Main Audit Report - SDCC 2018 SSN
Main Audit Report - SDCC 2018 SSN
Main Audit Report - SDCC 2018 SSN
INDEX
Sr Particulars Page No.
No.
3 Brief Introduction 6 to 9
6 Notes on Accounts 2
To
The Members of
Sindhudurg District Central Co-operative Bank Ltd., Sindhudurg
Auditors’ Responsibility
assessments, the auditor considers internal control relevant to the Bank’s preparation
and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of the accounting
estimates made by management, as well as evaluating the overall presentation of the
financial statements.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our Audit opinion.
7. In our opinion and to the best of our information and accordance to explanation
given to us, except for the effect of the matter described in the basis for qualified
opinion paragraph mentioned above, we state as under;
(i) The Balance Sheet and Profit & Loss Account of the Bank is drawn as per the
Banking Regulation Act, 1949 (as applicable to Co-operative Societies) as well as
the provisions of Maharashtra Co-operative Societies Act, 1960.
(ii) In our opinion proper books of accounts as required by the Maharashtra State Co-
operative Societies Act, 1960 and the Maharashtra Co-operative Societies Rules,
1961, have been kept by the Bank so far as appears from our examination of
those books;
(iii) In our opinion and to the best of our information and according to the
explanations given to us, said accounts subject to Para 3 to 6 above, read
together with significant accounting policies, and notes forming part of accounts
and our observations contained in the Audit Memorandum and Long Form Audit
Report, of the even date, gives the information required by the Maharashtra Co-
operative Societies Act, 1960 and Rules made there under and by the Banking
Regulation Act, 1949 as applicable to the Cooperative Societies, in the manner
so required, give a true & fair view in conformity with the accounting principles
generally accepted in India:
a) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st
March, 2018; and
b) in the case of Profit and Loss Account, of the Profit for the year ended on that
date;
c) In case of Cash flow statement, of the Cash flow for the year ended on that
date;
8. Subject to the limitations of the audit mentioned in paragraph above and our
comments, qualifications and observations contained in Audit Memorandum read
with other notes in annexure to the auditor’s report and Long Form Audit Report, we
report that:
a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purpose of the audit and have found
them to be satisfactory.
c) In our opinion, the financial statements dealt with by this report comply with
Accounting Standards prescribed by the Institute of Chartered Accountants of
India, as far as they are relevant to the Bank except AS 20 and AS 22.
d) The Balance Sheet and Profit & Loss Accounts dealt with by this report are in
agreement with the books of account and returns.
e) The transactions of the bank, which have come to our notice, have been within the
powers of the Bank.
Other Matters
9. The bank has been awarded ‘A’ Audit classification for the year ended on 31st
March 2018.
For Sankpal Kulkarni & Associates
Chartered Accountants
For the year 2017-18, total exposure limit for institutional borrower was Rs.
4020.83 lacs & for individual borrower ceiling was Rs.60.00 lacs. Bank has
disbursed loans to following borrowers exceeding the exposure limit of the Bank
fixed by the RBI/NABARD as on 31st March 2018 is as under;
2. During the year under consideration we observed that Bank is not following its
own Loan Policy properly. Some commercial loans are considered as Agricultural
finance and benefit of Agricultural finance are given to commercial advances. (For
example Sindhu Krushi Bhumi Loan Policy). Further Bank is not cautious to
sanctioning loans to corporate customers and taking guarantee of the corporate
customers. Bank is not following procedure as per Company Act 2013.
3. Monitoring of NPA
We observe that bank is not taking sufficient steps to early and continuous
detection of overdue /NPA accounts, which will help in making recovery at early
stage and avoid slippage of account in NPA category.
In some cases of cash credit/OD accounts NPA classification is not done as per
norms, even though there are deficiencies like, interest remain un-served, out of
order, non-submission of stock statements.
The Bank should evolve a mechanism to continuously monitor all loan accounts
where interest/installment dues are not paid by borrower.
1. Introduction
Sindhudurg District Central Cooperative Bank Ltd., Sindhudurg is District Central
Cooperative Bank Registered under The Maharashtra Cooperative Societies Act,
1960 vide registration Number SNDRG/BNK/1401/1983 dated 1st July 1983.
The head office of the Bank is situated at Plot No. 32, Navnagar Vikas Pradhikaran,
A/p Sindhudurg Nagari Tal Kudal District Sindhudurg.
As on 31st March 2018 bank has network of 98 Branches spread across the entire
district.
The main object as per clause No. 2 of the bye-laws, duly adopted by Bank is
providing bank finance to affiliated societies and carries on general Banking
activities. The Bank has other 33 clauses in object clause excluding the main
object.
2. Appointment of Auditors
In accordance provisions of Section 81 (1) (a) of the Maharashtra Co-operative
Societies Act 1960 Bank has appointed auditors for the year under consideration
from panel prepared and maintained by the Co-operative Department.
Accordingly, Bank has appointed us as a Statutory Auditors for the year 2017-18
vide Annual General Meeting Resolution No. 6 dated 18 st August 2017.
The criteria for selection of the branches have been prescribed by the NABARD as
mentioned above and accordingly Bank has selected the Branches for Statutory
Audit as follows;
The returns of remaining 4 branches are certified by Bank Authority were dealt by
us with appropriate manner for the purpose of our audit.
4. NABARD Inspection
During the year under consideration, NABARD has conducted statutory inspection
of the Bank under section 35 (6) of the Banking Regulation Act, 1949 (AACS). The
period covered for the inspection was 1 st April 2015 to 31st March 2017. Copy of
the report is available on record. The Bank has submitted compliance of the
Report on 19/06/2018.
Major audit observations were discussed with the Chief Executive officer during the
course of audit.
6. EXECUTIVE SUMMARY
Details of Financial performance for the year 2017-18
(Rs.in Lacs)
Particulars 31.3.2017 31.3.2018 Change in %
Increase/(Decrease)
Own Funds 12234.62 14527.58 18.74
Share Capital 3647.59 3877.83 6.31
Reserve & Surplus 8587.03 10649.75 24.02
Deposits & other A/Cs 150107.59 167899.28 11.85
Advances 106229.88 130415.09 22.77
Secured 104690.88 128515.09 22.76
Unsecured 1539.00 1900.00 23.46
Priority Sector 44976.34 40117.40 -10.80
% to Advances 42.34% 30.76% -11.58
During the year under consideration, there is increasing trend in share capital,
deposits, Advances and income earned by the Bank.
I. CAPITAL
Bank has total Authorised Share Capital of Rs. 50.00 Crore divided in to 5,00,000 No of
Shares valued Rs.1,000/- each as per clause No. 3 of bye-laws adopted by the Bank.
As on 31st March 2018 total issued share capital amounts to Rs.38,77,83,000/-. As per
registers maintained by the Bank, total members are 1298. Out of total members, 1045
members are society/sanstha members and balance 253 members are classified under
individual category. During the year under consideration total 28 new members were
adopted by the Bank and 8 members are resigned.
Rs.in lakhs
Particulars Individual Societies Total
No Capital No Capital No Capital
Rs. Rs. Rs.
As on 31-03-2017 250 5.42 1028 3642.17 1278 3647.59
New members during the 3 0.15 25 1.55 28
year 230.50
Additional capital subscribed - 52.06 - 176.74 -
by existing members
Resignation etc - - 8 0.26 8 0.26
As on 31-03-2018 253 57.63 1045 3820.20 1298 3877.83
1) Share capital from member societies, individuals and Govt. and share holding
During the year under consideration, Share Capital is increased by Rs.230.24 Lacs
(net). As compared to previous year share capital is increased by 6.31% (Prev Year
7.77%) during the year.
During the year under consideration, as per bye-laws clause No.5 (A) 13, Bank has
permitted ‘B’ Class membership to 94,530 numbers of persons as approved by the
Board of Directors.
