Banking Surrogate

Banking Surrogate means ascertaining the eligibility of the customers only on the basis of his banking statements. This product is specially designed for the customers who earn variable income/ profits per month i.e. for the self-employed customers. The fixed income earners like those of salaried class are not considered under this product to qualify for higher eligibility.

Documents Required for Banking Surrogate

  •         KYC of the business entity and the business owner/s
  •         Proof of Ownership for residence / office. Residence-cum-office is not accepted
  •         Business registration proof (AOA / MOA / Business registration certificate / GST registration certificate / Registered partnership deed / Gumasta shop establishment certificate)
  •         Business bank statements for the last 12 months

Eligibility criteria to apply for a Banking Surrogate

Here are the basic requirements for your business to be eligible for a Banking Surrogate Business Loan

  •         Promoter’s age should be between 23-65 years
  •         Business should be at least 2 years old
  •         Must have one owned premises in operating city. Proof of ownership not applicable if business vintage >=3 years
  •         Annual turnover should be between 50 lakhs to 40 crores
  •         Have Bank statements for the last 12 months
  •         Trusts, NGOs and charitable organizations are not eligible

Why Banking Surrogate Business Loan

While the possibilities are endless, here are some common purposes for which a Banking Surrogate Business Loan can be procured for your business:

  •         Meeting working capital requirements
  •         Procuring raw material
  •         Fulfilling bulk orders
  •         Purchasing inventory
  •         Paying suppliers in advance
  •         Paying for overhead costs like rent, office expenses etc.

Features and Benefits of Loan

Most of the NBFCs and banks in the race of capturing market shares gave loans to customers based on surrogates which resulted in over leveraging. This is where customer takes undue advantage. Under this the customer approaches not only to one bank and takes money on the basis of surrogates thus defaulting in many cases.

But the scenario is changed completely. Surrogates would be helpful to a customer only once and if multiple applications of a customer will be seen then it may result into rejection of their accounts.

  1. Loan provided on basis of other Loan Track

If the borrower has taken other big loans viz., Equipment loan, Mortgage, Commercial vehicle loan etc., which are large in size and repaid the loan with a clean track record without any default, then the new lender can extend the same or a little lesser percentage of Home loan to the borrower.

  1. Funding depends on Bank Balance

For an industry where the turnover is very high but the profit margin is always low(certain trading business), the lenders do approve of the calculation basis the gross profit and not the net.Bank statements for the last 3-6 months are compulsory for ascertaining the credit worthiness of any customer. Therefore majority of the banks have started asking for it.

  1. Gross Profit method

For an industry where the turnover is very high but the profit margin is always low(certain trading business), the lenders do approve of the calculation basis the gross profit and not the net.

  1. Turnover based on Industry Margin

If the borrower is in a manufacturing or trading business then a standard profit margin has been internally set by the borrower. For example, a manufacturing unit having 2 crores of turnover is expected to make a 10% profit and thus the income can be considered as 20 Lacs and basis this the loan application can be granted, even if it is not shown. Similarly, for a trading business, it could have been set at 5% as there’s no machinery etc. like a manufacturing unit as an asset, and been flagged at a little higher risk grade. At the same time, a service industry may not be considered for this type of surrogate funding at all.

Minimum to maximum tenure range for a Banking Surrogate Business

You can avail a Banking Surrogate Business Loan amounting 1 Lakh – 10 Lakhs for a minimum of 12 months to a maximum of 24 months (with a 6-month interval).

Basic parameters of the Banking Surrogate


  1. Application: The banking surrogate can be considered in the products of home loan, mortgage loan/loan against property, NRP loan i.e. non-residential premises loan, home loan balance transfer of home loan, mortgage loan balance transfer, NRP balance transfer, home loan top-up, mortgage loan top-up & NRP top-up. (Top-up loans are subject to the income eligibility and to the market value of the property).


  1. Loan Amount Criteria: The customer can apply for a minimum loan amount of Rs.10lakhs and a maximum loan amount of Rs.3crs. However, the ceiling limit for self- employed professionals such as doctors (MBBS/BDS/MD/MS), chartered accountants, company secretary, and architects, on the basis of their savings accounts only is Rs.50kakhs


  1. Loan To Value (LTV): LTV refers to the percentage of the property’s market value that a lender can finance through loans.

For home loan – LTV is 70%

For mortgage loan against residence – LTV is 60%

For NRP – LTV is 65% if self-occupied & 55% if not self-occupied.


  1. Loan Tenure: Maximum loan tenure allowed under the banking surrogate is for 15 years. However, for the tenure of more than 10 years of in-home loan and NRP, the LTV percentage is lowered by 5%.


  1. NRP under-construction status: If the customer buys an NRP under-construction property, for him to qualify for a loan under the banking surrogate, the completion status of the under-construction property must be 75% for CAT A and B builders & 85% for CAT C builders.


  1. Account’s credit transactions: The banking statements of the customer must reflect a minimum of 3 business credits per month in the current account and a minimum of 3 transactions per month in the savings account.


  1. The ADB calculation and its applicable ratio: ADB stands for average daily balance. It is the internal calculation method of the bank for determining the loan eligibility of the customer on the basis of his banking transactions.


  1. Credit Summation: In banking, surrogate credit summation is yet the second calculative method in determining the loan eligibility of the customer on the basis of his banking transactions. To calculate credit summation banks consider every single credit entry in the banking account of the customer for consecutive 12 months and dividing the figure by 2 i.e. considering only 50% of the derived number. Total Credit Summation for 12 months * 50%