Professional Documents
Culture Documents
15 September 2010
Dear Sir,
As you are aware, as a leader of the Cooperative Credit System in the State and as per
the provisions of the State Cooperative Societies Acts/Rules/Bye Laws, State
Cooperative Banks (SCBs) are required to conduct inspection of District Central
Cooperative Banks (DCCBs) affiliated to it. Further, as a lender, the SCBs also conduct
inspection of Apex Societies financed by it.
2. Recently, NABARD had conducted a few studies to ascertain the areas covered by
the SCB in such inspections. The studies had revealed that there was no uniformity
across the SCBs in the periodicity, scope, contents and coverage of inspections. The
Board of Supervision (BoS) for SCBs, DCCBs and RRBs which had reviewed the study
findings had directed that NABARD should prepare model guidelines for inspection of
DCCBs, branches of SCBs/DCCBs and affiliated societies by the State Cooperative
Banks for their guidance.
3. Accordingly, NABARD had prepared draft guidelines which was duly approved by the
BoS in its meeting held on 29 June 2010. A copy of the same is enclosed for your
information and necessary action, together with a CD containing soft copy of the
guidelines.
4. The guidelines are prepared in two parts Part I containing Guidelines for Inspection
of DCCBs and Part II containing areas to be looked into while conducting inspection of
branches of SCB, DCCB and affiliated societies. Proformae of statements that may be
called for from the DCCB before taking up inspection are also suggested in Annexure-I to
III. The same may be adopted with modifications suiting to the bank specific needs. The
periodicity of inspection, composition of inspection team etc., have also been left to the
discretion of the SCBs / DCCBs. Banks may therefore prepare their own policy
guidelines for the same.
5. The guidelines are only illustrative and not exhaustive. SCBs / DCCBs may
incorporate suitable modifications as per their requirements and adopt the same with the
approval of their respective Boards. They are also advised to translate the guidelines into
local language for the guidance of the officers / staff undertaking inspections.
6. Please acknowledge receipt to our Regional Office and advise them of the action
taken by your bank, at the earliest.
Yours faithfully,
Sd/-
(G.C.Panigrahi)
Chief General Manager
CHAPTER:1
OBJECTIVES OF INSPECTION
c. To assess that the bank's performance in various banking activities are being
conducted in conformity with the provisions of the relevant acts, rules, regulations
etc.
e. To ensure that the assets are safeguarded and liabilities are properly
controlled.
i. Management is able to identify and assess the risks to the business and ensure
efficacy of the risk management system of the bank.
In the present context, the inspection strategy should aim at including the
effectiveness of supervision over banks and also to ensure that the Inspection Reports
serve as an useful management tool for banks. The focus of Inspection should be on the
core areas of the bank's function mainly Capital Adequacy, Management, Earnings,
Liquidity, Systems and Controls (CAMELS).
The important roles of the Inspection Team are to ensure improvement in the
systems, operational efficiency and financial soundness.
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CHAPTER: 2
a. Inspection coverage:
1. Asset quality
2. Solvency and Capital Adequacy
3. Liquidity
4. Borrowings
5. Earnings
1. Introduction
2. Financial position - Data
3. Examination of Assets & Liabilities
4. Profit and Loss Account
5. Internal Checks and Control Systems
6. Management
7. Developmental Initiatives
Broad areas to be covered in the inspection report under each of the above items are
indicated below for the information of the Inspecting Officers. Guidelines for inspection
of branches are covered under part II and various aspects to be examined at the time of
visit to Societies are covered in Annexures.
1. Introduction
When the bank was established and commenced its operations
Area of operation and branch net-work
2
No. of societies affiliated to the bank
Position regarding audit of the bank and audit classification
No. and names of branches visited by the Inspecting Officer
Staff position of the bank
Audit position of the bank
2. Financial Position
Data may be furnished on the main items of Assets and Liabilities, Profit and Loss
Account, Capital adequacy, compliance with various provisions of the Banking Regulation
Act 1949 (AACS), State Cooperative Societies' Act / Rules & Bye-laws, etc.
(a) Assets
Direct loans
Classification as per priority Sector General Ledger Heads, Loans to SC/STs, SF/MF,
Minorities, Women
i. Farm Sector
ii. Non Farm Sector
iii. Staff loans, jewel loans, others (non-priority sector loans)
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(c) Direct Loans like Jewel Loan, Loans against deposits, NFS Loans, Staff Loans,
etc.
iii) Investments
4
v) Recovery of Loans:
Total Demand
Total Collection
Balance ( Percentage of overdues to demand)
Cash Credits and Overdrafts Outstanding
Of which, unrenewed Cash Credits/Overdrafts
Total overdues
viii) Imbalance:
Examine whether the borrowings made by the affiliated societies are fully covered
by the loans and advances outstanding from the members at society's level.
In case the borrowings outstanding are more than the loans outstanding, what are
the reasons for the imbalance ?
Examine whether the DCCB had been monitoring recoveries at the societies' level
and whether it had ensured that all the recoveries had been passed on to it ?
Suggest suitable remedial measures in case of imbalance
(b) Liabilities
i) Share Capital
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Any share capital in arrears from cooperatives? Adequacy or otherwise of share-
linking to be commented
Amount of share capital contribution received from the State Government during
the year and repayments, if any, made during the year by the bank.
Any bye-law amendment has been made/proposed to be made for increasing the
share capital contribution by nominal members and A class members.
iv) Deposits:
6
v) Borrowings:
7
Delegation of powers systems to ensure adherence to delegated powers, use of
discretionary powers.
System of internal chacks and control and to bring out shortcomings therein with
reference to (a) custody and periodical verification, by a responsible official, of
investments, securities, bills, parcels, vouchers, blank cheque books, unused stock
of fixed deposit receipts / cash certificates / draft forms, pass books, godown keys
etc. (b) daily independent checking of previous days entries from vouchers, (c)
periodical balancing of deposit ledgers, loan/overdraft/CC ledgers, bills purchased /
discounted, pay orders, DD/MT/TT registers, suspense and sundry deposit
registers, investment ledger etc., by a person other than those writing them, (d)
balancing of books by surprise, (e) rotation of duties among the staff and (f) long
outstanding items pending adjustment / reconciliation in the suspense / sundry
registers and bank accounts reconciliation register.
Maintenance of CRR / SLR
Working out DTL, deficiencies observed
System followed regarding caution advices from RBI/NABARD
Inspection of branches and societies
Regularity of submission of returns to RBI / NABARD chronic deficiencies
including false reporting etc.
Review of frauds modus operandi, amounts recovered, action taken to avoid
recurrence, prompt reporting to NABARD, submission of quarterly returns to
NABARD, suggestions for improvement in internal checks etc.
Setting up of vigilance cell preventive vigilance
Concurrent audit system compliance of observations
Methodology for disposal of complaints (Complaint Redressal Mechanism)
6. Management:
General Body:
Whether the annual general meetings were held regularly by the bank during the
period covered by the inspection? If not, reasons therefor.
Comments on major decisions including important amendments to Bye-laws
effecting policy changes in the working of the bank.
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Steps taken by the bank to induct Professionals in the Board.
Whether the bank has constituted Audit Committee by inducting a Chartered
Accountant, if required?
Various Committees constituted by the Board, their functions, meeting periodicity,
no. of meetings required to be held and actually held
Proceedings of Board of Management
Action taken in diversifying the loan portfolio especially in the non-farm activities
and expanding the business of the bank as well as the mobilisation of deposits.
Inadequacy or failure to place other important information / data / statement etc.,
required to be placed in the Boards / Committees meetings.
Whether there were any representatives of defaulting societies on the Board /
Committees?
Vacancies in the Board not filled up since long (with reasons therefor)
Important aspects of the banks functions and working not included in the agenda
for Boards / Committees discussions in the meetings.
Comment on whether the CEO fulfills 'fit and proper' criteria in the State that had
signed MoU for implementation of Revival Package under VC-I.
Comments on the powers vested in / delegated to the Chief Executive Officer
(CEO) of the bank and whether such powers were adequate and properly
exercised?
Staffing Pattern :
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Are the bank's operations are computerised to capture the data required for ALM
exercise?
Has the bank identified Nodal Officer for the purpose?
Whether ALCO Committee has been set up and how it is working ?
Whether the bank has been able to compile and generate Residual Maturity and
interest rate sensitivity statements and gap summary
7. Developmental Initiatives:
c) Annexures:
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CHAPTER: 3
a) Branches:
b) Societies:
a) Inspection Report:
Inspection Report will contain two parts viz., 'Part-A' and 'Part-B'. While Part-A
contains general information about the bank, Part-B will give a detailed analysis of the
banks functioning under various portfolios as also defective features as indicated in
Chapter II.
The deficiencies which could be rectified on the spot may be got rectified and a
reference to his may be made in the Inspection Report
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The Inspecting Officers may submit a confidential Note meant for Internal use,
broadly covering critical comments on Management, Rating of bank, areas suggested for
supplementary appraisals, any other issue of confidential nature which warrant
immediate action/attention of the higher financing agency (SCB).
V) Inspection Statements:
The SCB may prescribe a time limit for submission of compliance by the DCCBs on the
inspection findings (say maximum of 60 days), monitor the quality of compliance and
follow-up with the bank for rectification of all deficiencies and implementing suggestions.
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CHAPTER-4
Generate a genuine interest among the inspection staff towards what, why,
where, when and how of everything connected with credit and rural banking and also to
frame actionable points keeping the short-term and long-term goals in view so as to
make their mission successful.
The inspecting officer may discuss the findings of inspection with the heads of
operational departments of HO such as Advances, Recovery & Legal, etc. so that the
findings may be utilized by them for policy refinement, release of funds etc.
Ensure timely completion of the job with the required quality and coverage.
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INTERNAL MEETINGS WITH THE INSPECTING OFFICERS AND OTHER OFFICIALS
SYSTEMS IMPROVEMENT
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CHAPTER-5
BE ALERT
Always keep your eyes and ears open - make a mental note or note down
important points that may come to your notice for examination/ further probing. Take
the earliest opportunity to complete the job by yourself or assign it to others.
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PLAN YOUR VISITS PROPERLY
Do it in such a manner so as to spend the required time at branch/society and
minimise the wastage of time at each stage.
MID-TERM REVIEW
Of the work done and to be done - assess the position of time available -
schedule the balance work to be done - assess the extra volume of work vis-a-vis the
time requirement - if necessary, seek extension of time from headquarters by
substantiating with adequate reasoning.
OBJECTIVE PRESENTATION
Objective presentation with all facts and figures giving adequate coverage by
keeping the quality and effectiveness (of the points made) in view within the overall
frame-work laid down by the authorities would serve the purpose well for observing the
time schedule and for appropriate action.
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CHAPTER-6
DO'S
Take up the inspection with an open mind.
Ensure proper team spirit (where inspection is conducted by a team) during and
after inspection.
Create an impression on the bank that the inspection is a fact finding and not a
fault finding mission.
Ensure that normal functioning of the bank / branch / department is not hampered
because of inspection.
Ensure that minor defects are rectified during the course of inspection itself to the
maximum extent.
DONT'S
Do not place yourself under any obligation whatsoever to any of the staff.
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CHAPTER-7
Adequate and proper coverage of all the important aspects/ observations in an in-
depth manner.
More focus on the systems and deficiencies thereof should be brought out clearly.
Grammatical and spelling mistakes to be avoided lest they leave poor impression
on the report.
The contents of the inspection report should be clear and specific so that a
satisfactory compliance could be expected.
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CHAPTER-8
1. Increase or decrease in the share capital during the period covered by the
inspection, steps taken to collect the calls in arrears, if any. Whether the paid-up
capital exceeds the authorised share capital?
2. Whether share certificates were prepared and issued to the affiliated societies
promptly?