As per the byelaws clause No. 6.16.B, shares have to be collected from Member Society
@10% or 5% of the loan disbursed during the year up to the ceiling prescribed by the
Authority.
Deficit in share linking was observed in respect of 2 indebted societies of the Bank
amounting to Rs.0.66 Lacs (Prev. Year Rs. 56.30 lacs) as on 31 st March 2018. As
compare to previous year, deficit of share linking of Rs. 55.64 lacs has been decreased
during the year.
The major defaulting societies in respect of share linking as on 31 st March 2018 are as
under;
3) As per byelaws Clause No. 6.22, Bank has issued share certificates to the affiliated
societies.
4) As per byelaws Clause No. 3.3, value of each share is Rs.1000/- each. As on 31 st
March 2018, some members are holding old shares of Rs.50/- or Rs.100 each and not
converted into new shares of Rs.1000/-.
(Rs. in lacs)
Sr Particulars Amount
1 Paid up share Capital 3877.83
2 Statutory Reserve 2051.43
3 Agriculture Credit Stabilization Reserve 364.19
4 Building Fund 857.61
5 Contingent Provision against Std Assets (Excess
over required) 21.96
6 Dividend Equalization Fund 40.00
7 Investment Fluctuation Reserve 798.67
8 Undistributed profit 1000.00
9 Excess provisions made by the Bank 658.14
Total 9669.83
10 Total Assets 208149.23
11 % of own capital to total assets (Net worth) 4.65%
6) The level of CRAR as per RBI Circular reference NO. CO.R.F.BC. 40/07.38.03/2007-08
dated 4th December 2007 and revised circular RPCD.RCB.BC.73/07.51.012/2013-14
dated 7th January 2014 as is 10.30% as on 31st March 2018 as detailed under;
Sr Particulars Amount
(in Lacs)
1 Capital Fund 12908.65
2 Total risk weighted assets 125284.23
3 Capital Fund to Risk weighted 10.30%
assets
II. ASSETS
A. ADVANCES
1) Credit Appraisal
a) Loan Policy
The Bank had approved and documented loan policy. The Policy guidelines
contains terms and conditions of sanction, documentation, margin to be
maintained, securities acceptable to the bank, limit of loan amount, repayment
period etc for all types of loans and advances compiled in a booklet form titled as
“Bank loan policy”.
Certain additions/ modifications/ changes in the policy since then have been
communicated to the branches by way of office circulars issued from time to
time as directed by the Board of Directors.
The District Level Technical Committee (DLTC) was convened by Bank every year
and the scales of finance approved by the DLTC were communicated to the
branches/PACS by way of circulars.
The bank had also prescribed specific loan applications for all types of loans
sanctioned to Farm Sector, Non-Farm Sector, Short Term Loans, Medium Term,
Long Term loans and Cash Credits.
b) The Bank has prepared statement namely Normal Credit Limit (NCL) for the
disbursing the Loans to Agricultural Section. The NCL was sanctioned by the Board
of Directors on time to time as received from taluka inspection office.
The bank has fixed the limit for Short term loan for agricultural purpose based on
the holding of land and number of trees etc. The detailed list of various limits
applicable for the year 2017-18 was circulated to Branches.
The bank has delegated powers and limits to various committees and persons as per
byelaws rule No.38 (15) and 41 read with Schedule I, for smooth working and
disbursement of Credit portfolio.
The Bank is not looking into the aspects of the activity being financed, income
generation capacity, credit worthiness of the borrower, risk factor and estimates
submitted by the borrower. As a prudent banking policy bank should trust more
on repayment of loan and not only security offered by the borrower.
In some cases, loan appraisal note is not prepared properly considering the
usage of loan, income and background of the borrower and commercial and
economical viability of the project and financial projections submitted by the
borrower.
The Bank is not considering the actual income of borrower, estimated income of
the borrower during the appraisal. We observed that actual income or estimated
income is not matching with the repayment schedule of the loan.
In some cases appraisal done by bank is not proper and not based on factual
position of the business of the borrower.
The Bank should disburse the loan to borrower on its own merit. In many
cases, we observed that loan is disbursed at the maximum limit without
considering the borrower requirement, actual eligibility and need of borrower.
Age limit of the borrower is to be fixed by the bank. In some cases loan is
disbursed to persons having age more than 75 years.
During the year gold loan inspection of various branches has not been carried
out by the inspection department of the bank.
High value loans were approved and disbursed very fast, sometimes within two
days from the date of application. It created pendency of documents, wrong
appraisal, incorrect assessment of sources of income and installment etc.
Interest was not provided by some branches in the books of accounts on loans
disbursed as on 31st March 2018.
2) Sanctioning/Disbursement
a) To provide fast and good service to the borrower the Bank has decentralized the
powers of sanction as per bank loan policy revised during the year vide circular No.
Loan/999/33/VIKAS-54/1009/15-16 dated 25th June 2015.
As per loan policy, loan application within the power of Branches has been received
and sanctioned at branch level. The Loan applications beyond the delegation power
of the Branch Managers were sent to Head office. These loan applications are
processed at Head office after receipt of report from Loan Inspector. Based on
report, scrutiny notes were prepared by loan department/CMA department at Head
office and same were put up to the Loan sub-committee/Executive Committee &
Board for necessary sanction.
b) The Bank has policy of taking review of sanction, disbursement and recovery at
Taluka level committee and at head office during the meeting of Board of Directors
or Executive Committee.
c) The Bank has policy to verify all the loan documents during the course of inspection
at Branch level.
d) The Bank did not comply with the unit exposure norms under CMA.
As per NABARD guidelines following major exposure limits are applicable to the
Bank is as under:
The bank has submitted CMA returns I & II for the quarter ending March 2018
within due date.
e) In some cases, the branches had not adhered to terms and conditions of sanction
before disbursement of loans, resulting in deficit in share linking, deficit in
securities to be obtained and non-adherence to Loan policy and circulars.
7. In case of Loan against Salary, borrower has taken loan twice on same salary
from two or more branches. We observed that around 70 borrower have taken
loan amounting to Rs.2.50 cr from different branches.
8. In some cases accounts become NPA, in the year of disbursement itself. This
shows that branch is not doing proper appraisal and monitoring of advances.
Monitoring from HO level is much needed to plug such deficiencies.
f) Verification of utilization of funds before release of next installments was either not
recorded or recorded in a routine way.
h) Post disbursement visits are not done in cases of large advances to confirm proper
utilization of loan and future repayment of borrower.
3) Documentation
a) The Bank has prescribed loan documentation in the booklet ‘Bank Loan Policy’
more particular in Schedule No. 4 at Page No. 201. The Bank executes the loan
documents as per the terms of sanction. The Bank had prescribed specific loan
application format and other relevant documents for all types of loan activities.
b) At bank level, documents are kept in safe custody. All large loans, granted to
various borrowers are kept at head office in safe custody along with sanction letters
and other documents.
a) During the course of audit we observed that, in some cases bank has not monitored
the loans outstanding properly. In case of Gold loans, bank has renewed the gold
loans without recovering interest due/overdue interest. Bank should tighten the
supervision in such cases.
b) The bank is renewing the Cash credit loans disbursed to cooperative society and
other individual borrower in a routine way without being considering actual
transaction in accounts. The following deficiencies were observed in respect with
renewal of documents.
