Co operative Bank audit regarding cc renewal

You're raising a practical audit question related to Co-operative Bank loan renewal and mortgage property re-registration due to the expiry of the 15-year registration period.

Let’s break it down and guide you on:

1. How the auditor should treat the situation

2. What documentation/references to look for

3. How to ensure the loan remains compliant and secured

🔍 Situation Summary:

• Loan: Cash Credit (CC) facility renewed on 01.04.2023

• Mortgage property: Completed 15 years on 22.04.2023

• As per bank policy or local regulation:

  Mortgage registration is valid for 15 years, after which property title needs to be re-registered (i.e., re-mortgaged or fresh charge creation).

✅ Auditor's Perspective

As an auditor, your primary concern is:

1. Whether the mortgage continues to be valid and enforceable post 15 years

2. Whether the bank has renewed the loan without compromising the security

3. Whether re-registration is done or at least initiated

4. Whether sanction/approval and documentation are in place as per RBI/State Co-op norms

📌 Key Points to Check and Comment On

1. Sanction Letter & Security Clause

• Review the sanction/renewal letter dated 01.04.2023:

  • Does it mention that the mortgage needs re-registration after 15 years?

  • Is it conditional upon re-registration?

2. Security Validity as on Renewal Date

• As of 01.04.2023, mortgage is still within 15-year validity, so technically valid.

• However, since expiry is within three weeks, it’s a high-risk observation.

🔎 Audit Note: The security is technically valid on renewal date, but the very short residual life of mortgage raises concern over enforceability unless re-registration is done immediately.

3. Re-registration Process

• Verify if:

  • Re-registration was initiated or completed on or after 22.04.2023

  • Charge was created afresh in the registrar records

  • Memorandum of Entry (MoE) or new mortgage deed is available

📌 If not done, it is a reportable observation under audit.

4. Compliance with Co-operative Bank Guidelines

• Refer to:

  • State Co-operative Societies Act / Banking Regulation Act (as applicable)

  • RBI Circulars on renewal of working capital limits and security documentation

  • Internal bank Board policy or Credit Manual

You can mention:
"As per prevailing norms and banking practices, renewal of CC facility should be supported by valid enforceable security at all times."

📚 Reference Material to Check

✍️ Suggested Audit Reporting Language

You can include an observation like:

Observation:
The CC account of borrower XYZ was renewed on 01.04.2023 against mortgage of property which was due to complete its 15-year registration validity on 22.04.2023.

As per bank policy, mortgage security needs to be re-registered after 15 years.
While the mortgage was technically valid on renewal date, the close proximity of expiry required proactive steps for renewal of the mortgage.

On verification, [re-registration was done on __ / not yet done as of __].

Recommendation:
The bank should ensure timely re-registration of mortgage to maintain continuity of security enforceability and avoid potential legal risk.

✅ Summary Checklist for You