4. In case State Government had availed assistance from NABARD under NRC(LTO)
Fund for share capital contribution to cooperative credit institutions, whether there
was undue delay in transfer of funds to the primary societies?
5. Whether all the societies in the areas of operation of the bank were affiliated to it?
If not, the reasons therefor.
6. Ratio of share holdings to borrowings at the CCB / Societies level vis--vis the
norms prescribed in the Act / Rules / Bye-laws.
7. Adjustment of share capital of societies, if any, towards their dues vis--vis the
provisions of the Act / Rules / By-laws.
8. Whether the appropriation of profits was done in accordance with the provisions of
Act / Rules / By-laws and the investment of various Reserves, Dividend, ACS Fund,
etc., outside the business of the bank, wherever necessary, was in conformity with
the said regulations?
9. In case any reserves were drawn upon after the previous inspection, the
circumstances which justified their withdrawal and whether such withdrawal was
done as required under the Act / Rules / Bye laws ?
10. Whether investments towards Reserve Fund and other funds have been properly
earmarked by the Board of Directors specifying the necessary details?
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OTHER LIABILITIES
Examine other liabilities pending adjustment for more than six months with relevant
details viz., total number of cases, aggregate amount involved, period-wise
pendency, and furnish a few individual items involving large amounts.
Contingent Liabilities
1. Examine the guarantees issued by the bank on behalf of its constituents i.e.
individuals and affiliated societies. Comment on instances where such guarantees
issued are without adequate security from the parties etc.
2. Whether the volume of guarantee obligations had exceeded the owned funds of
the bank at any time? If so, instances with details thereof.
3. Whether the unsecured guarantee exceeded 25% of owned funds at any time? If
so, instances with details thereof.
Letters of Credit
Examine the letters of credit issued by the bank and indicate the deficiencies, if any.
Whether the bank followed the systems and procedures as prescribed for financing
societies for SAO with particulars reference to the following :
ii) Adoption of SoF fixed by the Technical Group(TG) whether the SoF was fixed by TG
followed uniformly by all the branches / PACS. If the scale of finance fixed by TG was
used as indicative, whether the range of variation was reasonable?
iv) Preparation and submission by the societies of NCL statement and drawal applications
v) Whether all the borrowers of crop loans were issued KCC? If not, the reasons and the
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extent to which covered under KCC?
vi) Whether the drawals of KCC were allowed by branches of DCCB or by PACS only. If
farmers were allowed to operate KCC at branches, whether mirror account was
maintained in PACS. The efficacy of the system including the margin sharing may be
examined and commented upon.
vii) Was there any restrictions by the bank / societies in the disbursement of cash
component? Whether farmers allowed to take kind component in cash subject to
production of vouchers?
ix) Disparity in the scales of finance and actual disbursements-Specific reasons may be
ascertained and commented in cases where the banks had higher scales of finance
but disbursements were made at a very low level.
x) If the share croppers/tenants/oral lessees etc., were financed for SAO, whether they
were financed on the same scales of finance as fixed for owner cultivators? If not, the
basis adopted/steps taken by the bank for financing such cultivators.
xi) Examine the system of financing Joint Liability Groups (JLG) and bring out the
deficiencies observed.
xiii) If the scheme of linking of credit with marketing had been introduced by the
bank in its area of operation, effectiveness or otherwise of its working (with relevant
figures of recoveries effected through linking arrangements, etc., and concrete
suggestions for improvement, if the arrangement is not effective).
xv) Whether separate credit limits were sanctioned to PACS for financing
cultivation of oilseeds covered under OPP, pulses under NPDP and DTP for financing
Tribals?
xvi) Whether separate DCB register was maintained for cultivation of oil seeds
covered under OPP? If not, reasons.
xvii) Whether the norms for identifying small farmers are those fixed by National
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Bank? If not, the actual norms followed by the bank.
xviii) Whether RCS had imposed any restrictions on financing societies? If so, details
thereof. Whether such restrictions affected the flow of credit to new and non-
defaulting members of PACS?
xix) In the case of ineligible PACs, arrangements made for ensuring adequate flow
of credit to new and non-defaulting members. Whether RCS had fixed any recovery
norms for financing PACS and whether such norms had come in the way of flow of
credit to new and non-defaulting members?
xx) Examine the Crop Insurance Scheme introduced in the area of operation of
the bank covering the following aspects:
b) Crops covered.
f) Sum insured (100% of (e) subject to a maximum limit of Rs.10,000 per farmer)
i) Whether insurance premium deducted out of loans has been passed on to the GIC?
j) On receipt of claim amount from GIC/State Insurance Fund, whether the CCB has
passed on the amounts to the concerned PACS giving full details of the notified
area/crop to which the claim relates and the percentage of the sum insured or loan
which has been reimbursed.
k) On receipt of claim amount, whether PACS had worked out the actual amount of
claim relating to each of the loan accounts covered by the claim and credited the
amounts to the respective accounts?
l) Examine as to how the insurance claim received has been adjusted at CCB and
PACS level. Whether the adjustments were in conformity with the objectives of the
scheme/instructions issued by National Bank/GOI?
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Interest Subvention Scheme of GoI
Whether the bank had ensured that the interest charged on crop loans by the
societies to the ultimate borrowers was as per the Interest subvention scheme of
GoI.
Whether the DCCB has compiled the claims for interest subvention correctly and
discrepancies, if any, observed.
(C) MT (Conversion)
Whenever natural calamity occurs, steps taken by the bank to provide relief to the
borrowers of cooperative credit system such as approaching the State Government
for declaration of Annewari and issue of land revenue certificate from the district
authorities, issue of instructions to the PACS for conversion of ST (SAO) loans into
Medium Term (Conversion), issue of guidelines to the PACS, etc.
Examine whether the bank had granted conversion of ST (SAO) loans into Medium
Term (Conversion) Loans and the amount converted during the period covered by
the inspection.
Examine the balance in the ACSF and the amount utilised by the bank for
conversion during the year. In case the balance in the ACSF was not sufficient,
how the bank had met their share?
Whether the bank had adhered to the criteria and procedures laid down by the RBI
/ NABARD for granting conversion facilities to the PACS?
Whether any 'overdue' loans were converted ?
Whether the bank had ensured that the benefit of conversion had been granted in
time to the ultimate borrowers at the society level?
Whether the security obtained for conversion loans was in accordance with the
norms prescribed by the RBI / NABARD ?
Whether the bank had met 15% share in conversion ? If not, how the share was
met ?
Whether the recoveries under MT (C) were passed on promptly to the SCB ?
Whether the bank had ensured that the farmers, for whom conversion was allowed
had been granted fresh loan by the PACS concerned ?
Whether the bank had framed policy and procedures for grant of Medium term
loans for agricultural purposes.
The purposes for which MT loans are generally advanced and adequacy of standard
outlays laid down as per unit cost / per acre basis in respect of any item of
investment.
The manner of working out repaying capacity of borrowers for different types of
investment credit.
In fixing the repayment schedule, whether the bank had taken into account the
repaying capacity of the borrower?
Whether economics of the projects was worked out and pre-sanction appraisal was
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carried out including borrower appraisal?
Whether security obtained for various medium term loans were as per the norms
fixed by the RBI from time to time?
Method followed for valuation of land and its reasonableness
Whether the due dates were fixed in accordance with the cash flow?
Whether utilisation / end-use of the credit was monitored and records available for
visists carried out by the field staff?
Whether insurance of assets acquired was insisted and whether available during
the pendency of the loan?
Policy followed for sanction of cash credit limits to PACS, Marketing Societies,
processing societies etc., for meeting working capital requirements.
Security and margin whether as per the norms fixed by RBI / NABARD from time
to time ?.
Adequacy of cover for clean advances
Instructions issued by HO for custody of the goods pledged in case of loans against
pledge
HO instructions regarding insurance of stocks and adequacy
Compliance with the directions of RBI on financing sensitive commodities
Whether the loans/limits sanctioned to a single society is within the net owned
fund of the society. If not, steps taken by the bank in bringing the exposure
within the net owned funds over a period of time say, three years.
(various aspects to be examined at the branch as well as during visit to the societies in
respect of various types of societies are indicated in Annexures)
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(G) Financing of Self Help Groups (SHG)
Whether the bank had formulated policy and operational guidelines for financing
Self Help Groups (SHGs)
Examine the guidelines issued by the bank to the branches in this regard and
ensure that the same are in conformity with the guidelines issued by NABARD for
SHG-Bank Linkage
Examine the application format and appraisal format for SHG financing and
comment on the same.
Examine the progress in financing SHGs by the bank vis-a-vis number of SHGs
having SB accounts.
Whether the bank had developed any 'Rating' Model for SHGs and advised the
branches ?
Whether the bank had conducted any evaluation of the SHG-Bank Linkage?
The inspecting officer may examine the financing of JLGs by the bank keeping in view the
following broad aspects:
A Joint Liability Group (JLG) is an informal group comprising of 4-10 individuals coming
together for the purpose of availing bank loan on individual basis or through group
mechanism against mutual guarantee. Generally, the members of a JLG would engage in
a similar type of economic activity in the Non farm Sector. The members would offer a
joint undertaking to the bank that enables them to avail loans. JLG members are
expected to provide support to each other in carrying out occupational and social
activities.
ii) The members should be residing in the same village/ area/ neighbourhood and should
know and trust each other well enough to take up joint liability for group/ individual
Loans.
iii) Members who have defaulted to any other formal financial Institution, in the past, are
debarred from the Group Membership.
iv) More than one person from the same family should not be included in the same JLG.
Group Approach:
i) All members of the JLG should be active enough to assume leadership of the group to
ensure the activities of the JLG. The selection of an effective /able/active leader for the
JLG is essential as this will ultimately benefit all the JLG members. The leader fosters a
sense of unity, oversees and maintains discipline, shares information and facilitates
repayments. For the bank, the leader is the focal point for group activities.
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ii) The JLG should hold regular meetings which must be attended by all the members
regularly to discuss issues of mutual interests.
iii) The principles of self - help and group strength need to be emphasised. Group
cohesion has to be ensured. Adequate emphasis should be placed on the roles,
expectations and functions of the group/ members & the benefits of group dynamics.
iv) The JLG can easily serve as a conduit for technology transfer, facilitating common
access to market information, for training and technology dissemination in activities
relating to non farm sector training and assessing input/ raw material requirements.
v) The JLGs for specific non farm activity, e.g. production of handicrafts / other non farm
products may be federated at village/ block level for development of the product.
vi) The JLG in the clusters on their stabilization could come together in the form of
cluster federation or producers companies with a view to contributing the entire value
chain and thereby achieving economies of scale in production and marketing of the
product.
vii)The JLGs and evolving JLG structures are expected to build up empathy and
understanding and create responsive lending mechanisms leading to greater interaction
and interdependence between the members of JLGs.
Savings :
JLG members need to be encouraged to save regularly. Banks may open savings account
by the JLG / individual members of the JLG to ensure regular savings and thrift habit
amongst them. However, the quantum of loan to be given to the groups should be
related to the credit needs of the enterprise and not to the quantum of savings.
JLG Models :
Banks can finance JLGs by adopting any financing individuals in a group or to the group.
Recovery - General
(a) Assess the quality of the assets of the Bank and comment on the following:
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a. Volume of unsecured advances and its trend.
b. Depletion in value of securities, loss of security, fraudulent transactions taking
place etc.,
c. No of cases where references are made to initiate Arbitration / Legal Action.
d. No. of cases of Conversion / Rephasement has taken place - Amount involved.
e. Over drawals permitted in Current Account remain unpaid after due dates.
f. No. of discounted instruments returned, devolved LCs, and initiated Bank
guarantees remain unpaid.
Whether the powers vested in / delegated to the Branch Managers were adequate
to ensure smooth and effective functioning of branches?
Whether the duties of the staff are clearly defined and periodically reviewed?
