Guidance Note for Inspecting Officers (PDF)

[CONFIDENTIAL & FOR INTERNAL USE ONLY] GUIDANCE NOTE (Chapter-wise) for Inspecting Officers INSPECTING StCBs and CCBs NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT DEPARTMENT OF SUPERVISION HEAD OFFICE MUMBAI October 2020 INDEX Sr. No. Subject Page From To 1 Introduction 2 Solvency/ Net worth 3 Compliance Review 4 Asset Quality Appraisal 5 Liabilities Examination 6 Risk Management System 7 Profitability Analysis 8 Management System and Procedures 9 Internal Checks and Controls 10 Non-Fund Business 11 Development Initiatives 12 Observations/ Deficiencies requiring compliance Appendices I Comparative Financial Position II Profit and Loss Account III Erosion Statement IV Major deficiencies observed in Loans and Advances V Rating of compliance to previous inspection report VI List of major deficiencies VII CRAR Statement VIII List of branches visited, Loan Accounts and Deposit Accounts examined 174 ------------- COOPERATIVE BANK LTD. INSPECTION REPORT 1. INTRODUCTION (i) Inspecting Officers (IOs) should collect basic information of the bank being inspected viz., date of registration, date of commencing banking business, date and other details of licence, area of operation, scheduling status (in respect of StCBs), position of the Statutory Audit of the bank & Audit class awarded, number of branches, licensing of branches (in respect of StCBs), number and types of societies affiliated, number of borrowing societies, total staff etc. (ii) In case of Opening of Branches by StCBs, licence is required from the RBI whereas in case of CCB only RCS permission is required. IOs may, therefore examine whether all branches of StCBs are licensed & branches of CCBs were opened with permission from RCS. (iii) IOs to examine the aspects / fulfilment of parameters relating to branch opening contained in RBI Circular DCBR.CO.RCB. No. BC-34 / 19.51.008 / 29014-15 dated 07 May 2015 (for StCB branches) and NABARD circular No. NB. DoS. HO.POL / 4215 / P-76 / 2010-11 dated 21 February 2011 (for CCB branches) and to make comments thereon.] In case of StCBs functioning from the period prior to the application of B R Act, 1949 to Cooperative Societies (prior to 1966), whether all the branches existing during that period are licensed by RBI now? In case such branches still exist, whether they had obtained permission from RCS of the State at the time of opening or thereafter. Whether the StCB, now approached RBI for obtaining licence for such branches? This aspect is also to be examined and commented, if exists, in StCB IRs.] 175 2 SOLVENCY/ NETWORTH/ REV (i) IOs to analyse the audited financial statements of the bank and also Inspection Statements furnished / generated. (ii) IOs to work out Net worth / REV, as per the instructions contained in circular No. NB. DoS. HO. POL / 1750 / J-1 / 2012-13 dated 26 July 2012 and subsequent revisions if any. (iii) For calculating REV / Net worth, IOs to estimate erosion in various types of Assets and unprovided for liabilities, if any. (iv) In case there was default in maintenance of CRR and RBI had levied penalty, if the bank had not paid the same as on the date of inspection, or not provided for the same, the same has to be reckoned as “unprovided Liability” for the purpose of assessment of net worth (circular No.NB.DoS.HO.POL/2894/J-1/2016-17 dated 25 November 2016). (v) IOs may refer to circular No.NB.DoS.HO.POL/3902/J-1/2016-17 dated 22 February 2017 (addressed to banks) regarding treatment of Income Tax Demand as ‘unprovided liability’ only if the bank’s right to appeal is extinguished. (vi) Revaluation Reserve is not to be taken for calculation of Net worth. (vii) In case of shortfall in the provision for Standard Assets, the amount may be adjusted by reducing the provision made for NPA 2.4. Capital Adequacy a. For working out CRAR instructions contained in RBI circular No. RPCD.CO.RF.BC.40 / 07.38.03 / 2007-08 dated 04 December 2007 and RPCD. RCB. BC. No, 37 / 07.51.012 / 2014-15 dated 29 October 2014 may be followed. b. A reference may be made to circular No. NB. DoS. HO. POL/1282/J- 1/2017-18 dated 23 June 2017 for netting off of credit balances in Current or other accounts of PACS which are not earmarked for specific purpose and free from lien while calculating RWA in respect of StCBs in Two Tier Structure and DCCBs. c. A reference may also be made to circular No.NB.DoS.HO.POL/1173/J- 1/2019-20 dated 13 June 2019 regarding assignment of zero risk weight for loan waiver / other schemes of State Government subject to payment schedule being provided by the State Government and adhering to the same. d. RBI vide circular No. DCBR.CO.RCBD.Cir.No.12/19.51.012/2015-16 dated 10 March 2016 had permitted State and Central Cooperative Banks to also include the following items under Tier I capital: 176 i. Contributions received from associate / nominal members where the bye-laws permit allotment of shares to such members and provided there are restrictions on withdrawal of such shares as applicable to