There is no system of working out drawings powers (DP). Either borrower was
not submitting stock statements periodically or the same, if submitted, were not
put up to any scrutiny.
c) As per the guideline issued by the RBI, advances to non-corporate entities with
limits beyond Rs.10 Lakh, compulsory audit is to be done by borrower and audit
report is to be kept on record by the bank. The Bank is not adhering to this
guideline in majority cases.
d) The Bank has policy of scrutiny of stock statement, but in majority cases same has
not been scrutinized by the bank officials and in some cases stock statements/
book debts has not been obtained by the bank regularly.
g) The Bank is preparing ‘Demand collection and Over dues Position’ on every June as
per guidelines of NABARD. The recovery performance as per DCB prepared for the
year ended on 31st March 2018 is as under;
(Rs. in Lacs)
Type of Loan Demand Recovery Over dues % of over
in Cash dues to
Demand
1) Agricultural Loan
a) STL 10948.99 8180.21 2768.78 25.29%
b) MTL 634.92 486.72 148.20 23.34%
c) LTL 24.98 5.30 19.68 78.78%
2) Non Agricultural 9314.79 8520.74 794.05 8.52%
Loans
3) Individual Loans 25267.09 23003.94 2263.15 8.96%
4)Un-renewed Cash 869.79
credit
5) Large Advances
Bank has violated unit exposure limit fixed by NABARD in case of following advances.
As on 31st March 2018, total outstanding loan is Rs. 4944.00 Lac. The account
is regular and there is no overdue amount.
As on 31st March 2018, total outstanding loan is Rs. 5141.45 Lac. There is no
overdue amount.
During the year under consideration, Bank has not negotiated any foreign bills under
letters of credits, pre and post shipment credits etc.
a) The Bank has implemented National Agricultural Insurance Scheme during the
year. As per policy adopted by the bank, the scheme is optional for all borrowers.
The main object of the insurance scheme is to financially help the farmers from
natural disaster, to implement new technology and to stable the farmers in case of
drought.
b) During period under consideration, Bank has taken insurance cover of 248 farmers
for Paddy.
c) The Bank is regular in paying the insurance premium to the controlling authority.
During the year amount of insurance premium is Rs.0.60 lacs pertaining to 248
farmers.
d) During the year no claims for paddy has been preferred by the Bank and settled by
the AICI.
e) The Bank is implementing ‘Weather Based Crop Insurance Scheme (WBCIS) for
Mango and cashew. Bank has taken insurance cover of 3179 farmers and the total
premium collected and paid was Rs.159.49 Lac.
8) Imbalances
a) The imbalances between the borrowing outstanding of PACS from DCCB and the
loan outstanding at members level increased as may be seen from the following
table;
(Rs in lakh)
Year No of Amount due to Amount due to Imbalances
Societi Bank from PACS PACS from
es members
Principal Interest Principal Interest Principal Interest
The bank should review the position and facilitate improvement in the recoveries at
the ground level and effecting reduction in the cost of management at PACS level in
order to address the problem.
9) Other
Bank was entered an agreement with Jay Jawan Suraksha Rakshak Sah. Sanstha.
Agreement has been expired on 31/03/2016. Bank has extended the contract on
05/12/2017 for the period 01/11/2017 to 31/01/2022. Total 53 security guards are
provided. Agreement does not contain amount of contract. Therefore the agreement is
not executable as it contains various defects. Agreement clauses are not complied by
the vendor and bank. I cards and KYC documents of guards are not on record.
B. Fixed Asset-
1. Bank does not have written documented purchase policy for fixed Assets.
2. Existence of physical assets as compared to books of accounts
3. Depreciation –
Depreciation of building at Zarap branch is charged @10% instead of 5%. Excess
depreciation of Rs.1,44,273/- is charged. ( Dep. @10% Rs.2,88,456/-). Further
depreciation on building at Malavan branch is not charged amounting to
Rs.2,000/-. Due to excess provision profit is decreased by Rs.1,42,273/-
4. Building
During the year under audit, Bank has prepared a policy for purchasing building
premises for branches based on performance of the branch sanction vide resolution
no.13, dated – 29/11/2017 of Board of Directors meeting.
C. INVESTMENTS
2) The bank has laid down Investment policy in terms of guidelines issued by RBI and
monitored by the Investments Review Committee consist of 8 officers of the Bank
and headed by Chief Executive Officer. During the year under review, total 12
meetings have been held by the committee.
3) The Bank gets the information of cash and bank balance through CBS system.
Surplus funds are mainly invested in mutual funds / call money. The Bank has
delegated power to make investments in GoI Securities, Treasury Bills and Deposits
in MSC Bank and others.
4) The Bank has done following transactions during the year 2017-18;
(Rs in Lac)
Total Total Sale Income received from GSEC transactions
Purchases
Profit Interest Total income
received on recovered received
sale
75211.94 51291.91 206.12 2498.65 2686.97
5) The Bank is regular in depositing Reserve Fund. During year, Bank has earmarked
Government Securities of Rs.1000.00 lacs towards investment in Reserve Fund also
redeemed Government securities of Rs. 500.00 lacs on 02nd Jan 2018. MSC Bank
has confirmed the earmarked deposits vide letter dated 28 th October 2015 & 21st
September 2017 totaling earmarked Government Securities of Rs.2500.00 lacs.
7) The Bank has appointed M/s Sushant Phadnis & Co, Chartered Accountants,
Kolhapur for investment audit. The Bank has obtained audit report of investment
portfolio on quarterly basis.
8) The Investment review committee and Board of Directors have taken review of
investment portfolio from time to time.
11) The Bank has defined procedure for valuation and provision. The Bank has
adopted procedure as per RBI/NABARD guidelines. The Bank has amortized the
premium over the period of maturity.
12) As per clause No.4.6 of the Byelaw, regarding Investments, Bank can invest/keep
deposits with nationalized banks and financially sound scheduled co-operative
bank.
13) The Bank has made other investments i.e. (Shares in cooperative and other
institutions) amounting to Rs.191.40 Lac.
14) The Bank has maintained the required SLR throughout the year. As on 31 st March
2018, the Bank has made investment in SLR category of Rs.45620.50 Lac. The
Bank has maintained SLR above minimum prescribed by RBI.
15) As per RBI Master Circular regarding Investment Fluctuation Reserve (IFR), Bank
has to create IFR to the Extent of 5% of AFS Securities.
D. OTHER ASSETS
1) As on 31st March 2018, total 40 items are consolidated under the head ‘other assets’
amount to Rs. 47,27,74,417.69. The Major items of other assets are as under :
Bank should pass necessary entries as per Income Tax returns filed and orders
passed by the Income Tax Department for the concern years.
Bank has paid the amount to Vikas Societies towards interest subvention as per
scheme for the year, which is claimed as receivable from Government under
Panjabrao Deshmukh Interest Rebate Scheme.
The Bank has claimed following amounts for interest subvention received from state
and Central Government. Details of receivables are as under;
Sr Particulars Amount
1 Kharif Central 2016-17 1,33,66,216.00
2 Rabbi Central 2015-16 37,51,825.00
Following assets have been considered as unrealizable and full provision is made
for the same.
Bank should reconcile its GST liability & ITC with Books of accounts and GST
returns and should make necessary adjustments time to time.
2) The Bank has laid down procedure of transactions and collection of charges as per
circular No. circular No. 999/35/1326/17-18 dated 29 th July 2017 covering Lockers
Rent and other charges to be collected.
3) As per the Bank policy for issue of Bank guarantee, Bank is collecting commission
1% for Six Months and 2% for more than Six Months.
4) In case of Safe Deposit Lockers, bank has revised rental charges w.e.f 1 st July 2016
vide circular No. 999/34/08. The Bank is collecting locker rent in advance and
treats whole amount as current year’s income irrespective of period of locker rent.
During the course of audit, we observed that locker rent is not collected
promptly and pending since long time (Kankavali and Sawantwadi City
Branch). Out of total 2034 lockers 1373 lockers are allotted to customer.
Bank should take initiatives to rent out balance lockers of 661.
5) The Bank has revised outstation cheque collection charges with effect from 1 st Aug
2017 (circular No. 999/35/1326/17-18 dated 29 th July 2017) based on provisions
of Section 18 of Payment of Settlement Act, 2007 and circular No. RBI/2008-
09/207/DPSS.CO.NO.611/3.1.03 (P) dated 8/10/1008 issued by the Reserve Bank
of India.