Whether the duties of staff are so organised that the work of an employee is not
27
allowed to remain unchecked and that he does not have absolute control over any
financial operations of important nature?
Entries pending unresponded for unduly long periods i.e. for over 6 months. Give
full details such as number of cases, amount involved, period-wise classification of
pending amount and a few individual items involving large amounts.
Methodology adopted by the bank for charging interest on funds lent by HO to the
branches and allowing interest to funds borrowed from the branches with a view to
evaluate their viability. (Transfer Price Mechanism TPM)
Whether branch inspection report /gist of major findings are placed before the
Board of Directors / Executive Committee?
Since MIS is an important tool to aid Managers in solving problems and making
decisions, it should be very effective and accurate.
1) Verify whether the MIS developed by the bank is complete in nature and provides
the information for making decisions regarding the integration of the organisation
through the process of management?
2) Whether the data collected is having clarity and consistencies to make correct
decisions to solve the problem?
3) Verify whether the right information has been provided in the right form and at the
right time?
4) Verify whether the bank is able to control the operations of the sub-systems of the
bank with the data collected under MIS?
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5) Conduct test check and ensure that the data furnished under various returns are
accurate and reliable.
6) Data collected should be relevant to the problem/ issue to be solved for which MIS
has been designed.
7) Ensure whether the project development team and users have communicated the
issue effectively?
8) While designing the MIS whether the project development team has clear mission
and vision of the purpose for which it has been designed.
9) MIS cannot establish, repair or modify the management system, as this can be
done only by Managers/ Users therefore the concerned personnel should be
trained properly-verify whether the personnel have been trained and organised for
implementation?
10) Verify whether proper implementation procedure has been developed and
adopted?
11) Verify whether the hardware, software and other materials acquired are able to
take care to install and implement the MIS designed/proposal?
12) Verify the forms designed for a specific MIS is adequate and serve the purpose.
13) Verify whether testing has been properly carried out before implementing the
system?
14) Verify whether key personnel are taking steps to implement the system
effectively to achieve the end results?
15) Ensure that the MIS helps the Management in formal review, formulation of an
action plan, and follow up of the decisions taken?
16) Ensure that the periodical returns prescribed under MIS to be submitted by
PACS, Field Manager of CCB, Branch of CCB and CCB in order to stabilise the
monitoring system, have been reviewed periodically to take decisions to improve
the effectiveness of management?
1. Whether the banks profits have been inflated / camouflaged in any manner, for
instance, by charging interest on advances, the recovery of which is doubtful or by
not duly accounting for depreciation on dead stock / fixed assets or by carrying
forward irrecoverable items or not making adequate provision for NPAs, losses due
to frauds / misappropriations / embezzlements, etc.?
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2. Tax Provisions whether adequate or not?
4. Whether the bank has derived any substantial income or suffered any loss from
non-banking business such as purchase / sale / revaluation of investments,
premises, other assets, etc.?
8. If the overdue interest was taken to profit and loss account, whether the bank had
made corresponding provision for an equivalent amount?
9. Did the bank make provision for depreciation on various types of assets? If so,
adequacy or otherwise of the rates of depreciation for different types of assets?
11.If the bank was working at loss continuously / showing declining trend in profit
over the past 2 years, reasons therefor and concrete suggestions to improve the
profitability of the bank.
13.If some branches were incurring losses continuously / showing declining trend in
profit over the past 2 years reasons therefor and concrete suggestions to improve
the profitability of such branches.
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ANNEXURE-I
Balance Sheet
4. Deposits
1
ixed *
(a) Individuals
of which NRI
(b) Reserve Fund deposits of
PACS
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(c) Special bad debts reserve of
PACS
(d) Other deposits of PACS
(* Including Recurring Deposits, Cash Certificates and other Deposits which
are wholly in the nature of time deposits.)
(e) Deposits from societies other than
PACS
(f) Employees' Provident Fund
and staff security deposits
(g) Deposits from other institutions
Sub Total (1)
2
avings
(a) Individuals
of which NRI
(b) PACS
(c) Other Societies
(d) Other institutions
Sub Total (2)
3
urrent
(a) Individuals
(b) PACS
(c) Other Societies
(d) Urban Coop, Banks
Sub Total (3)
4
oney at Call and Short Notice
(a) Individuals
(b) PACS
(c) Other Societies
Sub Total (4)
5
ther deposits (specify) **
Grand Total
** deposit of institution, local bodies, quasi Govt. institutions, etc.
5. Borrowings from
A. Short-term
1. From Apex Bank
(a) ST Agri.
(b) ST Non-Agri.
2. From Other sources
(a) ST Agri.
(b) ST Non-Agri.
B. Medium-term
32
1. From Apex Bank
(a) Normal
(b) Conversion
(c) Others
33
Others (specify)
(a)
(b)
(c)
(d)
Total
11. Profit
Grand Total
Contingent Liabilities
Outstanding liabilities for
guarantees issued
(a) Fully secured
(b) Others
Others (specify)
ASSETS
1. Cash on hand
At Head Office
At Branches
Total :
2. Balance with
SCB in Current A/c
State Bank of India and other
notified banks
34
5. Investment out of the principal
state partnership fund in shares
of:
PACS
Other societies
Total
6. Loans and advances
A. Loans to PACS
(i) Short-term for
Seasonal agricultural
operation
Marketing of crops
i) Secured
ii) Unsecured
Weavers' finance
Other industrial finance
Advances against the
security of fixed deposits
Others
35
Other purposes (specify)
C. Loans and advances to
individuals
I) Secured against
a) Fixed deposits
b) Govt. and other trustee
securities
c) Other types of security
(specify)
ii) Unsecured
D. Dues from societies under
liquidation
i) ST
ii) MT
iii) LT
E. Bills purchased and discounted
Total
7. Interest receivable on
Investments
Loans and advances
a) NPA account
b) Non NPA account
c) Of which dues from
Soceities under liquidation)
Grand Total
36
37
ANNEXURE-II
Name of Bank:__________________________________________________
PROFIT AND LOSS ACCOUNT FOR THE LAST THREE FINANCIAL YEARS
(Rs. lakh)
Items 31 31 31
March. March. March...
... ..
1 2. 3. 4.
I. Income
1
Interest on advances and discount
2
Interest and dividend on investments
3
Commission, exchange and brokerage
4
Subsidies and donations*
5
Income from non-banking assets and
profit from disposal of such assets
6
Other receipts (specify)
Gross Income
(Of which receivable)
II. Expenditure
7
Interest on deposits
8
Interest on borrowings
9
Salaries, allowances, provident fund and
gratuity
10
Directors and local committee
members fee and allowances
11
Rent, taxes, insurance, lighting, etc.
12
Law charges
13
Postage, telegrams and telephone charges
14
Auditors' fee
38
15
Depreciation and repairs to property
16
Stationery, printing and advertisement
17
Loss from disposal of non-banking assets
18
Provision for
a) Standard assets
b) Impaired credits
c) Overdue interest
d) Others (specify)
xiii) Other expenditure (specify)
Total
III (a) Profit before tax
(b) Profit after tax
39
ANNEXURE-III
40
VI. Difference (IV-V)
B. Income Recognition
(i) Total interest/dividend on
loans and advances and
investments taken to P & L
a/c
(ii) Of item (i) above,
interest accrued but not due
(iii) Of item (i) above,
overdue interest accrued
and not realised.
(iv) Other income taken
to P & L Account but not
realised.
(v)Provision required to be
made for overdue interest
and other income taken to P
& L a/c.
(vi) Provision for
overdue interest and other
income actually made.
Particulars Provision
i) Depreciation on investments Required Made
(a) Govt. securities/ bonds, etc.
(b) Share in other co-op. institutions
(c) Other investments - shares, etc.
(d) Repo sold
Total of (i)
ii) Frauds, embezzlements, etc.
Iii) PF, Gratuity, etc.
iv) Other liabilities like rent, rates, taxes, etc.
v) Contingent/ off-balance sheet exposures
vi) Interest on deposits and borrowings outstanding as liability
vii) Depreciation on other assets like land, building, furniture,
fixtures, etc.
Grand total
41
ANNEXURE IV
(The Inspecting Officer is advised to refer to the Banking Regulation Act 1949
(AACS) and its latest amendments as also clarifications if any, issued by the RBI
from time to time. This write up is only illustrative and not exhaustive)
Accepting for the purpose of lending or investment, of deposits of money from the public,
repayable on demand or otherwise and withdrawable by cheque, draft, order or
otherwise.
Agency Business
Collection of cheques and bills
Guarantees or Indemnity business
Acting as Trustees
Acting as Administrators
Letting out lockers
Doing any other Lawful agency business on behalf of the customers.
42
Section - 7 - Use of words 'Bank' 'Banker' 'Banking'
Banks are prohibited from holding immovable property unless it is required for
their own use.
Section - 11(2) - Value means 'Real or Exchangeable value' and not the 'Nominal value'
which may be shown in the Books of the Cooperative Bank concerned.
Every Cooperative Bank not being a scheduled Cooperative Bank for the time
being included in the Second Schedule of the Reserve Bank of India has to maintain by
way of Cash Reserve at not less than 3% of its aggregate Net Time and Demand
liabilities as obtaining on the last Friday of the 2nd preceding fortnight. For maintaining
CRR, the Cooperative Bank has to compute the total Time and Demand Liabilities on the
reporting Friday.
The aggregate total Time and Demand Liabilities for this purpose shall not
include
43
securities.
Banking System includes State Bank of India and its subsidiaries, Nationalised
Banks, Commercial Banks, Private Banks, Foreign Banks, Regional Rural Banks and
others as stipulated by the Reserve Bank of India from time to time.
b) Netting concept:
c) Maintenance of CRR:
Fortnight shall be the period from Saturday to 2nd following Friday both days
inclusive. Since the provisions of revised Section 18 read with Section 56 of the Banking
Regulation Act 1949 (AACS) has come into force on 29 March 1985, which is a Friday,
that day namely, 29 March 1985 shall be reckoned as a first alternate Friday for the
purpose of returns to be made in Form I. Accordingly, by way of illustration, the first 4
alternate Fridays commencing from 29 March 1985 will be 29 March, 12 April, 26 April,
10 May 1985 etc. The subequent alternate Fridays were determined on the same
consecutive basis.
CRR in respect of DCCB can be maintained in the form of Cash on hand, credit balance in
C/A with RBI / State Cooperative Bank of that State concerned, net balances in Current
Account from Banking system. The Cooperative Bank should maintain 100% CRR on
daily basis.
District Central Coop. Banks to hold shares of the affiliated State Cooperative
Banks.
44
a) Grant Loans and Advances on security of its own shares.
b) Granting Loans to or on behalf of any of its Directors
any firm in which any of its Directors is interested as Partner, Manager,
employee or Guarantor.
In public interest, the interest of Depositors, RBI may determine the policy in
relation to Advances to be followed by Banking Companies.
Margin requirement
Rate of Interest
Banks functioning prior to the commencement of the Act, had to apply for
Licence to RBI within a stipulated period.
These Banks will continue to function unless RBI refuses in writing, the grant of
such Licence.
Affairs of the bank are not conducted in a manner detrimental to the interests
of depositors.
45
Section - 23 - Restriction on opening of new place of business and transfer of
existing place of business
a) No Banking company shall open a new place of business in India or change otherwise
than with the same city, town, Village, the location of an existing place of business
without permission / licence from the RBI.
(i) opening a temporary place of business for a period not exceeding one month
within a city, town or village, where the Banking company already has a place of
business for the purpose of affording banking facilities
(ii) opening (or changing the location of branches) by a Central Cooperative Bank
within the area of its operation.
The Cooperative Banks have to maintain Liquid Assets at not less than
25% of NTDL. The Cooperative banks have to maintain the required liquid
Assets on daily basis without any default.
The Liquid Assets may be maintained by Non- Scheduled Cooperative Banks in the
following forms.
