Monitoring & Follow Up of Advances: H S Sharma, Guest Faculty, IIBF
Monitoring & Follow Up of Advances: H S Sharma, Guest Faculty, IIBF
Monitoring & Follow Up of Advances: H S Sharma, Guest Faculty, IIBF
H S Sharma,
Guest Faculty, IIBF
Learning Objectives
1. What/ Why/How of Credit Monitoring,
2. Different Stages of Credit Monitoring
3. Precautions required in Insurance/ Valuation/
Legal opinion/ Inspection
4. Onsite and Off Site Monitoring Tools
5. SMA Accounts
6. Early Warning Signals
7. Non Cooperative Borrowers
8. Sharing of Experiences
9. Recap
Credit Monitoring
CAMELS:-
(Capital Adequacy, Asset Quality, Management, Earnings, Liquidity,
Systems and Controls)
STAGES OF MONITORING:
STAGE I AFTER SANCTION AND PRE-DISBURSEMENT.
STAGE II DURING DISBURSEMENT
STAGE III AFTER DISBURSEMENT
What do we do on receipt of sanction?
1. Verifying Material change subsequent to submission of
proposal.
3. Conveying Sanction.
On Receipt of Sanction
Verifying material change subsequent to submission of
proposal?
o In constitution
o Other changes
Verifying Terms and Conditions of sanction-
o Purpose?
Conveying Sanction
o Acknowledgement
o Convey/discuss with the borrower
o Explaining T&C
o Bank Requirement
o Stock statement/ review/ charges
Obtaining Legal Opinion
Legal Opinion- Points
o Any Example?
Obtaining-Valuation Report
Valuation Reports – Points
o Empaneled valuers,
o Declaration from valuers (Not Relative/associated),
o Better to see the property,
o Sometimes two valuations required, Large Account/
large plants like- Mines & Minerals etc - Specialist
valuer capable to value-
o Institution of valuers- Publishes journals
o https://www.institutionofvaluers.net/
o Any Example?
OBTAINING QUOTATIONS/INVOICES
.
OBTAINING QUOTATIONS/INVOICES ETC-
o Due Diligence,
o Who is supplier,
o Supplies in the past,
o Competent to supply,
o Genuine quotations,
o Duly signed quotations
o Any Case to share?
INSPECTION OF COLLATERAL SECURITIES
A Good disbursement
can make a
BAD sanction GOOD.
CREDIT MONITORING AFTER DISBURSEMENT
Various components of
monitoring after disbursement ??
Credit Monitoring after Disbursement
Insurance:-
Timely Insurance
Timely renewal
Adequate Insurance – Generally 110 % of peak level
Claim rules
In case of lesser insurance than the stock available-
(Insurance Amount x Actual loss/ Value of security)
Adhoc Limits
Take-over of accounts
Bank clause
Clauses in Hypothecation Agreement
MONITORING AFTER DISBURSEMENT. Contd..
INSPECTION OF SECURITIES
Do it seriously,
Tighten the inspection procedure
Seeing is believing
Inspection..Points to note
1) Inspection to be done at stipulated intervals.
2) Verification of bank’s internal records before going for inspection
including previous inspection report.
3) Inventory control system employed by the borrower to be studied.
4) Whether consistent and accepted accounting principles are adopted.
5) Stocks declared in the stock statement to be verified with actual
stocks and records.
6) Receipts and invoices etc should be verified to ascertain the value of
goods
7) Overdue debtors to be verified to ascertain the reliability thereof.
8) Whether borrower is meeting statutory liabilities.
9) To check labour relationship.
10) Conditions of the machines to be examined.
Stock Statements- Important Issues
Why?
When?
How?
MONITORING AFTER DISBURSEMENT. Contd..
MONITORING BY CONTROLLING OFFICES
o Periodical Meetings/visits
o Meetings with Advocates/Valuers/Auditors
o Compliance of Terms & Conditions
o Returns/ statement by branches
o Exist or Exit
o Exit if future is not good-
o EWS, Use economic intelligence, Foreseeing now,
RECEIVABLES STATEMENT
QIS/QPR (FFR-Financial Follow-up Report)
INTERNAL/OTHER INSPECTION REPORTS
CONSORTIUM MEETING MINUTES
FINANCIAL STATEMENTS
Framework for dealing with loan frauds-
RBI guidelines 2015 (7/5/2015)
Objective- to direct focus of banks on aspects relating to:
1) Prevention of frauds,
2) Early detection of frauds,
3) Prompt reporting of frauds to the RBI
Challenge of maintaining
the quality of Loans
can be met through a
MEANINGFUL
Monitoring of the Credit Facilities
RECAP Some Questions
1. Objectives of Credit 11. Monitoring through account
Monitoring ? operations?
2. How banks are rated by 12. Inspection of securities-
Regulator? Important points?
3. When credit monitoring 13. Stock Statements- Important
starts? issues?
4. What do we do on receipt of 14. Physical Verification of
sanction? Vehicles- Points
5. Cares in Quotations? 15. Credit Audit/ Loan Review
6. Cares in inspection of mechanism LRM?
collateral securities? 16. Annual review- Exist or Exit
7. Cares in documentation? 17. Credit Monitoring Policy
8. Validity of sanction?
9. Off site tools of credit
monitoring?
10. On site tools of credit
monitoring?