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Audit Program for Concurrent Audit

Deposits/Accounting Opening/KYC





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All the documents required for opening of account as mention in account opening form(AOFs) should be obtained from the party and updated in the system

 

Copies of all the documents should be authenticated by the Branch officials noting that ‘Verified with originals’

 

For PAN card holders PAN number should be available

 

For Deposit accounts Form 15G/15H is obtained and should be updated in FINACLE

 

Branches have to obtain nominations while opening individual accounts and the same should be updated in the system

 

All the details in the account opening forms should be filled properly.

 

Beneficiary owner’s details should be obtained and updated in the account

 

Risk profiling of the customers is periodically done/ updated as per Bank’s guidelines

 

Account opening form should be properly filled.

 

Customer Id should have PAN number updated.

 

Form 15G/15H wherever applicable should be updated properly

 

Branch should conduct proper due diligence, obtain balance confirmation with the customers having considerable

Advances

 

General

 

If the growth in advances is abnormal in comparison to the earlier periods, Concurrent Auditors need to critically examine the reasons for the same and satisfy them that credit discipline has been maintained notwithstanding the spurt in advances

 

Loan applications received, disposed off register should be maintained by the branch.

 

Loan application should be properly filled, borrower’s, guarantors signatures should be available wherever required

 

Individual Assets & Liability statements of the borrower/s, guarantor/s should be filled properly, signed with date

 

Credit proposals received shall be dealt with and decision communicated to the applicants within a reasonable time

 

Proper due diligence should be carried out for new proposals. IT return verification, Due diligence and CIBIL report generation is must for all the loan customers

 

Search certificates from ROC should be ensured for eligible accounts before considering the proposals

 

Branch should obtain relevant documents in respect of customers who are legal persons/entities such as partnership, companies, societies, associations, trust etc. to determine who are the natural persons who ultimately control the persons /entities?

 

Revenue records (khesra, khata, etc.), and genuineness of title deed should be verified from related offices and report should be filed.

 

Branch should obtain confidential opinion/No Due Certificate/statement of account from previous Banker and examine to ascertain the indebtedness of the applicant/borrower/guarantor.

 

Branch should verify RBI Defaulters List, ECGC Caution List etc. to cross-check the previous indebtedness of the borrower and the guarantor

 

Assessment of external rating wherever applicable should be done as per Bank guidelines

 

As per Bank’s guidelines Internal Risk Rating should be carried out by the branch in respect of all eligible accounts from the Risk Rating Module

 

Genuineness / authenticity of balance sheets wherever applicable, should be ensured by the branch by enquiring from chartered accountants firm and report to this effect should be held on record and brought out in the process note.

 

Wherever applicable search reports from ROC should be obtained, verified for registration of charge and also in respect of existing charges. and held on record.

 

For loans above Rs.5 crore and housing loans above Rs.1 crore, obtain two LSRs and Valuation reports from two different / independent advocates / valuers (Large variation if any should be justified)

 

Advances granted under CGTMSE schemes are being misused. Therefore branch should take special care while processing these advances. Proper due deligence, unit inspection etc should be carried out by the branch and relevant report should be placed and referred in the process note. End use of funds should be monitored by the branch.

 

Search for prior charge has been obtained for immovable property through CERSAI at the time of sanction

 

Securities such as properties/stock/assets charged to the bank should be insured for full amount with bank’s clause and should be in force.

 

Sanction

 

Loan Officer should involve in the credit appraisal placing all the facts and figures to the sanctioning authority, through a process note

 

Sanctioning authority should exercise the sanctioning power deligently as per delegated/ discretionary powers accorded.

 

Branch should maintain sanction/rejection of loan proposals register sanction-authority-wise for the credit limits sanctioned

 

In case of exceeding the lending powers / overdrawing / adhoc limits allowed beyond discretionary powers, branch has to obtain ratification from the competent authorities and record to this effect should be held by the branch

 

Detailed process note with proper recommendation by officials and decision by the sanctioning authority should be available duly signed by the Sanctioning and recommending officials

 

Documentation

 

Branch should obtain necessary documents as per Bank’s guidelines which should be complete, valid, enforceable, and adequately stamped.

 

Latest premium paid receipt, surrender value calculation on the basis of which the amount is advanced, should be available on records, with proper discharge certificates/copy of the assignments.

 

Latest EC with bank’s charge noted should be available for immovable properties

 

Security / Charge Creation

 

For immovable properties taken as security, bank’s charge should be created by creating equitable Mortgage and memorandum should be registered with the concerned Sub Registrar’s Office wherever applicable. EC should be obtained and ensured that our charges are noted

 

During renewal of the limits with enhancements charge should be created for enhanced portion and fresh EC should be obtained ensuring noting of our charge with the enhanced portion.(wherever applicable)

 

Search Reports should be obtained before considering the renewal so as to ensure that no charge has been created in the intervening period by any other Bank/lending institutions to the detriment of the bank’s interest

 

Property mortgaged with the bank should be noted in the CERSAI as per Bank’s guidelines

 

Forms duly discharged and Charges should be noted with RTO for Vehicle loans

 

Loan against deposit

 

All the deposits taken should be properly discharged. Signatures should be verified with the account opening form.

