Bank Enquiries and Advance Monitoring Quiz

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30 Questions

What is the purpose of undertaking an annual review of advances by banks?

Assessing working capital requirements and adherence to lending norms

Why is the valuation of fixed assets owned by banks and accepted as collateral considered significant?

For accurate measurement of capital adequacy position

What should be the consequence for banks when diversion of funds is observed?

Recalling the loans and charging penal interest

Why is it essential for banks to have a mechanism for monitoring the end use of funds?

To protect the bank's interest

What is the primary objective of debt restructuring as per the text?

To preserve the economic value of the borrowing units

What is advised for Urban Cooperative Banks (UCBs) regarding the valuation of fixed assets?

Implement a system for realistic valuation and empanel valuers

Which of the following is NOT required for successful debt restructuring?

Providing additional funding to the borrower

How can banks effectively monitor advances according to the text?

Undertake regular reviews based on the latest data available

What is the minimum amount of wilful default that scheduled UCBs should examine and file suits against, according to the text?

₹1 crore and above

What additional action should UCBs take in cases of wilful default where there are instances of cheating or fraud by the borrowers?

File criminal cases against the defaulting borrowers

Which of the following is NOT a requirement mentioned in the text for scheduled UCBs to ensure appropriate certification by auditors?

Maintain adequate collateral security from the borrowers

Which of the following is true regarding the prudential guidelines on debt restructuring mentioned in the text?

They are not applicable to debt restructuring on account of natural calamities

What action should banks take to promote payment discipline among borrowers?

Mandate disclosure of 'aging schedule' of overdue payables in periodical returns

In what situation would providing finance against discounting of services sector bills be viewed as unsecured advance?

When it exceeds the limits prescribed by the Urban Banks Department

What is the consequence of banks entering into Repo transactions using bills discounted as collateral?

It violates banking regulations

How should Urban Cooperative Banks (UCBs) approach lending to Self Help Groups (SHGs) / Joint Liability Groups (JLGs)?

Follow a comprehensive policy approved by the Board

What leads to penal action from the Reserve Bank of India according to the text?

Violation of the instructions regarding Repo transactions

What should be a part of the overall credit policy of Urban Cooperative Banks (UCBs) when lending to SHGs / JLGs?

Maximum loan amount and interest rate chargeable on loans

What is the purpose of the Technical Working Group mentioned in the text?

To review and make changes to the data formats as necessary

Which types of financial institutions are represented in the Technical Working Group?

A mix of Scheduled Commercial Banks, Urban Cooperative Banks, Regional Rural Banks, and other financial institutions

What is the purpose of sharing the logic and validation processes involved in data acceptance with UCBs?

To enable UCBs to improve their data quality and minimize instances of data rejection

What is the expected timeline for UCBs to rectify rejected data and upload it with the CICs?

Within 7 days of receiving the rejection report

What is the purpose of making the rejection reports simple and understandable for UCBs?

To ensure that UCBs can easily identify and fix the reporting and data level issues

What is the main objective of the Uniform Credit Reporting Format mentioned in the text?

To standardize the data reporting requirements for consumer and commercial credit reporting

What is the primary requirement for banks to admit members?

Approval from the Registrar of Co-operative Societies

What is the Reserve Bank of India's view on UCBs financing companies involved in leasing and hire purchase business?

It is not favoured, as banks are required to cater to the credit needs of people of small means

What is the maximum bank credit that can be extended to companies engaged in equipment leasing and hire purchase?

3 times their net owned funds

What is the minimum requirement for a bank to be permitted to finance companies involved in leasing and hire purchase business?

Working capital funds of 25 crore and above

What is the maximum borrowing limit for companies engaged in equipment leasing and hire purchase?

10 times their net owned funds

What is the primary focus of banks, according to the text?

Catering to the credit needs of people of small means

Study Notes

Banking Guidelines

  • Quick disposal of enquiries by banks and award of deterrent punishment is necessary in cases of default
  • Annual review of advances is necessary for effective monitoring, including assessment of working capital requirements of borrowers

Valuation of Properties

  • Banks should put in place a system for realistic valuation of fixed assets and empanelment of valuers
  • Guidelines for valuation and empanelment are provided in Annex-1

Diversion of Funds

  • Banks should have a mechanism for proper monitoring of end use of funds
  • Appropriate action should be taken in cases of diversion, including recalling loans and reduction of sanctioned limits

Recovery of Dues

  • Banks should examine cases of wilful defaults of ₹1 crore and above and file suits
  • Banks should also examine cases of cheating/fraud by defaulting borrowers and file criminal cases

Prudential Guidelines on Restructuring of Advances

  • The objective of restructuring is to preserve economic value of units, not to evergreen problem accounts
  • Prudential guidelines will be applicable to all categories of debt restructuring except those due to natural calamities

Loan Disclosures

  • Corporate and other constituent borrowers with a turnover above a threshold level should disclose an 'aging schedule' of their overdue payables in their periodical returns

Loans to Self-Help Groups (SHGs) / Joint Liability Groups (JLGs)

  • Banks can lend to SHGs and JLGs as per their Board-approved policy
  • The lending policy should include the maximum amount of loan, interest rate, and other details

Technical Working Group

  • A Technical Working Group will be constituted to review and make changes to data formats
  • The Group will incorporate additional fields as detailed in Appendix - B

Rectification of Rejected Data

  • CICs should share logic and validation processes with banks to minimize data rejection
  • Rejection reports should be simple and understandable to fix reporting and data level issues

Test your knowledge on the quick disposal of enquiries by banks and the annual review of advances. This quiz covers topics such as deterrent punishment, assessment of working capital requirements, and safety of funds.

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