value addition to articles doing Bank audits

Internal Audit 4568 views 15 replies

Hai friends.....

This is Raghu.

I hope this serves all the articles in the Bank Audits.

CHECK IT OUT, BYE

ADVANCES

  • NPA
  • DOCUMENTATION
  • REVENUE LEAKAGE

NPA (NON PERFORMING ASSET):

PROCEDURE FOR IDENTIFICATION OF NPA:

  1. EXISTING NPA: IF ANY ACCOUNT HAS FALLEN INTO NPA IT HAS TO BE KEPT IN THE NPAs LIST. BY SEEING IN THE NPA LIST WE CAN IDENTIFY THE EXISTING NPAS

  1. PROBABLE NPA: GENERALLY A LOAN ACCOUNT BECOMES NPA IF .

    • THE PARTY FAILS TO PAY 3 INSTALLMENTS CONTINOUSLY
    • OVERDUE AMOUNT >3 (GREATER THAN 3)

INSTALLMENT AMOUNT

IF ANY ONE OF THE ABOVE CONDITIONS ARE SATISFIED THEN THE ACCOUNT SLIPS IN TO NPA STATUS

TREATMENT OF RECOVERIES IN NPAs:

IF ANY AMOUNT IS RECOVERED SUSEQUENTLY FROM NPA ACCOUNTS, THE AMOUNT SHALL FIRST BE ADJUSTED TO THE INTEREST AMOUNT OUTSTANDING AND THEN TO THE PRINCIPAL ANOUNT, IF ANY REMAINED.

IN CASE OF NPA ACCOUNTS, THE INTEREST ON LOAN ACCOUNTS SHALL NOT BE RECOGNISED ON ACCRUAL BASIS.WHEN SUBSEQUENT RECOVERIES ARE MADE, THE INTEREST WILL BE CHARGED FROM THE DATE WHEN THE ACCOUNT BECAME NPA TILL DATE.

BORROWER- WISE NPA:

IF ANY CUSTOMER LOAN ACCOUNT BECOMES NPA THEN ALL THE LOAN ACCOUNTS OF THAT CUSTOMER HAS TO BE TREATED AS NPA ACCOUNTS.

TRACK ON RECOVERIES IN NPA:

  • IS RECOVERY IS MADE BY SANCTIONING THE FRESH LOAN TO THE CUSTOMER AND TRANSFERRED THE AMOUNT FROM THAT ACCOUNT TO THE NPA ACCOUNT.

  • WE ALSO HAVE TO CHECK WHETHER ANY OTHER LOANS ARE SANCTIONED TO THE BORROWER WHOSE ADVANCES ARE ALREADY IN NPA/ PROBABLE NPA.

TECHNICAL NPA:

A LOAN ACCOUNT (CC ACCOUNT)BECOMES AN NPA IF STOCK STATEMENTS, BOOKDEBT STATEMENTS ARE NOT RECEIVED FOR 3 MONTHS UNDER TECHNICAL GROUNDS. THIS IS BECAUSE WITHOUT THE AFORESAID STATEMENTS, DP (DRAWING POWER) OF THE BORROWER CANNOT BE CALCULATED.

DOCUMENTATION:

  • IN CASE OF CASH CREDIT (CC) ADVANCES, ENSURE THAT FOLLOWING DOCUMENTS ARE HELD ON RECORD

v STOCK STATEMENTS EVERY MONTHLY

v BOOKDEBT STATEMENTS EVERY MONTHLY

v MONTHLY VAT (VALUE ADDED TAX) RETUTNS

v INSURANCE COVER IS FOR ADEQUATE AMOUNT AND IS VALID IN THE CURRENT PERIOD

v AUDITED FINANCIAL STATEMENTS FOR THE LATEST FINANCIAL YEAR END.

v PROJECTED BALANCE SHEET & PROJECTED PROFIT &LOSS ACCOUNT, CASH FLOW, FUNDS FLOW….

v EQUATED MORTGAGE REGISTER IS BEING MAINTAINED.

v NON ENCUMBRANCE CEERTIFICATES WHENEVER FACILITIES ARE EXTENDED OR ACCOUNT IS RENEWED

v VALUATION REPORT BY AN ENGINEER

v LEGAL OPINION BY AN ADVOCATE.

  • IN CASE OF ANY OTHER LOAN ACCOUNT ENSURE THAT ALL THE REQUIREMENTS ARE DULY CIMPLIED WITH SUCH AS DOCUMENTS TO BE MAINTAINED AS PER THE BANK POLICY AND SUCH OTHER REQUIREMENTS.

REVENUE LEAKAGE:

THE FOLLOWING CHARGES HAVE TO BE LEVEID ON ALL THE LOAN ACCOUNTS:

  • PROCESSING CHARGES AT THE TIME OF SANCTIONING THE LOAN
  • ADMINISTRATIVE CHARGES EVERY QUARTERLY
  • PENAL INTEREST FOR LATE PAYMENT OF INSTALLMENT AMOUNT. IN THE CASE OF CC ACCOUNTS, PENAL INTEREST IS ALSO CHARGED FOR LATE SUBMISSION OF STOCK STATEMENTS, BOOKDEBT STATEMENTS
  • WE HAVE TO CHECK WHETHER THE RATE OF INTEREST HAS BEEN CORRECTLY ENTERED IN TO THE SYSTEM. IF RATE OF INTEREST ENTERED IS LOWER THAN THE RATE TO BE CHARGED, IT ALSO AMOUNTS TO REVENUE LEAKAGE.
  • INSURANCE CHARGES IF POLICY IS TAKEN ON BEHALF ON THE BANK
  • IF THE ACCOUNT IS CLOSED BEFORE THE PRESCRIBED PERIOD, ENSURE THAT PRECLOSURE CHARGES ARE BEING LEVIED.
  • OTHER CHARGES HAVE TO BE PROPERLY CHARGED AS PER TERMS AND STIPULATIONS. FOR EG: CHEQUE COLLECTION CHARGES, CHEQUE BOOK ISSUE CHARGES ETC.
Replies (15)
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Hi Raghu You have done a marvellous job by contributing such a valuable information
Hi raghu, Thanks for the info.
ya your information was too gud
Hi Friends, Here, i would like to add few more aera's in relation to Revenue Leakage:- 1.Penal Int. for C/C & OD a/c's if o/s exceeds D.P. 2.Wheter Int. rate is revised in case of loans against FDR's when FDR's are renewed at the rate diffrent from the rate applied earlier. 3.Penal Int. for non-submission of Financial Statements in some cases. 4.Inspection Charges for C/C accounts.
useful information
thanks raghu its valuable information
thanx a lot mate.. i have just joined my tranning and my firm having mainly bank audits.. so its gonnna help me a lot.. thanx again
dear friend shiv i have not so much experience of bank audit but sorry to say, i think penal intt for non submission of documents and for DP exceeding limit is not treated as revenue leakage.. is'nt it?????
hi harpreet ,i think u r right it is not a revenue leakage .
wow Its too gr8. gr8 work raghu . Thx a lt.
WHAT DO U MEAN BY EQUATED MORTGAGE REGISTER

I want to know abt BAnk audit that penal int is charged on sanction limit or o/s bal?????

Penal Int. is Charged on the Amount which is in excess of Sanctioned Limit or D.P. where D.P. is less than Sanctioned Limit. But in case of non submission of stock statement Penal Interest is charged in addition to normal on daily basis.


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