6) The Bank is collecting various service charges, as per schedule of rates for various
purposes, for increasing its non-fund based business like charges for issue,
cancellation, revalidation of duplicate demand draft, duplicate pass book, bouncing
of cheques, stop payment instructions etc. The Bank is also collecting evaluation &
processing fee as mentioned in schedule 1 of Bank Loan Policy in respect of its
lending to non-agriculture sector.
1. The Bank has partially adhered to the prudential norms on income recognitions,
assets classification and provisioning –SCB’s /CCBs as issued by NABARD vide
reference No.NB.DOS.HO.POL.1577.P.57 -2002/03 dated 19th August 2002.
a) During the year under consideration, we have observed that bank has not treated
accounts as NPA amounting to Rs. 189.84 Lac of forty nine (49) loan accounts
as per prudential norms.
c) In case of cash credit/OD accounts NPA classification is not done as per norms,
even though there are deficiencies like, interest remain un-served, out of order, non-
submission of stock statements.
d) The Bank should evolve a mechanism to continuously monitor all loan accounts
where interest/installment dues are not paid by borrower.
2) Income Recognition
a) As per the IRAC norms, the Bank is recognizing the income earned on advances.
b) The Bank has system of providing unrealized interest on NPA account at the end
of the year. As per circular No. Acct/Stat/999/33/220/15-16 dated 5 th March
2016 Bank has implemented system of making provision for unrealized interest.
3) Asset Classification
a) The Bank has applied norms for assets classification in respect of all assets and
the provisioning norms, subject to newly identified NPA by us.
NPA % NPA %
ST (SAO) 285.76 8.75 332.60 8.55
MTL (Farm Sector) 15.45 0.47 48.55 1.25
Direct Lending to 109.84 3.36 99.32 2.55
Agriculture (MTL)
Long term 81.36 2.49 56.82 1.46
Agriculture
Total Farm Sector 492.41 15.07 537.29 13.81
Short Term Lending 1280.41 39.19 1352.65 34.76
Medium Term Loan 1149.86 35.20 1362.51 35.02
Long Term Loan 344.49 10.54 638.44 16.41
Total 2774.76 84.93 3353.60 86.19
NON Farm Sector
b) As per the classification of assets and provisioning required against NPA and
standard asset as on 31st March 2018 bank has to made total provision of
Rs.2339.36 Lac on gross NPA. The Bank has made provision for ‘bad and
doubtful debts (NPA) of Rs. 4959.90 Lac as on 31 st March 2018 towards Non
Performing Assets and Standard Assets. Thus, bank has made excess provision
for bad and doubtful debts.
c) During the year under consideration, bank has indentified new NPA of
Rs.1367.66 lac and Rs.743.94 lac recoveries effected in NPA account. Bank
should take more efforts for recovery in NPA account. The movement of NPA can
be tabularized as follows;
d) The NPA classification is done at bank level. The NPA statement is verified at
Head office level.
In our opinion, Bank should take necessary steps to early detection and
prevention of NPA. Bank should take regular efforts on quarterly basis so as to
take preventive step well in advance.
The bank has taken partially steps to recover the dues from NPA account. In
many cases, bank has not taken effective steps for recovery even though
mentioned in statutory audit.
e) The Bank has taken necessary legal aid to recover the overdue amount as
follows.
The Bank has initiated procedure under section 101 of the MSC Act (RRC) on 87
number of borrowers amounting to Rs.120.70 Lac during 2017-18. As on 31 st
March 2018, Bank has fully recovered Rs.309.78 Lac from 1283 numbers of
borrowers and partially recovered Rs.166.79 Lac from 435 borrowers.
(Rs. in Lac)
31st March 2018
Particulars
No of cases O/s Amount
Pending cases as on 1st April 2017 2871 1335.66
Add : New cases during the year 87 120.70
Less : Fully Recovered cases 1283 309.78
Partially recovery 435 166.79
The Bank has taken action under Securitisations Act 2002 on 1 borrower
amounting to Rs.240.23 Lac.
The Bank has filed arbitration cases on borrower for recovery of outstanding
loan and status of the same is as under;
(Rs. in Lakh)
31st March 2018
Particulars
No of cases O/s Amount
Pending cases as on 1st April 2017 6 45.43
Add : New cases during the year 1 23.45
Interest debited during year
Less : Fully Recovered cases 0 0
Partially recovery 1 1.73
During the year 2017-18, Bank has settled outstanding Loans & Advances
under scheme ‘One Time Settlement’ (OTS). The Details of OTS is as under;
(Rs. in Lac)
Sr No of Cases/ No of Outstanding Amount Amount
borrower Cases Loan collected waived
off
The Bank is monitoring performance of large loan accounts at Head office and sub-
committee level. The Bank is reviewing movement in NPA accounts on yearly basis.
The bank has taken legal aid under Securitisations Act 2002, Section 101 of MSC
Act, Section 138 of Negotiable Act etc.
The bank should implement the prudential Norms accurately. In some cases, bank
has not identified the NPA on recovery basis and timely basis. During the course of
audit, we have identified the New NPA amounting to Rs.189.84 lac in forty
nine (49) loan accounts.
The Bank is not taking impartial action in NPA accounts, in which directors of the
Bank is guarantor. In our opinion, Bank should take strict action on such
borrower, as it is moral responsibility of the Directors of the Bank. (For
example – M/s Bhai Saheb Sawant Nagari Pat Sanstha, Sawantwadi and
Sawantwadi City (Loan O/s 474.70 lac)
As on 31st March 2018, total advances outstanding from directors and their relatives
was of Rs.631.48 Lacs. Out of these advances amounting to Rs. 19.43 was overdue.
Three Directors Advances are categorized as NPA as on 31 st March 2018 amounting
to Rs. 25.49 lacs.
In our opinion, Bank should monitor the NPA movement on quarterly basis. Bank
should adopt the system of early detection and recovery in potential accounts.
Bank should implement the NPA in true spirit to as to early detection and remedial
measures can be taken in time.
During the year 2015-16 election was conducted under the Superintendence,
directions and control of State Cooperative Election Authority, Maharashtra State, Pune
in accordance with provisions of Section 73CB of the Act. As per the order issued by
Divisional Jt. Director, Co-operative Society, Kokan Division has published name of
elected members vide Order No VSN/Kokan/V-1/73 B/Pub/5/2015 dated 11 th May
2015.
As per byelaws clause No.8, total number of elected directors should be 19. Other
directors as per byelaws clause No.8.30.1 is to be adopted as Technical Director,
functional Directors and Special Invitee District Dy. Registrar.
During the year under review chairman and Vice Chairman was as under;
As per the bye laws of the Bank, meeting of the Board of Directors is to be conducted
once in a month. During the year under consideration, total 13 Numbers of meetings
held discussing the various issues as mentioned in byelaws clause No. 35.
As on 31st March 2018, total outstanding Loans & Advances from members of Board of
Directors and their relatives was Rs. 631.48 lac (Directors Rs. 338.94 Lac & Relatives
Rs.292.54 Lac) for various purposes. Out of total Loans and advances, amount of
Rs.19.43 Lac (Directors Rs. 15.49 lacs and relatives Rs. 3.94 lacs) was overdue as on
31st March 2018. In next period most of the loan accounts are regularized.
2) The Bank has formed following committees during the year under consideration to
assist the Board of Directors in discharging some of the functions.
We have verified the minute books of above committee maintained by the Bank. The
committee has done its work as per byelaws.
a) Day-to-day affairs of the Bank were looked after by the Chief Executive Officer Mr.
Anniruddha Yashwant Desai, extension given by Board of Directors in meeting hold
on 31st May 2016 as per “fit and proper criteria” circulated by RBI/NABARD. CEO
is possessing adequate experience in the field of banking and cooperation. Mr.
Desai, CEO of the bank was earlier worked as Class I, Special Auditor in
Department of Co-operative, Government of Maharashtra. Mr. Pramod S Sawant
was acting as Deputy CEO.
b) In second line management, Bank has appointed Six Managers and Eleven Dy.