Bank's shall within 30 days after the close of each calendar year submit a return
of all deposit accounts to the RBI with copy to NABARD, which have not been
operated upon for 10 years.
Banks to submit to RBI before close of the month succeeding that to which it relates,
monthly return (Form No.IX) showing its Assets and Liabilities in India at close of
business on last Friday of every month.
Section - 29 & 31 - Preparation of Year end Balance Sheet and Profit & Loss
Account and publication -
46
Preparation of accounts and balance sheet as per forms set out in the Third
Schedule or as near thereto as circumstances admit.
Submission of the same within six months from the end of the year to RBI and
NABARD.
Section - 35 - Inspection -
Powers of the RBI to cause Inspection of the bank and its Books and Accounts. The
powers exercisable by the RBI under this Section may also be exercised by
NABARD in relation to Cooperative Banks, other than Primary Coop. Banks
Section - 46 - Penalties -
For making wilful false statements in any return, Balance Sheet or any other
documents, punishment with imprisonment upto three years and fine also can be
imposed.
47
ANNEXURE - V
1) Whether the PACS has received recapitalisation under VC I? If yes, whether the
society has attained CRAR of at least 7%.
2) Has the society implemented the Common Accounting System prescribed under
the Revival Package?
3) Did the society have separate owned or rented premises to house its office?
4) Whether the society has increased the membership during the last two years with
special reference to small and marginal farmers and steps taken to increase the
membership of the society.?
5) Whether the rural artisans were also enrolled as members and financed by the
society?
6) Details the members covered and financed under SGSY and special programmes /
schemes for weaker sections.
7) Obtain state partnered particulars of the amount of contribution received from the
Government.
8) To examine normal credit limit statements of the society for the previous and
current Co-op years and to bring out deficiencies, if any, in regard to following
aspects in particular:-
Whether the statement had been prepared in two parts Small farmers and part
II for other farmers and whether the classification of farmers was made
correctly? [This should be checked with reference to the land registers
maintained by the society]
Whether all the members have been issued KCC, if not what are the problems?
Whether there was a system in the society to verify the crops financed by it?
9) If the society had granted advances against the pledge of produce, comment and
bring out deficiencies in regard to following aspects with instances.
a) Advances/ stocks outstanding for more than one year.
48
f) Insurance of produce pledged and
10)
a) Examine the medium term loans granted by the Bank / Society to members
and bring out deficiencies, if any, in the procedure followed for the
disbursement of loans.
b) Adequacy of the loan for the purpose for which it was sanctioned.
c) Arrangements for ensuring that, the medium-term loans are properly utilised
for the purpose for which they are advanced.
e) Verify utilisation of few medium-term loan accounts by field visits to bring out
the deficiencies/mis-utilization, if any, wherever possible.
11) Examine the loan documents obtained by the society from the borrowers for
short-term and medium-term loans to see whether they are in order or whether
there are any time barred pro-notes.
12)
a) Was there a system of issuing receipts / Pass Books to members for recoveries
/ loans advanced?
b) Whether recoveries effected from members were genuine, accounted for on the
same day and promptly remitted to the Bank? [Comments to be made after
examining cash book, loan ledger, members passbook / counter foils / receipts,
etc.,].
13) Adequacy of as the maximum borrowing power of society (b) the individual
maximum borrowing power of members for short-term and medium-term
agriculture loans.
15)
a) Was there arrangement of linking of credit with marketing in the area of
operation of the society?
b) Did the members of the society deliver their produce to nearby marketing
societies. The role played the credit society in this regard and genuineness or
otherwise of the recoveries effected through linking of credit with marketing
may be commented.
49
16)
a) Examine the DCB position of the society for the last 2/3 years and comment on
the steps taken to recover the over dues-The reasons for increase in the over
dues, if any-whether DCB position was correctly worked out?
b) Examine the period wise and purpose-wise classification of the over dues in
detail to ascertain the reason for over dues and suggest remedial measures to
improve the recovery from farmers.
c) Were all overdues over one year as on the date of inspection covered by legal
action?
d) Was legal action initiated by the bank/society on the lines specified in the Act/
Rules/ By laws such as issuing registered notices, obtaining decrees, etc.?
e) Was there any delay in taking legal action at any stage? [with instances where
arbitration proceedings not filed within 6 months against wilful defaulters /
where arbitration references were filed lying pending for more than 6 months /
where EPs filed but pending for more than 6 months].
17) Did the society undertake any other activity beside loaning? If it had borrowed
from the Bank for such purposes whether it had adhered to the terms and
conditions stipulated by the Bank?
18)
a) Comment and bring out irregularities, if any, in regard to the arrangements for
custody of valuables. Whether the arrangements, were satisfactory? What was
the limit fixed for keeping overnight cash balance and whether this was
adhered to? [If the limit had been exceeded continuously for long periods,
instances may be furnished]
b) Verify the Cash balance with reference to Cash Book and bring out deficiencies
if any shortage/ excess etc.
19) Whether the society has implemented the Income Recognition, Asset
Classification and Provisioning (IRAC) norms as prescribed by NABARD and as
communicated by the Registrar of Cooperative Societies ? Bring our deficiencies in
this regard.
20) When was the society last audited and for which year? was the copy of the
Audit report promptly received by it and rectification report sent within a
reasonable time?
21) Whether the Annual General Body and Managing Committee meetings were
held regularly as required under the By-laws/Act/ Rules/ Registrar's instructions?
22) Was any of the Managing Committee members a defaulter to the society? Was
any of them elected to office when in default or continued on the Board of
Management despite default? [This should be examined with reference to the
provisions of By-laws / Acts/ Rules and full details viz., name of the defaulting
director, date of election, due date for payment, amount of default at the time of
election and due date etc., should be furnished].
24) Efforts made by the society to mobilise deposits with a view to promoting thrift
50
among its members and strengthening into financial position and its performance
in this regard.
26) Examine the balance sheet of the society as on the date of Inspection and
Comment on important items of the liabilities and assets.
27) Whether rates of interest charged by the society for different types of loans
and advances were in accordance with the directives/instructions of the RCC/CCB?
30) Similarly, examine the other business undertaken by the society, such as PDS,
Fertilizer business, procurement and marketing of cloth, distribution of cooking gas
etc. and comment on the profitability of each type of activity.
51
ANNEXURE VI
Pattern of Working:
Extent of its area of operation, effective membership in relation to weavers in its area,
number of looms-active and / or dormant, etc.
Viability:
Was the Society identified as viable or potentially viable by the concerned department of
the State Government as per the norms prescribed in this behalf?
Yarn Purchases:
Could the Society buy its yarn requirements from the Apex/Regional WCS at concessional
rates? It not, alternative sources of purchase of yarn and long-term arrangement, if any,
giving it advantage of concessional rate?
Whether payments for purchase of yarn were made by cheque drawn on the Cash Credit
Account?
Production :
Was the Society getting cloth produced on its own account by issuing yarn to members
and paying wages?
Had the Society worked out a production chart for each type of cloth produced by its
members on its behalf? If so, how often was it revised?
Was there any linking between the share holding of a member in the Society and the
value of raw materials given to the members for production?
Whether the Society stipulated any time limit for the return of finished goods by its
members and the latter generally adhered to the time-frame for returning the goods?
In case of defaults by members, was the Society prompt in taking action for recovery,
steps taken for recovery and amount of advances which are likely to prove bad or
doubtful in this behalf.
Problems faced in production as also the difficulties, if any, in getting surplus of inputs.
52
Outright Purchase of Finished Goods:
Value of cloth purchased on outright basis from other Societies / depots / weavers
Society, the profit / loss, earned / incurred in such business during the last few years.
Marketing Arrangement:
What were the marketing arrangements for sale of cloth. Whether the location of office,
show room, go-downs, etc., was satisfactory?
Problems faced by the Society in marketing of its products and reasons for accumulation
of stocks, if any and suggestions thereof?
Sales:
The basis for fixing the sale price of cloth produced by members and profit margin added
to the cost price.
The proportion of total sales to the value of cloth produced during the last calendar year.
In case the Society has made credit sales, the authority sanctioning credit sales and the
amount due thereon. Do the Bye-Laws permit credit sales?
Stock:
Were the stocks of raw material, finished goods etc., stocked properly?
To test-check a few items of the stock of goods with reference to the stock register and
to bring out deficiencies, if any.
If there were old stocks, say above 24 months, any special measures adopted to clear
such stocks?
How often were the stocks verified by the banks / Departments Supervisors?
Were the stocks of finished goods and yarn adequately insured against fire, theft and
other risks and policies held in the joint names of the Society and the bank?
Share Capital:
The Government Share Capital contribution received and the breach of terms and
conditions stipulated by the RCS / Government in this behalf.
53
Maximum Borrowing Power:
Borrowings:
Did the DCCB take into consideration the NDR, value of annual production, sales
turnover, the remittances into Cash Credit Account during the previous year while
sanctioning / renewing the Cash Credit Limits?
Whether the Societys NDR was adequate to provide margin for its borrowings? Whether
the percentage of margin was fixed as per the instructions of the NABARD? (i.e. 10% for
normal/additional limit against pledge / hypothecation limits).
Whether the stocks were valued as per age-wise classification. In case of deficits in
margin, whether the deficits were covered by other admissible items?
Whether the drawals from the Cash Credit Account reflected: cost of yarn, dyes,
chemicals, etc., purchased and wages paid and the total repayments with the sale
proceeds during the previous financial year?
In case of deficits in cover, whether further operations were allowed on the Cash Credit
Account and how long did the deficits continue?
Did the Society submit a monthly stock statement to the bank regularly within the
prescribed time limit? (While examining the stock statements find out whether the value
of stock was shown at cost price or sale price and the norms prescribed for valuation of
stocks were adhered to?
Whether the rate of interest charged by the DCCB to the Society for
pledge/hypothecation advances for Working Capital purposes conformed to the rate of
interest prescribed by the National Bank?
If the Society had been sanctioned any block capital fianc (ie. For acquisition /
modernisation of looms, construction of work shed, installation of new looms, etc.) the
basis adopted for such sanction.
Violations, if any, in the terms and conditions of sanction stipulated by the DCCB for
block capital finance.
Violations, if any, in the terms and conditions of sanction in regard to medium-term loans
to members of the Society for purchase of shares in consumer type of Co-operative
Spinning Mills, as stipulated by the DCCB.
Whether the Societys dues to the DCCB were covered under the Guarantee Scheme?
(i.e. 90% Loss Guarantee Scheme, 90% Default Guarantee Scheme, Credit Guarantee
Scheme of CGTSI etc.)
54
(i)Was the Society maintaining cover for its borrowings (other than deposits) from other
sources like NCDC, KVIC, etc? (ii) Violation of the terms stipulated by the credit agencies.
Were there overdues under any category of borrowings as on date of inspection? If so,
the amount and period of default and the steps taken to clear the default?
Cash:
To verify Cash Balance as on the date of visit and bring out deficiencies, if any.
Adherence to limit for retention of overnight Cash Balance vis--vis provision of Bye-
Laws/Insurance Policies.
Cost of Establishment:
Whether the proportion of the establishment and contingent charges per month to the
monthly turnover under sales was reasonable? (2% may be considered reasonable).
Accounts:
General quality of maintenance of important books of account like general ledger, cash
book, personal ledgers, etc. If the society maintained any accounts (other than cash
credit) with the DCCB, the need for maintenance of such an account.
Rebate Claims:
Whether the Society was prompt in submission of rebate claims to Government and the
latter settled the claims within a reasonable period (say within 3 months)?
MDA
55
Annual General Body and Committee Meetings:
Whether Annual General Body and Managing Committee Meetings were held regularly as
required under the By-laws or Act/Rules/Registrars instructions? The delays, if any.
Management:
Whether any of the Managing Committee members are in arrears to the Society in
respect of return of finished goods or wage advances?
