MONITORING OF ADVANCES

Learning Objectives
Meaning Of Monitoring. To Know About The Tools Available. How to Monitor The Credit Portfolio of the Branch?

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Monitoring.
Monitoring is a tool to ascertain about any credit facility whether, it is as per general guidelines as conveyed by way of Book of instructions Loan Policy Circulars from time to time for Pre Sanction, Documentation,

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Monitoring.
Disbursement of credit facilities Project implementation Review Inspection Insurance of securities Post sanction follow up and regular follow up of credit facilities.

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Monitoring In General

Monitoring day to day operations in the account at least on a test basis. Satisfying upon stock/ book-debts statements;

Timely reviewing the account; Periodically inspecting / verifying the securities charged to the bank;

Credit Rating at regular intervals;

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Monitoring In General
Satisfying upon whether the borrower is paying statutory dues / Electricity bills / telephone bills / wages etc. in time. Finding whether the borrower has recently cutdown any major activity / expenses which he was doing otherwise in ordinary course of business.

Keeping an ear to the market news / reports.

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Monitoring.
Occasionally meeting with the borrowers and discussing with him, besides the business, what else he is doing / planning and whether something is bothering him in business or in personal life, like family separation

sickness of important person in the family

heavy financial commitment of personal nature etc

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Tools For Credit Monitoring.

Stock /Book Debt Audit Monthly Monitoring Report Credit Audit & Guidelines Concurrent Auditors Reports End Use Of Funds

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Tools For Credit Monitoring.

Review. Post Sanction Review. Norms For Risk Based Inspection/Verification of Stock and Book Debts. Credit Rating Internal Inspection. Ascrom.

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Monitoring
Insurance
All assets (stocks / fixed assets) charged to the Bank as security for advances are to be comprehensively insured against the risk of theft / burglary, fire & Strikes, Riots, Malicious Damages (SRMD), with an insurance company, in the name of borrower / guarantor, with Bank Clause, at the borrower's expenses, unless insurance is specifically waived or not required to be taken as per provisions relevant to the lending scheme
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Monitoring In The Account

Turnover Payee Stock & Book Debt Statement Frequent Cheque return Unit Visit QIS/QMR

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Review
Credit facilities sanctioned subjected to annual review to borrowers are

In case of borrowal accounts enjoying credit facilities of Rs.100 crores and above, where the credit rating of the account is BOB-6 or below, the account should be reviewed on half-yearly basis.

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Review
Short Review / Status Note: Consecutive Short Reviews shall be restricted to two with a maximum period of six months for each short review.

In exceptional cases, the next higher authority (not below the level of Chief Manager) may do more consecutive Short Reviews after satisfying himself about the need for the same and reasons duly recorded
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REGULAR REVIEW
Review takes a comprehensive view on Financial Health, Borrowers Performance, Prospectus, Quality of the Management, Conduct of the account, Compliance of Terms and Conditions of sanction etc.

Review evaluates the impact of deficiencies observed during inspection/concurrent audit/statutory/Credit audit/RBI Inspection etc.

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REVIEW-LIMITS UPTO Rs. 20 LAC-PENDING FINANCIAL STAT

Review advances accounts with limit up to Rs. 20 lacs: Trading activities, Micro & Small Enterprises, Borrowers in Rural area Borrowers having only term loan accounts Financed under government sponsored program me, borrowers enjoying only guarantee facility etc

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REVIEW-LIMITS UPTO Rs. 20 LACPENDING FINANCIAL STAT

Satisfactory conduct and turnover in the account. Fulfillment of repayment obligations (Interest/ Installments) Adequacy of securities, DP, Insurance coverage. Rectification of Inspection Irregularities. Compliance of Terms and Conditions of sanction.

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PSR
Covers all sanctions and credit decisions viz., Fresh / Increase / Renewal / Rejection / Adhoc / Excess / Modifications / Waivers / restructuring / rescheduling etc., Excluding sanction of staff advances, & LABOD (Post sanction reporting of LABOD and staff loans is not required) All Sanctions in respect of Fund-Based and Non Fund-Based credit limits (excluding LABOD & Staff Loans) up to Rs. 10 lacs (Rs. 5 lacs for Retail Loans) .(Annexure A)- Rural & Semi Urban Branches.
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PSR

All Sanctions in respect of Fund-Based and Non Fund-Based credit limits (excluding LABOD & Staff Loans) up to Rs. 25 lacs (Rs. 5 lacs for Retail Loans) .(Annexure A)- Metro & Urban branches.