Managers at Head Office. The mangers are reporting to the CEO in day-to-day
working.
c) The Bank has written policy of HRD including Staffing Pattern, Promotion &
Transfer policy, Computer policy, & Training Policy etc as per Mitra Committee
recommendations. The HRD policy is duly approved by NABARD vide there letter
No. NB.MRO.4530/CRR-6/11-12 dated 2nd January 2012.
d) The Bank has system of giving training for its officers and other staff. During the
year under consideration, bank has arranged training at various centers covered in
23 training session.
e) Corporate Governance
In our opinion, Board of Directors of the Bank, are striving to function in a way, which
is supportive of good corporate governance.
Corporate governance especially in the co-operative banks has come into sharp focus
because more and more co-operative banks in India, both in urban and rural areas,
have experienced grave problems in recent times, which has in a way threatened the
profile and identity of the entire co-operative system. These problems include
From the above table, it can be seen that net profit for the year has been
increased by 17.65% with increasing trend in Interest on investment and
decrease in Salary and allowances during the year.
The Bank’s income from interest received on loans increased by 11.79% during
the year. The main increase in interest income on loans is due to increase in
loans disbursement and increased rate of interest.
(Rs.in Lac)
Particulars’ 31.3.2017 31.3.2018 Change
in %
Net Profit to WC 0.48% 0.48% 0.00%
Net Profit to total income 5.26% 5.47% 0.21%
Interest income to total income 94.66% 96.07% 1.41%
Other income to total income 5.34% 3.93% -1.41%
Interest Recd on Loans to Average
Loans 11.48% 11.86% 0.38%
Interest paid on Deposits to Average
Deposits 6.50% 6.13% -0.37%
Staff cost to Average Deposits 2.52% 2.12% -0.40%
Interest paid on Deposit &
borrowing to Total Expenditure 61.91% 59.15% -2.76%
Cost of Management to WC 2.91% 2.55% -0.36%
Cost to Income 94.74% 94.53% -0.21%
Net interest Margin 3.58% 3.97% 0.39%
Productivity to No of employee 408.18 484.28 76.10
Productivity to No of branches 2589.27 3013.28 424.01
During the year, interest income to total income is increased by 1.41% and other
income to total income is decreased by 1.41%. The productivity to number of
employee is increased by 76.10 lac per employee and productivity to number of
branches is increased by 424.01 lac.
3) The Bank has earned profit of Rs.10,00,00,000/- as per the financial statements
prepared by the Bank.
4) We have taken test check of Interest applied during the year on deposits and loans.
5) The Bank has made adequate provision for impaired credits as mentioned below;
(Rs in lacs)
Particulars Amount % of Required Provision
eligible for Provision provision made by
provisioning Bank
i) Impaired Credits
a) Substandard assets 1555.54 10% 155.55
b) Doubtful –I 100.18 20% 20.03
c) Doubtful –II 101.98 30% 30.59
d) Doubtful –III 233.19 100% 233.19 4459.90
e) Unsecured Loans 1769.86 100% 1769.86
f) Loss Assets 130.14 100% 130.14
Total 3890.89 2339.36 4459.90
Excess provision made 569.01
The bank has made excess provision against the impaired credits.
6) Appropriation of Profit
The Bank has earned profit of Rs. 8,50,00,000.00 for the year ended on 31 st March
2017. The appropriation of net profit done by the Bank considering the provisions of
byelaws clause No. 21.63 is as follows;
Sr Particulars Amount
2 Less :
a) Transfer to Statutory Reserve @30% of 2,55,00,000.0
Net Profit 0
b) Dividend payable @ 9.75%
c) Transfer to Dividend equalization fund 3,42,49,601.0
d) Transfer to Technology Development 0 8,50,00,000.00
Fund 1,66,329.00
e) Transfer to Bank publicity & 1,96,00,000
propaganda fund
f) Transfer to BDD Reserve of Rural 15,00,000.00
Advance
39,84,070.00
3 Balance of Profit Nil
7) The Bank has declared Dividend @9.75% for the year 2016-17 amounting to
Rs.3,42,49,601.00.
8) The Bank has earned operating profit of Rs.3344.64 Lac during the year ended on 31 st
March 2018. The operating profit earned by the Bank was as follows for the last two
years.
(Rs in lac)
Particulars 2016-17 2017-18
Total Income 16159.07 18285.65
Total expenses before provision for BDDR, 14187.25 14941.01
Standard Assets & Investment fluctuation and
Income tax
Operating profit 1971.82 3344.64
Provisions as per above 1121.82 2344.64
Net Profit 850.00 1000.00
9) The Bank does have system of ‘Online CBS Audit’ to find out the income leakages.
10) The Bank has following transfer price mechanism (TPM) for assessing the
profitability of its branches.
For the purpose of TPM, bank had categorized its branches into four types and
differential rate of interest was paid to the branches. The Bank has given excess rate of
interest to D class branches to reimburse the management expenses and reduce
burden of interest paid on deposits. Bank has fixed the rate of interest according to the
TPM policy sanctioned by BOD meeting dated 28/12/2017 vide resolution no. 10.
V. LIQUIDITY MANAGEMENT
1) Cash
b) During the year under consideration, Bank hold average cash balance of Rs.
2471.90 lacs
As per above insurance policy 32 ATM centers were covered however total ATM
centers as on 31/03/2018 were 38.
Also average cash holding per ATM was Rs. 12 lacs but sum insured per location
was Rs. 4 lacs. Therefore insurance cover should be enhanced to that extent.
e) Cash has been maintained in Joint custody except in some cases where only one
man holds the custody.
a) The Bank has system of compiling and monitoring demand and time liability (DTL)
position in terms of RBI Act.
b) The Bank maintains record of CRR on daily basis to determine position of CRR. The
Bank maintains surplus position in CRR throughout the year. The Bank is regular
in reporting the position to controlling authority.
c) The Bank is reporting the SLR position through returns and online submission to
RBI Portal on regular basis to controlling authority.
d) The Board of Directors and CEO are taking regular review of position on CRR and
SLR. The Bank has system of ensuring compliance to the controlling authority.
e) As on 31st March 2018, position of SLR under section 24 and CRR under section 18
of the Banking Regulation Act,1949 is as under;
(Rs. in Thousands)
Particulars Amount Amount Surplus
required to be maintained by the
maintained Bank
Cash Reserve 626831 663341 36510
Liquid Assets 3055800 4598560 1542760
3) Repayment of Borrowings
a) As per byelaws clause No. 3.4 of the Bank, maximum borrowing limit is as decided
by the RBI/NABARD. As confirmed by Bank, RBI or NABARD has not
communicated borrowing limit.
b) During the year under consideration, bank has availed & repaid borrowed fund as
follows;
(Rs. in Lac)
Particulars Sanction Opening New loan Repaymen Outstanding
Amount Balance availed during t of loan Balance
1/4/17 2017-18 during 31/3/18
2017-18
ST Multipurpose 12000.00 0.00 5500.00 0.00 5500.00
Loan NABARD
UPNRM –NABARD
ST (SAO) MSC Bk 4200.00 4005.00 3250.00 4005.00 3250.00
Venture Capital 253.71 0.43 0.00 0.43 0.00
fund (interest free)
MSC Bank
MT Agri. Loan 3090.00 2719.80 3090.00 864.40 4945.40
MSC Bank
MT Non Argi. MSC 3410.00 2424.60 3410.00 818.80 5015.80
Bank
Long Term 0.00 2000.00 1000.00 0.00 3000.00
Subordinated
Deposits (LTD)
Society and
Individuals
Total 22953.71 11149.83 16250.00 5688.63 21711.20
As per schedule of borrowing, Bank had repaid all the installments without any
default.