Whether there were any Government nominees on the board? If so, were they taking
active interest in the working of the Society?
Staff:
Did the Society have whole-time paid Secretary/ Manager? If so, had he received any
training?
Balance Sheet:
Miscellaneous:
56
ANNEXURE - VII
e. Links, if any, between the Marketing Society and the procuring agency operating in
the area, e.g., FCI, Civil Supplies Department?
c. The effect of Government Share Capital contribution on the working of the Society
and violation, if any, of the terms and conditions of state partnership.
3. Borrowings:
a. Type of Cash Credit Limits sanctioned by the DCCB to the Society and the extent
and manner of utilization of the limits.
b. Compliance or otherwise with the terms and conditions stipulated by the bank in
regard to:
57
iv) Whether the borrowings from the bank under repledge finance were fully covered
by the advances outstanding against its members.
4. Operational Deficiencies:
b. If there were deficits in cover, did the bank allow further drawals on the limits? To
indicate whether the account was regularized thereafter.
c. If marketing finance was provided by the bank, whether the terms and conditions
laid down by the bank had been adhered to by the Society?
5. Pledge Advances:
a. Who was authorized under the Bye-Laws /Board Resolution to grant pledge
advances and who was exercising the authority? Whether pledge advances granted
are reported to the Board for ratification?
b. The margins prescribed by the Society for different commodities and adequacy
thereof?
c. Maintenance of prescribed margins while granting pledge advances and during the
currency of the loans?
d. Whether the advances were outstanding against any individual in excess of the
prescribed ceiling in the Bye-Law / by the Registrar?
e. Was any advance granted / outstanding for more than the period specified in the
Bye-Laws or say, 6 months?
f. Action taken by the Society in cases where members failed to redeem the stocks
before close of the period for which the advance was granted?
6. Other Advances:
58
7. Outright Purchases:
In whom were the powers of outright purchase vested? Were they judiciously
used? Were the Bye-Law provisions in this regard adhered to?
8. Distribution of Supplies:
a. If the Society was undertaking the distribution of fertilizer, pesticides, etc., was
the procedure adopted by the Society for the distribution of fertilizer pesticides,
etc., to members against authorizations from their credit Societies satisfactory?
Where the sale proceeds promptly remitted to the Bank/Marketing Federation /
Government?
b. Whether the fertilizer distribution business of the Society was affected owing to
competition from other agencies or by the inefficiency and ineffectiveness of the
functioning of the Marketing Society itself?
9. Godowns:
b. Were the different types of commodities / stocks insured for their full value against
risks such as fire, theft, natural calamities? If the Society had borrowed for any
type of activity from the bank, were such policies in the joint names or with bank
clause?
c. Was there any periodical verification of stocks owned / pledged with the society by
the responsible officials of the Society?
d. To verify some of the stocks held by the Society as owner/ pledge and to bring out
deficiencies, if any.
e. Did the Society have old stocks of goods which had depreciated very much in
value? What would be the likely loss if the goods were sold at the current market
price?
a. When was the Society last Audited and for which year? What was the classification
given?
59
11. Staff:
a. Was the Manager and other key personnel trained in Co-operative Marketing?
b. Was adequate security obtained from the members of the staff of the staff as per
By laws/Rules/ Instruction of the RCS?
12. Accounts:
a. Did the Society maintain up to date all the prescribed books of account and
registers? To bring out deficiencies / Shortcomings / Omissions in regard to
maintenance of important books and records.
b. To examine the balance sheet of the Society as on the date of inspection and to
comment on important items of the liabilities and assets.
60
ANNEXURE VIII
1. Efforts made to ensure that all sugarcane cultivators in the area of operation are
enrolled as members.
6. Ascertain the actual sugar production made during the year of inspection- compare
the production of the last 2 to 3 years. If any increase / decrease in production
noticed ascertain reasons.
8. Number of days the Mill is expected to work as per the target fixed for the sugar
year vis--vis the number of days actually worked In case of variation ascertain
reasons.
9. The sugar cane production in the area of the operation of the Mill is adequate /
inadequate-steps initiated by the Mill to procure sugarcane to make full utilization
of the plant capacity.
10. Whether the instructions given by the Directorate of Sugar periodically are being
adhered to?
11. Verify the types of credit facilities availed viz., capital Investment and Working
Capital requirement availed by the Mill.
13. Verify whether the Mill has utilised the financial assistance to the full extent In
case any under-utilization of the facility is noticed, ascertain reasons?
14. Verify the operations in Cash Credit Account maintained by the Bank with the
Books of the Mill.
16. Verify the payment of loan instalments and ensure that they are being made on
61
due dates- In case of any defaults, steps taken to regularise the defaults.
17. Verify whether stock statements are submitted on due date i.e. in time?
18. Verify whether the value of stock has been arrived at cost price or sale price?
19. Whether the stocks shown in the stock statements included old and damaged
stock?
21. Verify whether any stock purchased on credit has been included in the stock
statement? If so whether it has been properly reported?
22. Whether adequate cover is available for borrowings after excluding ineligible
stocks?
24. Verify whether proper Insurance cover is available for the stock held by the Mill?
25. Verify the advances granted to members and ensure that such advances are in line
with the terms and conditions stipulated in Bye-laws.
26. Verify the Demand collection, Balance position and ascertain the overdue
position. If any increase is noticed ascertain the reasons for increase steps
initiated to reduce ovedues.
27. Verify the purpose for which advances have been granted to Members and ensure
that the advances should be for the purpose other than the purpose for which
PACS have granted.
28. Whether sugar mill is prompt in settling the cane dues to members?
30. Verify whether the Mill is adhering to the instructions of Director of Sugars.
31. Short margins, if any, in CC pledge A/c - frequency of such short margins.
32. Whether the mill was covered under the package, comments on restructuring
terms loan (status), interest subvention, etc.
62
ANNEXURE-IX
NET DISPOSABLE RESOURCES (BORROWING UNIT)
A. INTERNAL RESOURCES
2) Reserves - Statutory Reserves and all the funds of permanent nature viz.,
Special BDR, Price fluctuation fund, depreciation reserve, dividend
equalisation and building fund (provided this fund has been utilized in
construction of the building)
3) Deposits - Fixed Deposits accepted for business, security deposits from dealers,
and other type of deposits like sundries, suspense, etc.
4) Surplus, if any.
B. COMMITMENTS
5) Intangible Assets.
63
ANNEXURE XI
INVESTMENT MANAGEMENT
I. RESOURCES POSITION:
INTERNAL RESOURCES:
1) SHARE CAPITAL
2) RESERVES
3) DEPOSITS
4) UNDISTRIBUTED PROFITS
EXTERNAL RESOURCES:
1) BORROWINGS
II. COMMITMENT:
4) INVESTMENTS.
64
DECISION MAKING FOR INVESTMETNS
1) LONG TERM RESOURCES (OWNED FUNDS) (+) LONG TERM DEPOSITS (MATURING
1 YEAR AFTER AND ABOVE)
LESS
2) CRR 3% & SLR 25% OF NTDL
3) BY GOING THROUGH THE MONTHLY STATEMENT YOU WILL FIND ONE COMMON
AMOUNT IN ALL BLOCKS i.e.,
(Rs. in lakh)
JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
6.00 7.00 5.00 8.00 9.00 6.00 7.00 6.00 5.00 5.00 6.00 7.00
RS.5.00 LAKH IS THE COMMON AMOUNT, OUT OF RS.5.00 LAKH, 80% CAN BE
INVESTED IN LONG TERM INVESTMENT.
65
Chapter 1
ii) Various procedures adopted by the bank to protect itself from the
shortcomings, if any that may eventually result in loss.
iii) System of internal checks and control and to bring out shortcomings
therein with particular reference to the following aspects:
iv) MIS its adequacy, usefulness. How the top management / Board
uses the MIS.
v) Regularity or otherwise in submission of various statutory and non-
statutory returns to the Head Office / Regional Office. Chronic
deficiencies including false reporting etc. should be pointed out return-
wise with adequate details.
vi) Whether concurrent audit in place?
Chapter 2
Deposits
1. Confirm that proper opening forms have been obtained for all the
deposit accounts and scrutinised by the branch/bank.
m) Are any deposit RD, FD are paid before due dates? Was
interest paid as per rules?
p) Whether the print outs of due date diaries is taken out and
filed and updated monthly/quarterly as per HO circular?
5) Proportion of High cost/ Low cost/ Zero cost deposits to the total
deposits of the bank.
6) Efforts made by the bank to tap deposits from local bodies - Quasi
Government, institutions, charitable institutions, clubs/ Association
etc.
8) Whether the account opening forms and specimen signature cards duly
authenticated were filed separately and maintained in custody?
14) Ensure that while paying/ receiving cash the KYC norms are
strictly adhered to?
15) Maintenance of due date diary of fixed and short term deposits
accounts.
17) Efforts made by the bank to ensure that the borrowing societies
invested their Reserve Fund with the bank.
18) Whether the bank was preparing the returns correctly and
sending them to DICGC promptly?
19) If target is not achieved, what are the attempts made by the
branch/bank to achieve the target? Any service or programmes like
customers meet etc. are arranged?
20) Any staff member does the field work to contact depositors?
What are the efforts made by the Branch Manager, involvement of
other officers and clerks?
22) Are all types of deposit accounts viz., SB, CA, RD & Term
Deposit, etc., are balanced monthly and verified by the officers?
Balancing of accounts are pending? Reason for this pendency, test
check some balanced accounts.
Current Accounts
5) Verify whether the over drawals allowed are noted in the over drawal
register, duly signed by the sanctioning authority. Whether approval
obtained/ sought for over drawals in excess of the discretionary
powers?
2) Verify in case of minors' accounts whether the date of birth have been
obtained and recorded in the ledger.
3) Confirm whether PAN or form No. 60/61 obtained while opening the
account.
4) Whether the branch has opened the accounts in the names of
Proprietorship / Partnership/ Limited Companies/ Associations.
Payment of interest, are not permitted for Government Department /
Bodies, payment of interest is permitted, provided the funds received
in the account are not through Budget allocation? Verify for violations
of guidelines.
12) Verify whether the staff members have intimated the bank in
writing, about opening / maintaining accounts with other banks as well
as with branches other than their branch of posting.
2) Confirm that the maturity value has been verified before payment, to
ensure payment of correct amount due to the depositor.
3) Verify whether the branch has diarised the maturity dates of the term
deposits. Are the deposits intimated of the maturity dates in advance?
5) Whether the interest rates recorded are correct and the application of
interest is done correctly?
7) Confirm that the renewal of Overdue Term Deposits is made as per the
guidelines issued from time to time.
8) Verify whether the branch has taken effective steps for renewal of the
long pending items in Matured Deposit accounts or for transferring
them to Dormant Deposit account?
10) Verify whether the form 15G accepted are being forwarded to
the Income Tax Authority duly filled for every financial year?
Dormant Accounts
1) Confirm that all items outstanding for more than 3 years under
unclaimed deposit, matured deposit and balances in inoperative
accounts remaining dormant for more than 3 years are transferred to
Dormant Deposit account at the Branch.
2) Verify whether the payments from the dormant accounts have been
authorised by the Manager/ Authorised officer?
Reporting has to be such that deficiencies which can be rectified on the spot
are rectified and only outstanding items are reported.
Chapter 3
Advances
LEGAL ASPECTS OF ADVANCES AND DOCUMENTATION
7. Whether a letter ceding Pari Passu charge has been obtained from
other financial institutions?
10. Whether all the documents have been adequately stamped and
properly cancelled prior to execution of the document?
11. Whether search at the office of the Registrar of Companies was carried
out to rule out any prior charges over the assets/properties
charged/mortgaged to the Bank?
15. Whether clearance from the legal advisor was obtained before creating
the mortgage and the property was physically inspected by the branch
functionaries?
