equipment which should be more than 8 years old. If the customer has unencumbered equipment, then he can seek finance against it. The repayment tenure is 1 year to 4 years for the amount of loan availed.

Trade Finance

Finance is provided to dealers who deal in commercial vehicles and construction equipment so that they can meet their working capital requirements, fund their inventories and ensure finance to run their business smoothly. The advance provided is a short-term revolving credit and may or may not require the pledging of a security depending on the company’s principles.

Loan against Shares

Shares, stocks, mutual funds, bonds, etc. can be pledged to Citicorp Finance (India) Limited and money can be availed as loan against these securities. This is the type of loan which is granted in this category. A term loan is granted against securities with a fixed rate of interest which is affordable on the pockets of the borrowers. The company has a list of approved securities and if the securities pledged are among the prescribed list, only then will the loan be granted. The repayment tenure within which the loan should be repaid is 1 year and above and the company first analyzes the borrower’s credit-worthiness before they sanction the loan. Not 100% value of the shares pledged is allowed as loan. The company has a margin requirement which may be 35% to 50% of the value of the shares making the loan disbursed equivalent to 65% to 50% of the value of the shares which are pledged with the company for obtaining the loan.

For granting Commercial Vehicle loan and Construction Equipment Loan, the company first grades the borrower before deciding on the rate of interest which would be charged from him. This gradation depends on the ownership of existing vehicles (for commercial vehicle’s loan), ownership of construction assets and their replacement value, ownership pattern, repayment history, market reputation, referrals, guarantor profile, geographical area, etc. among other yardsticks. After the grade is determined, interest would be charged which is depicted in the following table corresponding to the respective grades.

Grade of the Borrower	Purchase of new asset or equipment	Purchase of used asset or equipment, top-up or refinance.
A & B	9.5% to 11%	11% to 13%
C Grade or MO	9.75% to 11.50%	12% to 14%
SMTC or SO	10% to 12%	12.50% to 15%
FTU or FTB	10.50% to 12.50%	13% to 16%

The rate of interest charged in case of loan against shares is 9.50% to 15.50% and there is no gradation in this context. If there is any pre-payment of the loan before the stipulated time, a penalty of 4% of the principal outstanding as on that date would be payable. Moreover, a processing fee of 1% of the amount of loan disbursed is payable for all cases of loans against shares.

In case of commercial vehicle or construction equipment loan the charges for prepaying the loan amount is 3% of the principal outstanding on that date and it is called a pre-payment penalty. On the other hand, the processing fee applicable in these two types of loan is limited to a maximum of 3% of the amount of loan sanctioned by the company.