 

Lien should be noted to all the deposit accounts taken as security

 

Differential rate of interest should be charged for LTD accounts where third party deposits are taken as security

 

Proper due diligence should be conducted by the Branch while advancing high value accounts

 

Housing Loan

 

Legal opinion from empanelled lawyer should be obtained in the bank’s format. LSR should be studied and any ambiguity should be noted and action should be taken. Process note should refer the LSR and necessary recommendations should be placed before the sanctioning authority. If the value of the property is more than 1 Crore, 2 legal opinions should be obtained and analyzed. LSR should accompany search report also.

 

Property mortgaged with the bank should be noted in the CERSAI as per Bank’s guidelines

 

Loan proceeds should be paid directly to the seller with proper acknowledgement. Proceeds should not be handed over to the borrower. In case of fresh purchase, Branch Manager/official should visit the Registrar’s office and handover the proceeds to the seller and obtain the documents after registration

 

Property documents listed as per LSR should be obtained and kept serially and safely along with the loan documents

 

Insurance cover for the property with bank’s clause should be available

 

Legal audit should be conducted and enforceability should be ensured and reports should be held on record

 

Risk Rating should be done as per extant guidelines and reports should be held on record.

 

Property inspection report should be on record.

 

Vehicle Loan

 

Latest CIBIL report of the constituent, partners, guarantors etc should be obtained and analyzed in the process notes. If any deviations are observed Branch has to justify/obtain specific approval from competent authority

 

ITR/Income proof of the borrower/guarantor should be available

 

RC with bank's clause should be available. Original Invoice, delivery challan and stamped receipt to be obtained

 

Insurance for the vehicle with Bank’s clause should be on record

 

Branch has to ensure the infusion of margin money by the borrower as per sanction terms.

 

Branch has to obtain an acknowledgement from the borrower for having taken delivery of the vehicle

 

Review/Renewal of limits

 

Latest Balance Sheet and other financial statements (audited wherever applicable) should be obtained and verified with the banks transaction. Variance if any should be probed and relevant noting are recorded and held on record. Projected balance sheet obtained previously should be verified with the actual

 

Pricing of loans (application of rate of interest) should be done as per prescribed guidelines and as per risk rating of the account wherever applicable

 

Eligible working capital limits, Annual review/mid-year review/other periodic review should be conducted as per Bank’s guidelines

 

Operation in expired limits should be allowed only with proper authorization from competent authorities

 

Stock Statements

 

Verified the stock statements due during the particular period.

 

Whether all the stock statement due during the period are received in time ie. 7th of the next month/quarter?

 

Whether penal interest is charged in case stock statements not received?

NPA/SMA Management

 

QMC (Quick Mortality Cases), if any Loan Account becoming NPA within one year of sanctioning. These accounts should be verified for the reason of becoming NPA. Branch should take immediate steps to bring back the account or recover the amount in full

 

Branch has to take steps to take physical possession under SARFAESI in eligible cases

 

Auditors should also ensure that branch has taken relevant step for recovery of o/s balance.

 

Accounts which has been classified as SMA or PNPA should also take due care to secured such accounts from becoming NPA

 

Whether the SMA accounts has been correctly reported in system generated SMA report, and if not verified all such accounts manually to correct classification of accounts.

 

List of term loan (excluding NPA) with more than one defaulted installments should be checked to determine whether all principal and interest are received in time as per its repayment scheduled.

Suit Filled Cases/ Nominal Accounts

 

In suit filed cases/DRT cases, proper follow up should be made with advocate/DRT for speedy disposal of cases

 

Suit filed details should be updated in the accounts

 

Outstanding entries over 3 month under nominal accounts should be verified and mention in report.

Revenue Leakage

 

Rate of interest should be charged as per sanction terms/scheme terms only. Penal interest should be charged as per guidelines

 

Collection of prescribed charges/ fees/ commission in case of Non fund based facilities should be ensured as per Bank’s guidelines

 

Processing charges should be collected on pro-rata basis for the broken period as per Bank’s guidelines

 

Documentation/CIBIL/CERSAI/inspection/folio charges should be recovered as per bank guidelines.

 

Whether branch has taken step to recover locker rent in arrears, if any?

Statutory Compliance

 

Whether branch has complied with TDS/TCS provision regarding deduction and timely payment of TDS deducted?

 

Whether branch has submitted Form-15G/H on time to income tax dept online?

 

Whether quarterly statements of TDS have been filled in time?

 

Whether the provision of reverse charge on service tax is applicable, if yes, whether it is complied or not?

By CA Anmol Chaurasiya

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