Filling the gap of awareness about the product....

So, this wise customer who has never taken a mortgage loan in the past wanted me to make him understand the way a DOD limit works... I explained over the phone. He asked me to send en email with all the details... Have never done this in 15 years of experience.... But there is a first time for everything.... Sent this mail...sticking to being specific and as transparent as they come...

Dear Sir,

Greetings for the day!

As discussed with you during our meeting today, following are the key aspects of a DOD limit-

1. DOD stands for drop-line overdraft. 

2. The limit drops each month in such a manner that at the end of the tenor, the limit becomes zero. For example - if a customer is given a DOD limit of Rs. 120 lakhs for a tenor of 10 years, the limit will drop by 1 lakh every month.

3. Before the 4th of every month, the customer needs to pay these to the bank- a) the interest applicable to the limit that has been utilized in the previous month if any and b) the principal if the limit has been overdrawn. For example, if the customer withdraws the entire Rs. 120 lakhs on the first day, before the 4th of next month, he needs to pay back the bank the interest for the entire month and also the Rs. 1 lakh of limit which is over drawn, because, in the second month, the limit that he has access to is Rs. 119 lakhs only.

4. Collateral is the property that the customer offers as a security.

5. In case we are assessing the eligibility on rental income, following points need to be kept in mind-

a) The profile of the lessee is very important. It has to be an established brand. 

b) An escrow account will be opened in which the lessee will have to deposit the rentals. 

c) An NOC would be required from the lessee in the bank's format. 

d) The rent agreement has to be registered. 

e) The eligibility would be calculated only in the remaining tenor as per the rent agreement. 

6. In case of DOD limits a minimum utilization clause is a part of the loan agreement. On an average, the customer is required to utilize 30% of the limit. This assessment is done at the end of every quarter. In case the average is falling short of 30%, the customer is levied a commitment fees charge of 0.1% of the difference between utilized amount and 30% or Rs. 5000/-, whichever is higher.

Kindly let me know on case of any queries.

Looking forward to serve you.