18. The following points are to be adhered to by the bank while obtaining
the documents.
h) That the borrower has signed in full and in the same style
throughout all the documents.
q) That the date on the Promissory Note and the date on other
documents is the same and that the documents were taken on
the Bank's standard forms wherever available and never on
Photostat copies.
20. Whether in respect of Company advances, charge was created with the
Registrar of Companies under Section 125 of the Companies Act
together with the instrument if any, creating or evidencing the charge
within 30 days of creation of charge.
21. Whether the Branch has adequately insured all the assets including the
collateral security charged to the bank and that the Policy is in the
joint names of the Borrower and the bank?
22. Whether the Insurance Policies have been taken with "Bank Clause"
wherever the policies were taken solely in the name of the borrower?
23. Whether the Branch has obtained periodical Search Reports from the
Office of the Registrar of Companies and/or Registrar of Assurances
after release of the amount during the time of review or renewal?
25. Whether revival letters were obtained before the expiry of limitation
period as revival letters obtained after expiry of the limitation period
will not revive the documents.
26. Whether revival letters were obtained even in case of Term loans
within three years from the date of execution to keep the borrower's
personal liability in tact so that the bank can also proceed against the
other personal assets of the borrower?
27. Whether revival letters were obtained from both the borrowers and the
guarantors or their duly authorised agents to extent limitation against
both of them?
28. Whether in case of Joint borrowers, revival letters were obtained from
all the joint borrowers, to extend the limitation against each one of
them?
29. Whether in case of more than one guarantor, revival letters were
obtained from all the guarantors, to extend the limitation against each
one of them.
30. Whether in case of time barred documents, the Branch has obtained
fresh documents and DP Note for the balance outstanding as on the
date of execution of fresh set of documents with fresh guarantee deed
from the old guarantor, if possible, or from a new guarantor as the
case may be?
33. Whether the pay-in-slips (credit vouchers) paid into the bank as part
payment before expiry of the limitation period were duly signed by the
borrower-or by his authorised agent in order to extend the period of
limitation?
34. Whether the adhesive stamps were duly cancelled by the Branch
Manager to ensure that they cannot be used again?
35. Whether the contents of the documents were typed on the reverse
side of the Non-judicial stamp papers?
37. Whether attestations were obtained for all mortgages from two
respectable persons and their addresses recorded along with their
signatures?
38. Whether the stamp papers were purchased by the executants in their
own name?
39. Whether the date of document is always subsequent to the date of
purchase of the stamp paper (or date of embossing of adhesive
stamps)?
40. Whether the suits were filed in a court which has proper territorial and
pecuniary jurisdiction?
41. Whether all suit filed accounts are being properly followed-up with the
advocates.
42. Whether in respect of Mortgage suits, application for Final Decree have
been filed wherever courts have granted Preliminary Decree within the
limitation period?
43. Whether the Branch has filed EPs in respect of all decreed accounts?
44. Whether the Branch has filed suits within the period of limitation as
applicable to various types of documents?
Crop Loans
2) Whether all the borrowers of crop loans were issued KCC by the PACS?
If not, the reasons and the extent to which covered under KCC?
8) Examine the system of financing Joint Liability Groups (JLG) and bring
out the deficiencies observed.
10) If the scheme of linking of credit with marketing had been introduced
by the bank in its area of operation, effectiveness or otherwise of its
working (with relevant figures of recoveries effected through linking
arrangements, etc., and concrete suggestions for improvement, if the
arrangement is not effective).
11) Examine whether the branch has ensured that the finance by the PACS
to the notified crops in the notified areas are covered under the Crop
Insurance Scheme, collection of premia from the PACS, prompt reporting
to HO and settlement of claims if any.
12) On receipt of claim amount, whether PACS had worked out the actual
amount of claim relating to each of the loan accounts covered by the
claim and credited the amounts to the respective accounts?
13) Examine as to how the insurance claim received has been adjusted at
CCB and PACS level. Whether the adjustments were in conformity with
the objectives of the scheme/instructions issued by National Bank/GOI?
1. Verify all loan documents and they are properly obtained, stamped and
executed. Confirm that document contain discharged deposit receipts.
3. Verify whether any loan as been granted against the deposit of other
branches and the branch is holding proper lien acknowledgement
letters?
4. Verify whether any loan has been granted against Term Deposit issue
from the Compensation amount awarded by any Tribunal and / or
court with specific instruction?
6. Confirm that all closed Loan accounts are authenticated with full
signature by the officer.
8. Verify that the branch is maintaining the required margin as per the
guidelines.
10. When loan is arranged against Minors deposit, the purpose of the loan
is to be indicated by the Guardian and he has to certify that the
advance is for the benefit of the Minor / for meeting the necessities of
the Minor. Verify loans against Minors deposits and confirm that the
branch is following guidelines.
13. Verify branch is reporting all the Loans / Overdrafts sanctioned against
third party Deposits over a certain amount to Head office as per the
policy and check the rate of interest on such advances is being
charged as per the guidelines issued.
14. Whether the Deposit is the refunded at reduced rate of interest before
maturity, interest on Loan / Overdraft shall be charged the prescribed
rate. Test check whether the branch is allowing the concession?
15. As per RBI directives Loans and Advances cannot be granted against
securities on composite basis. Verify from the branch for compliance.
17.Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
2. Whether the duplicate set of godown keys duly sealed are held under
dual control?
6. The value of the goods pledged is as per the invoices and the invoices
are in the borrowers names.
7. Whether proper stipulated margin is maintained?
8. Confirmthat the pledged goods values are not inflated to
accommodate excess drawing power.
15. Confirm that there are no other goods / stock stored in the godown
other than the goods pledged to the bank
16. Verify whether godown chart and godown register are maintained and
it is up to date?
17. Whether the drawing power is revised and recorded from time to time?
18. Verify whether advances against commodities like cotton, tobacco
requiring licence / permits for dealings/ storing / transportation are
obtained and held with the bank / Branch?
19. Confirm that the goods pledged are properly insured and banks
interest is noted in the Insurance Policy.
20. Ensure that the description of goods and godowns agrees with that
mentioned in the policy.
21. Verify whether the branch is maintaining market report book for local
commodity and recovering the additional margin whenever the prices
fall?
22. Verify whether the locks used have the banks name engraved there
on?
23. Confirm by test check that the goods pledged are as permitted in the
sanction.
26. Quantity in the godown and size of the godown any mismatches to
be seen
27. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
3. Ensure that the stock shown in the stock statement do not cover
unpaid stock, stock which are already under pledge, stocks
covered under letter of credit unpaid and stock of no value.
8. Confirm that the goods hypothecated are insured for the full
value as per the guidelines.
13.List out cash credit accounts where the turnover in the account
is not satisfactory.
16.Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the bank
4. VEHICLE LOAN
5. Confirm whether all the borrowers under the scheme have been
admitted as Associate Members of the Bank
6. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
f) Valid Marine / Fire Insurance Policy with Bank clause and risk of
Insurance with partial losses clause stipulated.
3. Confirm that the subsidies from the Government are received in all
eligible cases and they are duly appropriated to the loan dues.
4. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank.
5. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
3. Whether all the terms / conditions of the sanction are complied with. If
not, identify the cases, reasons there of / approval sought / obtained
etc. and report?
4. Verify whether the LC register has been properly maintained and the
outstanding entries therein have been periodically balanced and tallied
with the General Ledger?
5. Verify whether the bills under LCs are retired promptly on presentation
of bills / on arrival of goods. If not identify the cases and steps taken
to realize the bills?
6. Verify whether the expired LCs are squared up in the books and the
contingent liability is reversed after observing formalities in this
regard?
8. Ensure that the margin money is refunded only after all the bills drawn
under the LC are received and retired.
12. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank.
13. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
7. UNSECURED ADVANCES
1. Confirm that the over drawals allowed are as per the HO instructions/
procedure, if not, identify the cases and report separately.
2. Verify and list out the parties who are frequently enjoying the clean
loans, over drawals in current account exceeding in Over Draft account
disproportionately and beyond the limits of discretionary powers
7. In case of demand loans verify whether the branch has sanctioned the
same after assessing repayment capacity of the borrowers. Confirm
documentation as prescribed is obtained in all cases?
8. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank.
9. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
8. ADVANCES AGAINST GOVERNMENT SECURTIES / NSC
1. Ensure that the signature of endorsers tally letter to letter with the
name/s of endorsees in previous endorsements.
5. Verify whether all the joint holders of the NSCs have signed the
borrowing documents?
9. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank
10. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
9. ADVANCES AGAINST SHARES, DEBENTURES AND UNITS OF
MUTUAL FUNDS
2. Verify whether the branch holds the blank transfer deeds / forms
signed by the registered holder
3. Verify whether the units are transferred in the name of the Bank, in
the absence of blank transfer forms
4. Verify whether the branch has obtained a letter of authority from the
units holder, authorizing the bank to collect the dividend on the
pledged units from the Trust / Fund on behalf of the borrower and is
forwarded to mutual funds with a forwarding letter in the prescribed
form.
8. Verify that the shares and debentures are not clubbed together as
security to sanction loan / advance as per the RBI directives.
9. Verify that the bank / branch holds valid and endorceable blank
transfer forms for each marketable lot / folio and for each certificate
odd lots, duly signed and witnessed without date.
12. Ensure that the part of security released has been recorded and
acknowledged by the borrower.
13. Ensure that the dividend / interest received from the company / are
credited to the concerned borrowers account.
14. Verify whether dividend mandates have been obtained and registered
with the respective companies?
16. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank.
17. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
1. Confirm whether all the borrowers under the scheme have been
admitted as Associate Member of the Bank
2. Confirm that the officer has followed the instruction / guidelines issued
to establish the proof of identity of the borrower before issue of Jewel
Loan Application (Ration card, Driving License, Employer Identity card,
Bank Pass book, Telephone Bill etc.)
3. Confirm that all the Jewels have been appraised by the duly appointed
Jewel appraiser and also confirm that the Jewels are appraised in the
branch premises itself.
4. Verify that the appraisers seal has been affixed on the knot in such a
way that it is not possible to untie the knot without tampering the
appraiser seal.
5. Ensure that the Jewels received from every borrower shall be
separately bunched and kept separately under joint custody.
6. Verify whether the branch is following the stipulation made by Head
Office in repayment of interest / principal / any dues and such
stipulation is in conformity with RBI instructions?
7. Test check random Jewels pledge with regard to number of items,
description, gross weight, net weight, appraised value, margin
etc.(where interest is in arrears for more than 3 months are to be
invariably checked).
8. Confirm that deposit and withdrawal of Jewels are being done
according to the procedure stipulated and ensure that maintenance of
the Jewel Bags Stock Register is up to date.
9. Verify whether any Jewel Loan has been granted to the Jewel appraiser
or his relatives? If yes, who has appraised the Jewels pledged in such
loan comment giving details of such loans?
10. Verify whether the branch has sent periodical statements connected
with the issue of Jewel Loan to Head office?
11. Confirm that the branch has maintained overdue Jewel Loans register
and follow up action is taken.
12. Ensure that the stipulated margin is maintained and furnish a list of
over advanced loans. Branch to collect the deficit in margin to
maintain necessary margin.
13. Verify the Jewel Loan register and report whether borrowers discharge
has been obtained at the time of redemption?
14. On repayment of the loan, whether the branch is taking proper care to
obtain signature of the borrower for taking delivery of Jewels pledged
and officer delivering the Jewels verifies the signature of the borrowers
and signs for having delivered the Jewels?
15. Verify whether any death claims are pending against pledged items
and comment?
16. Verify whether timely action is taken to action the Jewel pledged,
pertaining to the overdue loan. Confirm whether there are any clean
Jewel Loans after adjustment of auction proceeds
17. Verify whether action in on irregular loans such as sending registered
notices, auction notices etc., are initiated by the Bank / Branch.
