value addition to articles doing Bank audits

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This is Raghu.

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ADVANCES

NPA
DOCUMENTATION
REVENUE LEAKAGE

NPA (NON PERFORMING ASSET):

PROCEDURE FOR IDENTIFICATION OF NPA:

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

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.