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    Educative Series Part 5

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    Ps Padhu
    This document lists major lapses and irregularities that may be noticed during branch inspections of banks. It outlines issues that could be found in areas such as application processes, pre-sanction screening, sanctioning, documentation, charge creation, disbursement, post-sanction follow up, and general operations. Some examples given include incomplete applications, lack of proper documentation, non-compliance with legal and regulatory requirements, inadequate security, and irregularities in loan disbursement and repayment. The document serves as a checklist for inspectors to evaluate loan processes and identify any deficiencies or non-compliance at bank branches.

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    Download as PDF, TXT or read online from Scribd

    Educative Series Part 5

    Uploaded by

    Ps Padhu
    34 views4 pages
    This document lists major lapses and irregularities that may be noticed during branch inspections of banks. It outlines issues that could be found in areas such as application processes, pre-sanction screening, sanctioning, documentation, charge creation, disbursement, post-sanction follow up, and general operations. Some examples given include incomplete applications, lack of proper documentation, non-compliance with legal and regulatory requirements, inadequate security, and irregularities in loan disbursement and repayment. The document serves as a checklist for inspectors to evaluate loan processes and identify any deficiencies or non-compliance at bank branches.

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    Educative Series Part 5

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    This document lists major lapses and irregularities that may be noticed during branch inspections of banks. It outlines issues that could be found in areas such as application processes, pre-sanction screening, sanctioning, documentation, charge creation, disbursement, post-sanction follow up, and general operations. Some examples given include incomplete applications, lack of proper documentation, non-compliance with legal and regulatory requirements, inadequate security, and irregularities in loan disbursement and repayment. The document serves as a checklist for inspectors to evaluate loan processes and identify any deficiencies or non-compliance at bank branches.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views4 pages

    Educative Series Part 5

    Uploaded by

    Ps Padhu
    This document lists major lapses and irregularities that may be noticed during branch inspections of banks. It outlines issues that could be found in areas such as application processes, pre-sanction screening, sanctioning, documentation, charge creation, disbursement, post-sanction follow up, and general operations. Some examples given include incomplete applications, lack of proper documentation, non-compliance with legal and regulatory requirements, inadequate security, and irregularities in loan disbursement and repayment. The document serves as a checklist for inspectors to evaluate loan processes and identify any deficiencies or non-compliance at bank branches.

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    The Lakshmi Vilas Bank Officers’ Association

    (Affiliated to AIBOC) (Regd. No. 14/SLM)

    Email: [email protected]

    EDUCATIVE AWARENESS
    Part-5 28.09.2017

    Major Lapses and Irregularities noticed at the time of Branch Inspection


    Nature of Lapse/Irregularity

    Application & Annexure


    Application Blank/Incomplete
    Photo of the Borrower and/or Co-obligant/Guarantor not on record

    KYC documents to the satisfaction of the bank not obtained

    F.NO -111 Assets & Liability Blank / Not filled in properly


    Proof of Income not on record / Not reliable
    Statutory Licences and Approvals not obtained
    Power Connection and with required load not available
    Quotations/ Proforma Invoice from an approved dealer/producer not
    submitted
    Lease Agreement is not registered (not applicable for small loans)

    Pre-Sanction Screening
    Credit Investigation Report/Due Diligence Form not on record

    Pre-Sanction Unit Inspection not on record


    CIBIL Report not on record
    Existing Loans and Other Liabilities of the Borrower not taken into account fully

    Credit Information Report from the existing banker not obtained

    ‘No Dues Certificate’ from the present banker not obtained

    Borrower has not submitted satisfactory proof as to the source of funds to pay the
    margin money, if the loan gets sanctioned
    Appraisal
    Process Note not on record
    Process Note not in the standard format
    Process Note not signed by the Appraising Officer
    Process Note has not covered all relevant points
    Credit Rating/Personal Banking Score not on record
    No satisfactory proof for required capital infusion
    Projections made are exaggerated and not achievable
    Major deviations from the rules/guidelines of RBI and Loan policy of the bank are
    observed.
    Name of the Borrower and/Co-obligant/Guarantor appearing in CIBIL/Caution
    List/Wilful Defaulters’ List/ECGC’s Specific Approval List

    “Risk comes from not knowing what you're doing.” Warren Buffett Page 1
    Nature of Lapse/Irregularity
    Sanction
    Loan sanctioned does not fall within the branch powers
    Sanction Letter not on record
    Sanction Letter has not incorporated all the standard terms and
    conditions
    Sanction Letter not signed by the sanctioning authority
    A copy of the sanction letter not handed over to the borrower
    Borrower and Co-obligate/ Guarantor not acknowledged the terms of
    sanction
    Legal
    In case of Sale Deed executed by the GPA Holder, prior approval from Le g al
    D e pa r tme n t was not obtained.
    Legal Opinion not on record
    Supplementary Legal Opinion not on record
    Certified copies of title deeds and Search Report not on record
    Legal Audit not conducted
    Compliance to legal audit remarks not submitted to R O/ C O
    Documentation
    All the documents as per terms of sanction not obtained
    Employer’s Letter of Undertaking for recovery of loan instalments from the
    monthly salary and/or terminal benefits of the borrower not obtained
    Undertaking Letters and Affidavits (where required) not obtained from the
    borrower
    Post date cheques / ECS mandate not obtained
    Documents are blank/ incomplete
    Documents not signed / All pages of the loan documents not
    signed
    All parties to the loan transaction not signed the documents
    Details of assets financed by and charged to the bank and the
    percentage of Margin thereon not clearly and correctly mentioned in the
    Composite
    DocumentsAgreement
    are not stamped
    Special Adhesive Stamps affixed on the documents not defaced
    Stamps affixed defaced without date