4) Deposits
a) The Bank has laid down norms and guidelines for conduct and operation of
inoperative accounts vide circular No. Acct/Banking/75/29/F54/3067/ 2011-12
dated 30th November 2011.
c) The RBI has issued Directions u/s 35A of B.R. Act, 1949 (AACS) vide circular No
DBR.AML.BC.NO.81/14.01.001/2015-16 dated 25th February 2016 to follow
customer identification procedure under PMLA 2002 & PML (MR) Rule 2005.
Further, RBI has issued master circular on KYC Norms and norms of opening of
Bank accounts vide circular NO. UBD.BPD.(PCB) MC.NO.16/12.05.001/2014-15
dated 1st July 2014. In accordance with directions bank is implementing KYC
procedures.
Further, to directions issued by RBI in Feb 2016, Bank has categorized customers
under Low, Medium and High Risk category. Bank has not allotted Unique
Customer Identification Code (UCIC) to its customer. We observe multiple customer
IDs’ of a single customer. Some examples of multiple customers ID are as follows –
The Bank has updated KYC Policy in 2011. In our opinion, Bank should prepare
master (consolidated) KYC policy in accordance with the latest directions and
master circulars issued by RBI.
(Rs. in Lakh)
S Particulars As on As on Change
r 31/3/2017 31/3/2018 in %
1 Fixed Deposit
a) Individual’s 68881.33 66278.51 -3.78
b) Other societies 16950.40 21597.89 27.42
2 Saving Deposits
a) Individual’s 49765.42 57601.65 15.75
b) Other societies 3379.47 3669.09 8.57
3 Current Deposits
c) Individual’s 10696.16 18292.98 71.02
d) Other societies 434.81 459.16 5.60
Total 150107.59 167899.28 11.85
During the year under consideration, deposits have been increased by11.85%.
There is no unusual large movement in aggregate deposits.
f) Composition of Deposits and growth thereof as on 31st March 2018 are under;
(Rs. in Lac)
Sr Particulars As on As on Change in
31/3/2017 31/3/2018 %
1 Fixed Deposit 85831.73 87876.40 2.38
2 Saving Deposits 53144.89 61270.74 15.29
3 Current Deposits 11066.14 18686.59 68.86
4 Money at Call 64.83 65.55 1.11
Out of total deposit held by the Bank, low interest bearing CASA deposits are
47.66% (Prev Year 42.82%). The proportion of fixed deposits in total deposits
52.34%. As per banking industry norms, Bank holds good amount of CASA
deposits.
g) During the year, bank has introduced following new deposit schemes.
1. Suvarna Thev Yojana
h) The Bank does not hold any FCNR and other non-resident accounts.
j) The Bank has furnished information regarding receipt, disposal & pending
grievances in respect of internal grievance redressal system of PSB’s and FIS as per
circular MRO.DoS/9622/C & G/2014-15 dated 25th February 2015.
3) House Keeping
a) The Bank has placed system of monitoring the position of balancing of general
ledger and other books at regular intervals. The Bank has system of periodical
reconciliation of control and subsidiary records. The Bank has finalized the financial
statements well in time.
b) The Bank has maintained proper record of Demand Drafts payable, Demand Draft
paid without advice instrument wise. At regular intervals, the balance of
outstanding instruments is transferred to other ledger heads and to Head Office for
proper control.
c) The Bank has system of physical verification of security forms like cheque books,
FDR’s, Demand Draft, Money Transfer etc at regular interval and at the time of
inspection from the head office. In our opinion, method of verification and interval
should be fixed by the bank.
4) Inter-branch Adjustment/Reconciliation
a) The reconciliation of branch adjustments has been done at Head Office level. No
material delays and discrepancies were observed in preparation of bank
adjustments. Accounts department at Head Office prepares a monthly consolidated
summary for the Bank as a whole.
The bank has system for reconciliation of bank accounts on monthly basis. The bank
has prepared reconciliation statement and obtained confirmation letters from the
respective banks.
Branches have been permitted to operate the accounts with other Banks, mainly to
facilitate the clearing. There are no long outstanding entries of material amounts
pending in Reconciliation of Bank Accounts.
The details of balances held by the Bank in other bank accounts excluding Fixed
Deposits accounts are as under;
(Rs. in Lac)
Particulars Amount
Current deposit with RBI 645.57
Current deposit with MSC Bank 556.56
Balance with other banks 2577.76
Total…… 3779.89
Under the head, ‘Sundry Debtors’ amount of Rs.59,40,206.00 is shown as receivable. The
bifurcation of the same is as under;
Particulars Amount
Sundry Debtors at Head Office 58,51,626.00
Sundry Debtors at Branch level 88580.00
Total 59,40,206.00
7) As per our observation and checking, there are no long pending items in balance sheet,
which require special attention as on 31 st March 2018 except those mentioned
specifically in the report.
8) Bank inspection
a) During the year under consideration, Bank has implemented following types of
inspections;
Continuous Concurrent & Revenue Audit
Revenue audit – Online Inspection
Internal & Revenue Audit
Inspection of gold loan & security thereof
Checking by Vigilance officer
b) The Bank is conducting various inspections and audit mostly on six monthly bases
except Continuous cum Concurrent audit which is done on quarterly basis.
c) The inspection cell consists of total 14 persons details of the same are follows;
Manager - 1 No (from 01/10/2016)
Dy. Manager - 1 No
Asst Manager - 2 Nos
Banking Officer - 3 Nos
Jr. Banking Officer - 3 Nos
Clerk - 3 Nos
Peon - 1 Nos
d) The status of branch inspection, status of report and compliance made thereof as
on 31st March 2018 is as under;
The Bank has to modify and update its audit cell and other inspections according to
the need of the Bank. Branches has made due compliance of inspection report. The
Audit committee, constituted by the BOD, has taken regular review of compliance
offered by the branches and the committee has taken appropriate actions in time.
f) The Bank has system for supervision and monitoring the PACS. During the year
Bank has done inspection as follows;
The Bank has completed inspections 33.48% of PACS during the year. Last year it
was 85.22%. The coverage of inspection should be increased so that early detection
of incompletions / shortcomings could be made possible.
a) The information flows from the branches to Head office at periodical intervals in the
form of returns and statements. A department at Head office gathers all the
information and processes it in tabularized forms. Such processed information is
placed before the higher authority for review and comments.
b) The bank is regular in submitting off-site surveillance system (OSS) returns and
other external returns.
b) The Bank is reporting the frauds, misappropriations etc to the controlling authority.
c) The Bank has system of monitoring and reviewing the frauds, thefts etc.
d) The Bank has made 100% provision for frauds occurred in the bank.
e) The Bank has taken preventive measures to avoid recurrence of frauds by issuing
circulars No. Acct/B/75/28/80/2010-11 dated 10th April 2010 inviting attention of
all the branches to prevent frauds in gold loans.
The existence and effectiveness of risk management mechanism is vital for designing a
compatible internal control system to achieve the goals within the desired risk spread.
The Bank has to set up effective system to evaluate risk and take effective mitigating
measures.
a) Liquidity Risk
b) Credit Risk
Credit risk means the possibility of failure in repayment of loans by the borrower on the
due dates. Misjudgment of credit risk leads to non-recovery of loans. The deficiencies/
irregularities observed in the policies and procedures in relation to appraisal, sanction,
disbursement and monitoring of loans and advances portfolio, pertains the credit risk
faced by the bank. The deficiencies in loan scrutiny/appraisal, follow-up by the
branches, documentation, etc. amounted to non-compliance with prudent banking
practices. The bank was found to be sanctioning high value advances without
scientifically assessing viability of the project and examining the credit
worthiness/repaying capacity of the borrowing units, violating unit exposure norms
and improper moratorium period. The Bank should take concrete steps to bring down
the level of credit risk exposure by evolving strategies for further reduction in NPA.