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Monitoring.
Copies of Credit Proposals with Fund Based and Non Fund Based sanctioned limit aggregating above Rs. 10 lacs (retail loans above Rs. 5 lacs) for R & S branches & Rs. 25.00lacs (retail above Rs.5.00lacs) should be forwarded to PSR authority Within 3 days of sanction along with Appraisal Note, latest financials with necessary comments by the sanctioning authority latest credit rating sheet gist of major adverse features of Inspection report. and non-compliance of stipulated terms and conditions .
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P.S.R

In case of RETAIL lending (Above Rs.5.00Lacs)copies of Application cum Appraisal Note to be sent

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P.S.R Contd.
Broad parameters relating to sanction are only examined by the PSR authority whereas the sanctioning authority shall take care of all procedural details on credit appraisal, adequacy of security, documentation etc.

Observations of PSR authority are to be attended immediately, which shall also serve as guide to the sanctioning authority for future.

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P.S.R Contd.
The PSR authority is required to clear the proposal from PSR angle within a period of 30- days from the date of receipt of proposal. If the PSR authority has not made any observation within the said period, it will be presumed that the PSR authority has no observation to make and the proposal is cleared from PSR angle.

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MONTHLY MONITORING OF A/Cs

Advance accounts of over Rs.10.00crores to be monitored by Competent authority at BCC. Zonal Manager to monitor all advance accounts above Rs.5.00crores to Rs.10.00crores.

Regional Manager to monitor all advance accounts above Rs.1.00crores to Rs.5.00crores.

Branch Manager up to Rs.1.00crores

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MMR
Regional Offices are also to monitor: Advance accounts with exposure of Rs. 25 Lac to Rs. 1 Crore based on quarterly monitoring reports received from Branches/Scrutiny of ASCROM data. Advance accounts with exposure of Rs. 1 Lac to Rs. 25 Lac based on scrutiny of ASCROM data.

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MONTHLY MONITORING- ACCOUNTS CAUSING CONCERN

RO to Submit With exposure of above Rs. 1 Crore to Rs. 5 Crore along with copy of MMRs to BCC with a copy to Zonal Office at monthly interval, within 7 days of reporting date of MMR With exposure of above Rs. 25 Lac to Rs. 1 Crore along with copy of quarterly monitoring report (QMR) to BCC with a copy to Zonal Office at quarterly interval, within 7 days of reporting dates of QMR

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MONTHLY MONITORING- ACCOUNTS CAUSING CONCERN

Creation of stipulated mortgage/First Charge/Second Charge / Pari-passu charge is pending on date. Stock inspection /Book Debts verification and /or submission of Stock and Book Debt Statement pending for more than one month from the due date. The credit rating score of the account is deteriorating for last two years. The financial performance of the account is showing deterioration in last two years.

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MONTHLY MONITORING- ACCOUNTS CAUSING CONCERN

Unsatisfactory conduct of account-Poor Turnover, Return of cheques for financial reasons, Consistent overdues etc. Deterioration in quality of assets charged to the Bank. The name of promoters on the defaulters list of RBI/ECGC. Adverse market reports
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MONTHLY MONITORING- A/Cs CAUSING CONCERN

Request for repeated advances and default on commitments. Repeated advance bills o/s for more than 10 days.

Invocation of guarantees-dues not settled.

Change in Govt. policies likely to have adverse effect. Sunset industry

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MONTHLY MONITORING- A/Cs CAUSING CONCERN

Account overdue for review. Dispute among promoters/partners.

As regards to accounts causing concern officials from RO/ZO may visit such accounts for taking timely remedial decisions to prevent slippage.

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Special Mention Accounts.

For early recognition of slippage and timely interventions, it is suggested that banks introduce a new asset category between Standard and Sub-standard for their own internal monitoring and follow up.

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Special Mention Accounts.

An asset may be transferred to this category once the earliest signs of sickness/ irregularities are identified. This will help banks to look at account with potential problems in a focused manner right from the onset of the problem, so that monitoring and remedial actions can be more effective.

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Spl Mention Account.

Once these accounts are categorized and reported as such, proper top management attention would also be ensured. Introduction of a Special Mention category of assets would be on the basis of not only overdue position in the account but also other factors, which reflect sickness/irregularities in the account.

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Special Mention Account Contd.