Whether all procedures have been followed for conducting the auction
and auction proceeds are properly accounted as per procedure.
18. In case of priority sector activity including agriculture, branch to
confirm that the borrower is pursuing the relevant activity.
Documentary proof to that effect has to be obtained and kept along
with loan application. Ensure that applicable interest rates and margin
are being followed according to the guidelines stipulated. Verify and
comment.
19. Verify Jewel Loan appraisers file and ensure that a condition has been
stipulated that the appraiser is solely responsible for the purity, gross
and net weight of the Jewels.
20. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
2. Verify whether the activity for which cash credit has been sanctioned is
with in the approved list of GST?
3. Verify whether the activity proposed is being under taken with in the
area of operation of sanctioning office?
5. Verify whether the renewals of Cash Credit limits have been made
before it is expired and by taking into consideration of the previous
years performance?
6. Ensure the valuation of stock has been done on the basis of Cost Price
or Market Price whichever is less.
7. Verify whether the Drawing Power has been fixed after deducting the
margin amount and from the value of paid stocks and permitted level
of book debts?
8. Verify whether the outstanding under each cash credit account is with
in the Limits / Drawing power prescribed?
10. Verify whether all the documents are in custody of the officer /
executive who is authorized for this purpose?
11. Verify whether there is a provision in the agreement to inspect the
trading concern?
12. Verify whether the stock in trade has been insured in the joint names
of the bank and the trading concern?
13. Verify whether the procedure laid down has been followed to initiate
action to regularize the overdues?
14. Verify whether the stock statements are being submitted periodically
before the due dates fixed for submission?
16. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
1. Verify whether the loan has been sanctioned as per the loan policy of
the bank?
8. Verify whether the sanction of loan has been as per the terms and
conditions laid down by the Head Office ?
9. Verify the documents submitted by the applicant along with the loan
application and ensure that they are complete and in order viz.,
10. Ensure that the repayment period is within the maximum period as
stipulated by HO.
11. Verify whether the details of disbursement have been intimated to pay
disbursing officer?
12. Check the rate of interest and ensure that rate percentage is as per
the regulations and interest is applied properly.
13. Verify whether the installments are being made regularly on or before
the stipulated date and in case of any belated payment, penal interest
has been collected?
14. Verify whether the branch is closely monitoring the recoveries and
borrowers who have committed default have been reminded regularly
to clear their over dues?
15. Verify whether the defaulted cases have been referred to Head Office
for Legal Action / Arbitration proceedings as per the norms prescribed?
16. Verify whether the interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
13. LOAN AGAINST MORTGAGE OF PROPERTY
6. Confirm that the documents obtained by the branch are in order and
enforceable.
a) Legal opinion from the approved panel lawyer and got approved
from Banks Legal cell / Section wherever required.
10. Whether the Head-Office / Branch has incorporated all the clauses as
per the guidelines / circulars issued from time to time in this regard.
11. Verify whether the legal adviser (Lawyer) has scrutinized the
documents and Encumbrance Certificate for 13 years and confirm that
legal opinion has certified that the mortgagor has clear marketable
title to the property to be mortgaged.
12. Also verify whether the lawyer has scrutinised the flow of title to the
property proposed to be mortgaged to the Bank, for a period of 25
years and certified that there is clear title to the property.
13. Ensure that the borrower has mortgaged the property in favour of the
Bank for the loan amount and registered with the concerned Sub-
Registrars office before sanction of the loan.
15. Ensure that the borrower has given his acceptance / consent to retain
all the original documents with the Bank pertaining to the property as
advised by the legal advisor till the loan is cleared in full.
16. Confirm that the Head-Office / Branch has complied with the
provisions of Urban Land Ceiling Act or any other similar Acts,
wherever applicable.
17. Verify whether the branch has obtained E.C. Land Tax receipts
periodically and any alteration of property has been noted while
sanctioning the E.C.
18. Verify whether the Head-Office / Branch has inspected the mortgaged
property periodically and maintained record for the visits.
19. Ensure that the period of repayment of the loan has not exceeded the
period prescribed by the bank.
20. Ensure that the borrowers repaying capacity has been properly
assessed i.e. his/her monthly income is adequate to repay the monthly
installments towards principal and interest and also ensure that the
monthly repayment installment should be within his repaying capacity.
21. Ensure that the borrower has been admitted as Associated Member
before sanction of the Loan.
22. Verify the loan application and ensure that the borrowers have
furnished additional document namely wiz. Building permit, plan,
estimate of construction etc., as required under the loans scheme in
the event of availing the loan for extension / repair / renovation of
building.
25. In the event of overdue / NPA Loans, verify whether the Head-Office /
Branch has initiated step to regularise the bad loans.
27. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
4. Verify whether the lawyer has scrutinized the documents and E.C. for
13 years and confirm that legal opinion has certified that the proposed
seller has clear marketable title to the property to be sold?
6. Verify whether the loans are sanctioned directly to individuals who are
above 18 years of age and within the maximum age as fixed by the
bank?
9. Ensure that the house purchased by the borrower under the scheme is
in good tenantable condition and normal useful age and remain in such
condition at least for a minimum period of 20 years from the date of
purchase?
10. Verify whether the loan sanctioned is within the purview of Purpose
mentioned in the terms of conditions stipulated and satisfied all
conditions?
11. Ensure that the quantum of loan sanctioned is within the limits
prescribed for different purposes.
12. Ensure that the property offered as security for loan stands in the
name of applicant and unencumbered.
13. If the property is in joint names, parties concerned should have given
consent and join in execution of registered documents-Verify and
comment.
14. Ensure whether the loan eligibility in favour of each borrower has been
properly assessed and sanctioned as per norms prescribed?
15. Ensure that the borrower has satisfied / fulfilled all conditions
stipulated by the HO viz., a) Not more than one loan has been
granted b) The Borrowers are having a regular and adequate source
of Income. c) Left over service is at least 5 years for attaining the age
of superannuation.
16. Ensure that the Loanee has mortgaged the plot and the house to be
constructed in favour of the Bank by registering the same.
17. Ensure that in the case of purchase of Flat the undivided share in the
land and the Flat has been mortgaged by the loanee.
18. Ensure that the Mortgage Deed is signed by the loanee and two
witnesses.
19. Ensure that the Original Deed is with the Head-Office / Notified Branch
as per the policy of the bank.
20. Ensure that Evaluation Fees has been collected from the loanee.
21. Ensure that Head Office / Branch has obtained an affidavit cum
undertaking to the effect that the built up property has been
constructed as per the sanctioned plan and / or building bye laws.
22. Ensure that the disbursement of loan has been done in installments as
per % of loan amount prescribed for each stage of construction.
23. Ensure that in the event of acquiring a House / Flat the payments have
been made directly to the sellers.
24. Ensure that in the event of up gradation of the existing House whether
the loan amount has been disbursed in 2 or 3 installments.
25. Ensure that the construction of the House / Flat or up-gradation in the
existing House has been carried out exactly in accordance with the
approved plan, specifications estimates on the basis of which the
amount of loan has been computed and sanctioned.
26. Ensure that the repayment schedule has been fixed as per the income
stream of the borrower but not exceeding the period fixed by the
bank.
27. Verify whether there are any cases of default and in such cases penal
interest, stipulated under the scheme has been collected over and
above the normal rate of interest?
28. Verify that interest charged on the loans is as per the rate fixed by the
bank.
29. Ensure that the construction has been completed within the stipulated
time from the date of first installment of the loan is paid to the
borrower.
30. Verify whether the annual inspection is being carried out in respect of
Houses Constructed by availing loan from the Branch / Head-Office to
ensure that the House is maintained well?
31. Ensure that the original documents of title to the plot and property
under mortgage have been obtained from the mortgagor and kept in
safe custody along with mortgage deed.
32. Whether the House / Flat constructed / Purchased and House / Flat in
which up gradation has been made out of the loan sanctioned by the
Bank has been Insured in the joint names of the borrower and the
Bank with the Insurance Company against Fire, Flood, Cyclone and
Earthquake etc.?
33. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
34. Ensure that the housing loan granted is as per the RBI / NABARD
guidelines.
Ref:- RBI / 2006 -07 / 187 RPCD. R.F. B.C. 35/07.40.06/2006-07 Dated
22/11/06.
i) In cases where the applicant owns a Plot / land and approaches the Banks
/ Financial Institutions for a credit facility to construct a house, a copy of the
sanctioned plan by competent authority in the name of a person applying for
such credit facility must be obtained by the Banks / Financial Institutions
before sanctioning the home loan.
ii) An affidavit cum undertaking must be obtained from the person applying
for such credit facility that he shall not violate the sanctioned plan,
construction shall be strictly as per the sanctioned plan and it shall be the
sole responsibility of the executant to obtain completion certificate within 3
months of completion of construction, failing which the bank shall have the
power and the authority to recall the entire loan with interest, costs and
other usual Bank Charges.
iii) An architect appointed by the Bank must also certify at various stages of
construction of building that the construction of the building is strictly as per
sanctioned plan and shall also certify at a particular point of time that the
completion certificate of the building issued by the competent authority has
been obtained.
ii) An architect appointed by the Bank must also certify before disbursement
of the loan that the built up property is strictly as per sanctioned plan and /
or building bye-laws.
All the Banks have been advised to strictly comply with the above directions.
1. Verify whether the loans for purchase of consumer durables under the
banks scheme have been sanctioned only after obtaining signature of
two guarantors who satisfy the prescribed eligibility norms.
2. Ensure that loans sanctioned to persons as per the policy of the bank.
4. Verify the articles enlisted in the Invoice, submitted along with the
loan application are eligible for purchase under the bank's scheme and
also verify whether the Invoices are obtained from Authorized Dealers
/ Co-op. Super Markets.
6. Verify the Guarantors networth and ensure that he/she has the
repaying capacity in case of default by the borrower.
7. Verify whether the following documents have been furnished
8. Ensure that all documents are with the custody of Person authorized
for the purpose.
10. Verify whether the eligibility criteria has been arrived on the basis of
salary / Income of the Applicant?
11. Verify whether the applicant has remitted Margin money as stipulated
under the Scheme.
12. Verify whether the repaying capacity of the Borrower has been
properly assessed to fix the loan installments to be repaid under E.M.I.
13. Verify whether the payment has been made directly to supplier /
Manufacturer out of the loan sanctioned to the Applicant.
14. Verify whether the loan repayment period under EMI has been
restricted within the period stipulated by the bank.
15. Verify whether the EMI has been arrived after charging interest at the
Rate prescribed.
16. Verify the Repayments made under the scheme are regular and is
there any overdue payments (made after due date) in such cases
whether the Bank has collected penal interest as prescribed?
17. In cases where default persists, Continuously for 3 months, whether
the Bank has exercised the right to recall the loan and send notice to
take possession of the articles purchased with the Banks advance.
18. Verify whether the goods have been properly Insured by the borrower
as prescribed.
19. Verify whether the over due recovery procedure has been followed to
regularize the over dues as prescribed
20. Verify whether the Bank / Branch has initiated action to file arbitration
proceedings in cases whether the loan recoveries are not forth coming
even after giving sufficient time to regularize.
21. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
11. Verify whether the following documents have been collected from the
parties to whom a bills purchase limit is granted.
12. Verify whether the person has been admitted as Associate Member
before extending this facility.
13. Ensure that this facility has been extended to a customer who is
maintaining an account in his own name to the satisfaction of the Bank
at least for a period of one year or such other period prescribed by the
bank.
14. Verify whether this facility extended to customer within the ceiling
permitted.
15. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
1. Confirm that Life Insurance Policies assigned to the Bank are in the
names of borrowers / parties to the borrowing transactions and
assignments are duly registered with LIC.
2. Ensure that the Life Insurance Policies are not under the Married
Womens property Act 1974, Children Endowment, Children Deferred
Policies etc.