(Rs. in Lac)
Sr Particulars Ratio Amount
c) Exposure Risk
The Bank has violated the unit exposure norms for sanction of loans prescribed by
NABARD in respect of its finance to D Y Patil SSK, Gaganbavada, Kumbhi Kasari SSK
Ltd , Kuditre, Sindhudurg Shikshan Prasarak Mandal. Further, Bank has disbursed
loans to Commercial Real Estate violating RBI norms. The Bank is facing exposure risk
for which it should take appropriate steps to mitigate it.
As per OSC-7 return prepared by the bank. The details of capital fund, risk assets
/exposure and risk assets ratio as on 31st March 2018
Sr Particulars Amount
(in Lac)
1 Capital Fund 12908.65
2 Total risk weighted assets 125284.23
3 Capital Fund to Risk weighted assets 10.30%
The yield on deployment of fund is increased from 9.41% to 9.49%. The details of net
interest income of the bank, is as under;
(Rs in lac)
Sr Particulars 31/3/2017 31/3/2018 Increase or
Decrease
1 Interest Income
On Loans & Advances 12011.88 13428.20 1416.32
On Investments 3283.91 4138.61 854.70
Total 15295.79 17566.81 2271.02
2 Interest Expenditure
On deposits 9056.69 9516.08 459.39
On borrowings 421.08 709.10 288.02
Total 9477.77 10225.18 747.41
3 Net Interest Income 5818.02 7341.63 1523.61
The net interest income is increased by 26.19% (Prev. Year increased by 6.44%) during
the year 2017-18.
e) Operational Risk
As per the BASEL committee norms, the operational risk in the Bank arises due to
failure of the people, systems and controls.
Though at present no major evil has occurred due to operational risk, considering the
future that would require facing fierce competition, complex technology, rigorous
statutory compliances and lesser protection; operational risk would shoot up. The
present systems and processes would no longer be helpful to control this risk. Hence, it
is suggested to comprehensively revamp the entire systems and processes to meet the
future challenges.
The Bank has not set up “Vigilance Cell’ as suggested by NABARD vide their circular
No. NB.DoS.HO.POL.3899/p-71/2005-06 dated 14th January 2006. The Bank has
nominated Dy. Manager as “Vigilance Officer” to carry out the working of vigilance cell.
The Board of Directors has approved scope of vigilance cell to align with NABARD
Circular during the board meeting Resolution no. 8 dated 27 th December 2013. During
the year under consideration, Vigilance Officer has visited 58 branches and carried out
checking and inspection of cash balance, security arrangement, sensitive stationery
and overall working of the bank.
VII. COMPLIANCE
As per the byelaws clause no. 11.43, Board of Directors has formed audit committee
consisting 5 members from Board. Vice Chairman of the Board is acting as
Chairman of the Committee. The Bank has inducted Mr. Ashok C Sarang,
Chartered Accountants w.e.f. 01/06/2017 as independent member on the
committee.
During the year, committee has conducted 7 meeting, discussing the various issues
as specifically mentioned in byelaws clause no. 11.43.b. The audit committee has
taken good efforts to exercise control over inspection and compliance thereof. The
committee is efficient and active in reviewing the compliance on observations made
by NABARD and regulating authority.
1) Section 6
The form of business in which the bank may engage is specified in Section 6.
The Bank had rented out its premises survey No. 792 at Sawantwadi to Janta
Vastu Bhandar Sawantwadi Consumer Cooperative Societies and Flat
No.520/E/1 in Sai Complex in violation of the provisions of Section 6 of the Act.
2) Section 9
The Bank is prohibited from holding any immovable property howsoever acquired
except such as is required for its own use for any period exceeding 7 years from the
acquisition thereof. The Bank did not comply with the provisions as under;
3) Section 35A
As per section 35A RBI has issued guidelines vide Master Directions DBR.AML.BC.
No.81/14.01.001/2015-16 dated 25th February 2016 under ‘Master Directions –
Know Your Customer (KYC) Directors 2016’. The Bank has partially complied the
guidelines mentioned in the circular. As per clause No 12 –Risk Management of
directions, the Bank has categorized customers into low, medium and high risk
category. But Bank has not allotted Unique Customer Identification code (UCIC) as
per directions. As informed to us bank is in process of allotment of Unique
Customer ID.
3. Provisions of Know Your Customer and Anti Money Laundering Act, 2002
(AML)
The bank has partially complied with KYC norms as issued by RBI/NABARD. Bank
is in process of allotment of Unique Customer ID.
As per circular, the bank shall continue to review the quality of their lending
to non credit cooperative societies/units outside the cooperative fold and
individuals, on a quarterly basis and submit a Memorandum thereon to their
Board.
6. The Bank has complied with the provisions of Section 44AB (Tax Audit) of the
Income Tax Act, 1961.
The Bank has implemented Core Banking Solution (CBS). The Bank is using OMNI
software developed by M/s Infrasoft Tech India Ltd., Mumbai as a core banking
solution. As on 31st March 2018, all the 98 branches have been covered under CBS.
During the year under consideration the bank has carried out Application Audit, Data
Base Audit & Network Audit. But compliance of the same is in progress.
Also it is suggested that following should be included in scope of CBS audit,
2. Application:-
Application audit of software installed is carried out by the bank from CISA
Auditor. Compliance of audit is under process. In our opinion bank should give
attention on points mentioned above to strengthen the CBS system.
The Bank has prepared written Information security policy. Information security
policy is most important document for a technology driven organisation. The Bank
should have installed proper system in place for quality and safety of data and reports.
The bank has formulated Business Continuity Plan (BCP). BCP is an important
area in order to offer uninterrupted services to customers and fulfilling regulatory
requirements of DR Site.
The bank has established Cloud Disaster Recovery site at Bangalore. Bank has
not taken Drill Test and not done audit of DR Site.
6. The Bank has opened 33(Thirty Three) ATMs up to 31st March 2017. During the year
under audit bank has opened 5(Five) ATMs. The Bank has not issued any technology
driven products and services like smart Cards, credit card etc during the period 2017-
18.
7. Bank has executed various AMC agreements for Data Centre, Administrator Nework,
Desktop & computer, Database management etc. We observed that SLA (Service Level
Agreement) is not provided for verification.
8. Customer ID :-
The Bank has not implemented customer ID Policy for all the accounts of a single
customer. Customer ID is the most necessary thing in the CBS environment to have
control over the customer accounts.
2) The Bank has formed committee namely “District Level Monitoring and Review
Committee” for monitoring the progress and execution taken under DAP/MOU. Total 6
members are included in the committee which includes representative of NABARD, RBI
and MSC Bank. The meetings of the committee are held during the year on quarterly
basis.
3) The performance of the bank as discussed in the meeting of the DLMR held on 24 th
April 2018 is as under;
(Rs. in Lac)
Sr Particulars As on 31st March 2018
Target Achievement % of
Achievement
1 Branches (Nos) 100 99 99.00%
2 Share Capital 3700.00 3731.41 100.85%
3 Deposits 156000.00 155355.16 99.59%
4 Loans & Advances 120000.00 127609.52 106.34%
5 Recovery of Loan (30th 85% 86.00% 101.17%
June)
6 Net NPA % 0.00 0.00 100%
7 C D Ratio 75.64% 72.89% 96.36%
4) Miscellaneous -
a) During the year under consideration, profitability of the Branches and head office is
as under;
(Rs. in lakhs)
Particulars No of Profit Loss
Branches
Profit making Branches 97 3272.98
Loss making branches 1 0.32
Loss at Head office 1 2272.66
Net profit of the Bank 1000.00
X. Audit Classification
NABARD has issued circular No. NB.DoS.HO.POL.No2743/J-1/2012-13 dated 12 th
October 2012 (Circular No 248.DoS.34.2012) regarding Audit Classification of CCBs and
revised certain norms/scales.