    Documents not shown to the inspector of branches during the inspection which
    gives room for other angles in the inspectors mind.

    Adequacy of insurance cover on the assets charged to our Bank to be ensured.

    F.460 not submitted for the excess drawings/TOD /BPC allowed to the borrowers.

    Documents not obtained on Renewal/Enhancement/ Sanction of


    additional facilities
    Charge Creation
    All documents mentioned in the Legal Opinion not obtained

    Entries not made in Title Deeds Register chronologically


    EMD not registered with the SRO concerned
    Mortgage not registered for the aggregate amount of all limits in force
    EC after registration not obtained to confirm the charge on the properties
    mortgaged in favour of the bank

    Registration with ROC not done


    Certification of Registration not obtained
    Proof of registration of mortgage with CERSAI not on record

    “Risk comes from not knowing what you're doing.” Warren Buffett Page 2
    Disbursement
    Pre-disbursement conditions not fulfilled
    Borrower’s margin not ensured
    Disbursement made in cash – partly or fully
    Loan amount directly credited to borrower’s running account
    Disbursement in instalments was not made in accordance with the
    progress of the project/stage of construction
    Margin money of the borrower was not ensured at the time of release of
    each instalment
    Reimbursement made for the purchases made in the past, where
    such action is not specifically allowed, as per the loan policy guidelines
    OCC Limit was released, before the commencement of commercial
    operations
    Post Sanction
    Cash Bills/Stamped Receipts not on record
    Post sanction inspection not conducted
    Name Board of the Unit not displayed
    Bank’s Name Board not exhibited at a prominent place
    In case of Vehicle Loans, registration with RTA not done and a copy of the
    RC Book with name of the bank not submitted to the bank
    Duplicate Key for the vehicles financed not on record
    Insurance of all securities (primary/collateral) not done for full
    value/policies are not in force
    Hypothecation clause in favour of the bank not found in the insurance
    policy
    Branch has not reported the sanction in the ADA for the relevant month
    Certificate of Compliance with sanction terms and conditions not
    submitted to R O/CO

    Operations in the account


    Operations in the account are too low
    Frequent cash withdrawals are noticed
    Cheques are issued for purposes that are not connected to the line of
    activity of the borrower
    Frequent transfers to personal accounts of the
    borrowers/other accounts in the same group observed
    Funds are diverted to investment in capital market, gold and real estates

    Stock statements not submitted regularly


    Statement of Book Debts not submitted regularly
    Book Debts statement not certified by a qualified
    Chartered
    Interest Account
    and every quarter
    other charges debited are not paid promptly
    Instalments are not paid regularly as per schedule
    Liability outstanding is less than the Limit and/or DP
    Excess drawings are allowed frequently
    Excess drawings and Ad hoc limit are sanctioned simultaneously
    Excess drawings and/or Ad hoc limit are not adjusted within the
    stipulated time
    Cheques issued to the vendors are returned unpaid on many occasions
    Cheques/ Bills returned unpaid are not adjusted immediately
    Cheques issued by the Debtors of the Borrower are returned unpaid
    Devolvement of L.Cs / Invoking of Bank Guarantees noticed

    Limits are overdue and operations are being allowed

    “Risk comes from not knowing what you're doing.” Warren Buffett Page 3
    Post sanction follow up
    Sales turnover and profit projected in the proposal not achieved even to
    the extent of 80%
    Regular unit inspection is not conducted and a register is not kept for
    unit inspected

    Demand notices are not sent for recovery of bank dues


    Latest Audited financial statements are not obtained and reviewed

    Term Loans are not reviewed periodically


    Balance confirmation letters are not obtained at half- yearly intervals for
    working capital loans
    AOD not obtained for term loans
    Present status of the account

    Unit is not working


    Primary security is not available
    Borrower is not traceable
    Account is in NPA/Doubtful category
    Suit filed for recovery
    Case filed in DRT for recovery
    Proceedings under SARFAESI Act initiated
    General Remarks
    SOC not submitted in almost all the branches and have a habit of submitting to
    controlling offices after the findings of the IOB’s.

    More firm and sure the hand of courage


    strikes, when it obeys the watchful eye
    of caution.
    James Thomson

    “Risk comes from not knowing what you're doing.” Warren Buffett Page 4

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