5. Whether the premium, on all the assigned policies are paid up to date
and the receipts are properly held.
9. Verify whether any Advance / Loan have been granted against the
following Policies since they are not eligible for advances.
10. Verify whether the terms and conditions prescribed under the scheme
has been followed while fixing the limit in relation to % of the
surrender value.
11. Verify whether the advance is granted only after policy is assigned in
favour of the Bank and duly attested by a person other than the
relative.
12. Verify whether the notice of assignment and the policy have been sent
to LIC for registration and collected it back.
14. Verify the repaid Loan and Advances and ensure that in such cases
polices have been reassigned in favour of the policy holder only.
15. In case the policy matures, verify whether the Bank has sent
completed claim voucher together with the policy duly discharged to
LIC to receive the amount.
16. Upon receipt of the amount, whether the Bank has adjusted the same
to Loan account.?
17. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically.
5. Ensure, that the customer who availed T.O.D. facility has been
admitted as Associate Member of the Bank before extending the
facility?
6. Whether the customer has executed pro-note for the amount required
as temporary accommodation?
8. Ensure that the Temporary overdraft has been sanctioned only by the
Officer / Executive who is competent to sanction T.O.D.
9. Verify whether the outstanding in the T.O.D. accounts are within the
delegated limits prescribed by Head Office from time to time to
different category of Officers / Executives?
11. Verify whether the interest has been charged to the Current Account
holders who have availed the facility of Temporary accommodation as
per the guidelines issued by Head Office from time to time?
12. In the event of Overdue accounts, ensure whether the penal interest
has been charged as per the regulations prescribed over and above
the regular rate of Interest.
13. Verify whether the Head Office / Branch has insisted the borrower to
provide security by way of assigning LIC Policy, NSC, FD receipts etc.,
if so, whether proper lien has been marked in the Deposit ledgers with
appropriate authority?
14. Verify the T.O.D. accounts and ensure that outstanding in the account
has not exceeded the TOD limit fixed in favour of each customer, even
after charging interest to the account at monthly rests.
15. Ensure that Head-Office / Branch has followed the time gap limitation
as specified under this facility while renewing / sanctioning of T.O.D.
for second and subsequent times.
16. Ensure that the classification of overdues has been done properly as
per guidelines issued and prompt action has been initiated against
defaulters to clear the outstanding by issuing Demand notices / Final
Demand notices within the time frame work prescribed.
17. In the event, outstanding is not cleared even after final demand notice
has been issued, ensure whether Head Office / Branch has initiated
legal action by referring the matter to Legal Department at Head Office
is respect of all overdue loans.
18. Ensure that right to recall the advance condition clause has been
incorporated in the terms and conditions to sanction T.O.D. and
communicated the same to customer.
19. Ensure that Temporary Overdraft Register has been updated with all
details viz., Name of the customer to whom T.O.D. limit is sanctioned,
date of availment, amount availed, due date for repayment etc.
20. Verify whether the periodical return on the loans sanctioned has been
sent by the branch to the HO.
1. Verify the purpose and ensure that the purpose mentioned in the
application is in line with the purpose for which the scheme has been
designed.
2. Verify the course mentioned in the application to obtain loan under the
scheme and ensure that whether it is under the enlistment of courses
eligible for sanction?
5. Verify whether the Bank / Branch has obtained the certificate from the
college, Institute or University as the case may be confirming the
studentship, the course admitted, duration of the course, the
approximate expenditure towards the entire course with annual break-
up?
6. Verify the loan amount sanctioned is as per the provisions of the
scheme viz., percentage of the total cost, maximum amount
prescribed for each course etc.
7. Verify the security aspect for the loan disbursed and ensure that the
deeds executed by sureties are as per the stipulations made under the
scheme.
9. Verify the period and procedure fixed for repayment and ensure that it
is as per the regulations laid down.
11. Verify the interest charged / collected from the borrower whether it is
as per the procedure prescribed and if any deviation is noticed call for
explanation and record the same.
12. Verify whether any rebate in interest has been as per the scheme of
GoI / State Government to students and if so, verify whether the
rebate has been extended in such cases.
13. Verify whether proper follow up action has been initiated in default /
over due cases?
14. Ensure that the Education Loan is sanctioned as per RBI instructions
15. Verify whether the Interest and penal interest have been collected as
per the terms and conditions from the borrowers periodically
1. Ensure that the beneficiaries identified under SGSY are duly approved
by the Gram Sabha.
5. Ensure that subsidy extended and received under the scheme is kept
separately and passed on the benefit to the members only after
settlement of all dues to the bank.
6. Verify whether the preference has been given for group activities.
7. Verify whether the initiative has been taken to bring every assisted
family above the poverty line by providing income generating assets.
10. Verify whether the groups formed are within the optimum level i.e.
between 15 and 20 members.
11. Whether the bank has extended financial assistance in a quick and
flexible manner.
12. Whether any initiative has been taken by the bank to open SB account
in favour of SHGs members to promote savings habit. Verify whether
the SB Accounts have been opened in favour of SHG only.
13. Study the % of recovery of dues from out of the loans extended to
SHGs by comparing the % of recovery of dues from others.
14. Verify whether the loans have been extended to SHGs who have
satisfied all eligible criteria
15. Verify the system and procedure followed by the bank in credit rating
to ensure that it is as per the regulations laid down and selection of
group has been made accordingly.
18. Verify whether the bank and SHGs have executed agreement before
sanction of loan.
19. Verify whether the disbursement of loan by the bank to SHG and SHG
to members are simultaneous.
20. Verify whether any provision has been made in the agreement with
regard to repayment of loans to bank by SHG. If so, ensure that the
period of repayment should not exceed 5 years.
21. Verify that documents executed by the SHG to bank at the time of
availing Loan / C.C.
22. Verify whether any District Level Monitoring Review committee has
been formed to monitor the performance of SHGs.
1. Verify the size of the group and ensure that it should not exceed 20
members.
3. Verify the loan ledger and ensure that the bank loan has not been
utilized by the SHG for financing a default member.
4. Ensure that recovery of internal and external loans are good say, at
least 85% of the demand.
5. Verify the loan ledger and ensure that at least 50% of group members
should have taken internal loans.
7. Verify the Books and ledger and satisfy yourself that the groups are
maintaining Books of Account properly.
Chapter 5
(a) Cash
3. Examine whether the cash is kept duly sorted into re-issuable, soiled
and slightly mutilated notes?
4. Verify whether cash issued from the double lock to the cashier exceeds
the normal requirements?
5. Verify the cash excess / shortage register and ensure that postings are
upto date and that shortages are not frequent.
8. Verify whether the customers' movements inside Banking Hall near the
safe room and cash cabin are properly monitored / restricted?
9. Verify petty cash held if any, at the branch and ensure that it is under
proper control.
10. Verify whether Manager's scroll and cash Receipts and Payments are
properly maintained and tallied daily?
11. Ensure that cash vouchers are signed by the cashier in full and all
vouchers are signed in full by the officer authorised. Receipts are
properly accounted and payments are properly authorised.
12. Verify whether inward and outward mail transfer / money order
register is maintained?
14. Confirm whether the rubber stamps "Cash Received" "Cash Paid" and
tokens are kept under lock and key, over night?
15. Confirm that cash paid vouchers are stitched, sealed and kept in safe
custody on a day to day basis after due verification with scroll/ Cash
Receipts and Payments Register / Day Book.
17. Whether the mode of conveyance used is safe, considering the law and
order situation prevailing in the area en-route?
18. Verify whether the duplicate keys of the safe & safe room, locker room
are deposited with nearest Commercial Bank and obtained safe
custody receipt?
19. Verify whether there are any claims pending under Blanket Insurance
policy in respect of Losses due to theft / burglary or fraud?
20. Verify whether the Branch has furnished the requirements called for,
by Insurance Company in respect of the claims submitted. All such
particulars are properly recorded and follow-up action initiated?
21. Examine whether the cash retention limit fixed for the branch is
adequate, considering the daily turnover and the facilities available to
raise funds?
22. Work out the average cash balance usually maintained by the branch
and see if it is in excess of the requirement continuously for a long
period.
26. Whether the bank is following the system of Reserve cash? If so, that
entire cash balance held overnight need not be handed over to the
cashier and a portion of it may be kept in the safe.
27. Adequacy of Insurance cover for cash in hand [in safe and at counter]
and cash in transit. Violations of the conditions in the insurance
policies, if any, and timely renewal of the Insurance Policies.
2) Limits, if any, fixed for keeping call deposits with commercial banks.
Whether they were exceeded?
iii) Verify whether the system forces periodically, the user to change
password?
vi) Verify whether Officers and Operators do use their own USER-ID
and password for operations?
viii) Verify whether any digital certificate / smart card / access card
was issued to the branch staff. If so, verify whether the same have
been returned to the branch under proper noting, on transfer /
resignation etc., of the employee. Also comment on safe keeping of
such items and receipt / return of the same to Head Office?
[C] Day Begin Operations:
i) Verify whether the check-sum of day-begin and balances (in case of
SB) are printed during day-begin and tallied with previous day's
day-end check-sum & balance; in case of ALPMs?
ii) Verify whether the operator logs out of the system while leaving
the seat?
iii) Verify whether proper access controls are in place for Computer
H/W, S/W, Media, Records etc. Also comment on exercise of proper
control on computer service personnel and any third party involved
in data-entry / networking / telecommunication etc., services?
i) Verify Whether the UPS is used only for the Computer Systems and
Networking Equipments. Verify, if any other power consuming
equipment is connected to the UPS?
ii) Verify whether the batteries of UPS are properly kept in a rack?
v) Verify the Visit register / Call reports and note the details of serious
breakdowns if any.
vii) Verify whether the manual of instructions for operations of all the
applications is supplied by HO and is available for ready reference.
ix) Verify whether any computer H/W is available in the branch, which
are not installed/not in use? If yes, the reasons therefore.
xi) Verify whether the supervisors and operations staff have received
the training on working of the Applications?
xii) Verify whether all branch staff are trained in operations of branch
systems / applications?
Verify whether :
i) Validation for closed / stopped / frozen / dormant account is
provided.
ii) Verify whether all the slips / vouchers entered on the System bear
the transaction number generated by the System, with due initials
of clerical / supervisory staff for having entered / checked?
[H] GL Operations:
i) Verify whether day book postings, day book, GL, reported are duly
verified and authenticated?
ii) Verify whether any on-line help is available for the required codes?
iv) Verify whether system prints the Day Book after matching
automatically before the day end?
v) Verify whether the matched Day Book report is being checked and
authenticated by Officer / Manager?
iv) Verify whether the branch keeps proper record of the interest
calculations on quarterly / half yearly basis?
ii) If yes, verify whether the following aspects are taken care of -
a) Warning for the operator before day-end procedure in case the
clearing module is not executed?
b) In case of execution of clearing module any report is produced
in respect of number of instruments and amount posted?
iv) Verify whether charges for clearing returns are debited manually?
iii) Verify whether cheque books issued are entered in the system
regularly? (Scrutinize the exceptional transactions report).
[M] Reports:
iii) Verify whether day-end reports like exception reports, MIS report,
access log, User-ID report, parameter changes, sensitive GL head
report (in CBS branches) etc. are printed and authenticated /
signed by the Branch-Head / authorised person and are filed
separately?
vi) Verify whether branch tallies "All OK" statement on daily basis in
case of TBM branches and total of all accounts of the individual
modules tallies with GL, in ALPM Branches? Verify whether, parking
GL is nil in case of CBS Branches?
ii) Audit Trail Facility - Does the Computer System maintain a log of
access activity?
[P] Back-Up:
ii) Verify whether these back-ups have been tested for restoration at
any point of time (preferably immediately after completion of the
back-up and before proceeding ahead for any other operation)?