As per the norms, the bank has scored 90.20 marks out of 100 marks. The details are as
under;
As per the marks obtained by the Bank according to the criteria and parameters
fixed, Audit class “A” is awarded for the year 2017-18. The detailed statement of
marks obtained by the Bank is attached as annexure.
XI. Conclusion
In our opinion, bank has done overall good achievements and improvements in systems
and workings. The Bank is making good efforts to overcome the defects and deficiencies in
progressive manner. The overall supervision and control of the Board of Directors found
effective. The working of the committee is also very energetic and taking keen interest in
the business of the Bank.
(Cash Credit –Nokia 2017, Feb 2018 and March 2018 are not on
Dealership) record. Penalty of Rs.2800 \- per
Swami enterprises statement is not recovered.
2. Insurance of Stock is not on record.
3. Latest audited Financial Statements are
not on record.
4. As per Balance Sheet as on 31-03-
2016,there was loan of Union Bank of India
of Rs.22,00,982/46,NOC of Bank is not
obtained.
5. As per Email by Dekate Sachin from
tnsmobile dated 12-07-2017 , the
dealership is granted only for Ratnagiri
district. As informed to us by bank
officials, all stock is at Ratnagiri. Also as
per inspection report of bank inspector,
dated 08-11-2017 there was no stock on
given address. Additional place of business
is also not registered with GST
department. No control of bank on
hypothecated Stock.
6. Charge noted on 7/12 Extract is not on
record.
7. Poor credit appraisal.
8. Details of Stock are not mentioned in
hypothecation deed.
9. Transactions in account are made with the
signature of Shailesh Tirodkar, but consent
of other partner is not on record.
19824/539 400.00 1. PAN & GST number of company is not
Agro Tourism M. T. obtained.
Loan 2. Project land is on individual name of Ilyas
Dreamland Lawns A. Shaikh and Mariambi I Shaikh. Land is
(P) Ltd. not transferred in the name of Company or
leased to Company. Charge is not noted
with ROC.
3. Old loan of Ilyas Shaikh is closed by
Sanctioning loan to Company. Total loan of
Rs.4 Crore is sanctioned against
hypothecation of land of Ilyas Shaikh &
Mariambi I Shaikh. But loan of Mariambi
Shaikh is not closed. Both loans are
disbursed against same project. This shows
credit appraisal is not done properly. Loan
of Mariambi Shaikh should be closed, as
Project is run by the Company in which
Mariambi Shaikh is also a Director. This
shows double finance for same project.
4. Approved Plan is not on record.
existing law.
4. Legal search report is obtained as if the
seller of the land will be taking the loan.
But Bank should provide detailed
information to the panel advocates in a
standard form to avoid any miss-
communication and to get a clear cut legal
opinion considering all the aspects of the
loan proposal.
5. Scrutiny & Recommendation Report of the
Development Officer or Branch Manager
not on record.
20501/699 30.00 1. Detailed quotation for land development
Agri Land purchase expenditure not obtained.
& development 2. Loan is appraised on the basis of detailed
Umesh Gavade project report submitted by borrower for
doing nursery business. According to it,
the business is shown profitable from the
1st year itself. And there was no need for
moratorium period but still HO has
sanctioned the loan with moratorium
period.
3. Borrower has submitted quotation for
purchase of saplings etc. from his own
firm M/S Vaishnavai Nursery.
4. Payments for expenditure on land
development were not made directly to
the various suppliers as stipulated in the
sanction letter after taking bills/receipts
from them.
5. Charge noted 7/12 extract of the
mortgaged land not on record.
6. As per policy, maximum permissible bank
finance is 70% of project cost. Borrower
has submitted project for Rs. 40 Lakh &
Bank should have sanctioned Rs.28 Lakh as
loan. But excess sanction is done to the
extent of Rs. 2 Lakh.
Malvan City 17501/7 45.00 1. Audited financial statements are not on
Cash Credit record.
Sanskruti 2. RERA compliance documents are not on
Infrastructure record.
3. As per sanction letter condition no.13
margin calculation statements are not
submitted by borrower hence drawing
power could not be calculated.
4. Since year 2015 the project is not
completed till date. Construction activity
is very slow. As informed to us there is no
satisfactory.
5. As on 31/03/2017 Stock was of Rs.10.52
lac and as per stock statement of
December 2017 stock was Rs. 74.69 lac.
Which was drastically increased by Rs.
64.17 lac? Analysis of this increase was not
made while making scrutiny of the
proposal.
6. Poor credit appraisal.
7. Rs. 1.47 crores are receivable from sister
concern Sai Sea Foods, as per balance
sheet as on 31/03/2017.
Oros 17501/45 20.00 1. Operations in the account are not
CC for jeweler satisfactory. Original limit of Rs.
business 14,00,000/- was constantly overdrawn in
FY 2016-17. and as on 31/03/2017 account
was NPA.
19826 / 941 20.00 2. Account was made regular in April 2017 by
MT Loan granting 3 gold loans (Account No. 16601 /
Pandurang B. 2608, 2616 & 2623) and renewed with
Malvankar enhancement of Rs. 6,00,000/- on
02/05/2017 as per HO approval.
3. These Gold Loans also were closed by
using proceeds from enhanced CC limit
only.
4. Later on CC limit is converted into Medium
Term Loan (19826/941) on 29/03/2018
5. CC to MT loan is converted without
considering the borrower’s previous track
record and present repayment capacity. As
per latest available ITR & P& L Account of
FY 2015-16, turnover of the business is Rs.
12.25 Lakh and Net Profit is Rs.3.70 Lakh
only and EMI for the TM is Rs. 37,480/-.
Considering the current position of
business of the borrower, repayment of TL
seems to be very difficult.
6. CA certified Financial Statements not on
record for FY 2016-17.
7. Insurance cover for shop, stock of gold and
silver is not adequate.
8. One of the guarantors, Mr. R S Desai, has
not signed MT loan documents.
Osargaon 17501 / 4 100.00 1) Existing charge noting of Rs.100 Lacs with
Kokan Mahila Vikas MCA is not on record.
2) Additional charge noting of Rs.10 lacs is
not done.
3) Net loss of Rs.164.68 lacs as per audited
financial statement of 31.03.2017.
2.
20501/414 700.00 1. Loan disbursed for Agrl Land Purchase to
Agrl Land Long Partnership Firm.
Term 2. As per Circular No.25 of Bank Sindhu Jamin
Sankalp Siddhi Kharadi, Loan is to be disbursed to
Developers Individual or Co-operative Society only.
There is no provision of finance to
Outstanding Loan Partnership firm or company. Thus loan is
31/3/18 disbursed against the Loan Policy.
Rs.733.03 Lacs 3. As per Circular, 30% amount is to be
invested by borrower. Borrower has not
invested own contribution for purchase of
Land.
4. Search Report of property has not been
taken on record before disbursement of
Loan.
5. As per Loan proposal, 300 acre land is to
be purchased by borrower.
6. As per agreement kept on record for Land
purchase by borrower only 152 acre land is
purchased amounting to Rs.263.35 lacs.
7. The Bank has disbursed excess loan of
Rs.515.65 lacs without actual
utilization /purchase of Land by the
Borrower.
8. Bank has disbursed full amount to
borrower without being purchase of Land.
As per condition no 1 of sanction letter,
amount is to be disbursed as per purchase
of land. Bank has violated the
condition/terms of sanction letter.
9. Borrower has not mortgaged full land
purchased out of Loan. Thus Loan
becomes unsecured. Borrower has given
mortgage of partial land. As per condition
no 3 borrower has to mortgage land
amounting to Rs.900.00 lacs.
10. As per condition no 4, borrower has to
submit sale deed and mortgage deed
before disbursement of loan. Bank has
disbursed full amount without confirming
the condition.
11. Bank authority has not visited the location
of land and not submitted visit
report/inspection report on record.
12. As per condition no 11, borrower has not
submitted the full purchase deeds of land
to the Bank.
13. As per condition no 12, 2% deposit of Rs.14