The following types of accounts in standard category shall be brought under special mention A/c: Irregularity in the account for 30 days. Non-compliance of terms & conditions for 30 days (unless the Sanctioning authority has given extended time period for compliance). No turnover in Working Capital account for 30 days.

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INSPECTION/VERIFICATION-SECURITIES

Prime Security Charged for WC limits

Latest Credit rating as per CRISIL RAM

Periodicity

BOB1 to BOB3 BOB4 to BOB5 BOB6 & below Fixes Assets charged against DL, & TL,

Half Yearly Quarterly Bimonthly

Half yearly (Jan. & July)

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PERIODICAL INSPECTION/ VERIFICATION-SECURITIES

Consortium Accounts

As fixed by consortium

Inspection of collateral securities

Preferably on annual basis for all types of facilities i.e. funded as well as NonFunded

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INSPECTION / VERIFICATION OF SECURITIES

Retail loan
Housing Loan

Periodicity
On every disbursement & thereafter once in 3 years (if a/c is regular) On disbursement and then annually

Overdraft Against Property

Two wheelers/ Car loans

Annually

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INSPECTION/VERIFICATION OF SECURITIES

Traders Loans & Professional Loans

Once in a year in the month of March and the gap between two inspections should not be less than 10 months.

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Field visit by Authorities

For advance accounts falling upto the powers of Branch Manager. For advance accounts falling upto the powers of Regional Manager For advance accounts falling beyond the powers of Regional Manager For advance accounts where obligor (borrower) credit rating has slipped by two notches By the Branch Manager Preferably once in a year

By the Regional Manager or by An executive or an officer Designated by him preferably once in a year By the Zonal Heads or by an executive or an officer Designated by him preferably once in a year Periodicity of field visit will be accelerated on case-to-case basis as warranted, to be decided By Regional / Zonal Authorities for taking timely corrective actions

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Stock /Book Debt Audit

The existing practice of conducting stock inspections and book debts verification by branch officials and random inspection by concurrent auditors Annual Stock/Book Debt Audit (i.e. covering the period 1st April to 31st March every year) is to be carried out compulsorily in all accounts having fund- based working capital limits (including DA LC limit) of over Rs. 5.00 crores with our Bank.
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Stock /Book Debt Audit

The Stock Audit/Book Debt Audit may be conducted at more frequent intervals (i.e. more than once a year) if deemed necessary by the Bank.

Panel of Chartered Accountants / C.A. firms for entrusting Stock Audit Work to be finalised by Zonal Authorities.

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Stock Audit
Stock Audit Report - Contents Full details of the stocks audited. The full details of the book debts audited. Calculation of the advance value/drawing power. Intelligence analysis by the stock auditor. Whether the sales of the company are in tune with the past trends/projections? Whether the turnover is routed through our bank account / other bank accounts?

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Stock Audit
Stock Audit Report Contents Whether there is a tendency to show higher sales at year end for booking profits? Whether inter-firm sales/ purchases (within the group) are valued as per standard accounting norms? Accounting practices adopted by the company Pricing policies of the company System of maintenance of stocks, movement of stock/goods, procurement policy and management of stocks.

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Stock Audit
Stock Audit Report Contents Whether proper record of stocks, including intransit stocks, are kept at all stages and whether the company has a clear title to such goods. The inventory holding level pursued by the company. The inventory management system of the company is adequate and proper in view of the nature of the business and size of the company. Statutory dues and obligations of the company in relation to the stock.

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CREDIT AUDIT-OBJECTIVES
Improvement in quality of credit portfolio Review of sanction process and compliance status of large loans. Feedback on regulatory compliance Independent Review of Credit Risk Assessment Pick up early warning signals and suggest remedial measures. Recommend corrective sanction to improve credit quality, credit administration and credit skill of staff etc.

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CREDIT AUDIT
Coverage: Fresh Sanctions above Rs. 5 crores Review Rs. 10 crores and above 5% accounts on random selection basis with sanctioned limits of Rs. One crore and below Rs.10 crores . Conducted within 3 to 6 months of sanction/Review. Report to be submitted within 15 days of audit.
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Imp Control Returns.

Sr Name Of The Returns. no 1. Statement Of T.O.D allowed During Fortnight Periodicity Authority to Whom To Be Submitted.

Fortnightly. Regional Head.

2.

Statement of Excess Drawings allowed .

Statement of B.P,O/S more than a month. Monthly Statements of N.P.A recovery

Monthly

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3.

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4.

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