regular members. ii. Contribution / non-refundable admission fees collected from the nominal and associate members which are held separately as 'Reserves' under appropriate head since these are not refundable. Outstanding amount in Special Reserve created under Section 36(1) (viii) of the Income Tax Act, 1961 if the bank has created Deferred Tax Liability (DTL) on this Reserve. Keeping in view the above instructions / guidelines, IO may work out the CRAR of the bank as on the date of inspection and draft the paragraphs on the following lines: (i) IOs may compare CRAR calculations of earlier years and analyse movement of capital funds, share of different stake holders, external infusion, capital augmentation by way of new instruments (LTD, IPDI), internal accretions, changes in Risk weighted Assets etc., for commenting on the sustainability of CRAR in the years / period to come. (ii) IOs may examine the Monitorable Capital Restoration Plan, if any, prepared / being implemented by the bank for assessing when the bank is likely to achieve regulatory CRAR in case the bank’s CRAR was less than the minimum prescribed (iii) Revaluation Reserve is to be taken at 55% discount (i.e., only 45% of the Revaluation Reserve is taken into account for calculation of Tier-II capital). IOs may also comment on (a) efforts made by the bank for augmentation of capital during the period covered by the present inspection as also till the date of inspection, if any (b) mobilization of capital by way of new instruments permitted by RBI like LTD or IPDI (c) Efforts, if any to reduce RWA by keeping Capital at the same level keeping in view IDD circular No.255 dated 17 December 2015. If the CRAR is less than that prescribed by the RBI, the proposed strategy of the bank may be called for IOs may make any other observation in the calculation of CRAR, like for treatment of provisions in calculation of RWA or in Tier –II capital etc. 3. COMPLIANCE REVIEW As per the extant instructions compliance with provisions of Section 11(1) and 22(3)(a) of B R Act, 1949 (AACS) / Sec 42(6)(a)(i) of RBI Act, 1934 is to be assessed w.r.t. position on 31 March (Reference Date of inspection) and 177 compliance with provisions of other sections like 6, 8, 9, 18, 19, 20, 21, 24, 27, 35A etc., of B R Act, 1949 is to be examined up to the date of conduct / completion of inspection. (Period covered by the current inspection and subsequent period up to the date of completion of the inspection). In case position of compliance is different during the period covered by the current inspection (April – March) and during the subsequent period i.e. from the reference date till the date of actual conduct / completion of inspection, IOs to report the status in this regard accordingly indicating the period of compliance or otherwise. 3.4. Compliance with the provisions of Section 18 of B.R. Act, 1949 (AACS)/ 42 (1) of the RBI Act, 1934 i. Checking correct calculation of NDTL is very important. IOs have to familiarise with RBI instructions, HO circulars, Software used by the bank for calculation of NDTL, correctness of the software etc., and independently calculate the NDTL on a few Reporting Fridays to ensure correctness. ii. As advised in circular No.NB.DoS.HO.POL/2959/J-1/2017-18 dated 24 October 2017 addressed to the banks, direct loans from NABARD obtained by DCCBs under Section 30 of the NABARD Act, 1981 are also exempted from NDTL. iii. In terms of circular No.NB.DoS.HO.POL/1830/J01/2019-20 dated 06 August 2019, banks were advised to include Net Credit Balance in branch adjustment account as a part of other demand and time liabilities for the purpose of CRR and SLR calculation. IO may also check whether Blocked Accounts have also been properly reported as per the above circular and ensure that the bank concerned has complied with the same and net credit balances have been correctly reported in Form-I etc. iv. On the basis of the returns submitted by the bank, a BO report “calculation of NDTL and maintenance of CRR / SLR” will be generated in ENSURE. IO has to verify the inconsistencies, if any, as per the books of the bank and comment in the IR. v. In case mistakes were observed in compilation of NDTL, details should be brought out clearly in the IR, besides recording a special note in this regard for furnishing to RBI. IO has to calculate CRR and SLR as per revised NDTL based on his assessment on each Reporting Friday during the period covered by the inspection till the completion of inspection to be included in the IR and 178 special note. In case of default was observed CRR and / or SLR as per revised NDTL, number of occasions and number of days of default should be indicated clearly in the IR as well as details furnished in in special note. 3.6. Compliance with the provisions of Section 6 and Section 9 of B R Act, 1949 (AACS) i. Section 6 of the B R Act, 1949 (AACS) deals with the forms of business in which any banking company may engage, whereas Section 9 of the Act, ibid, is regarding holding of or disposal of non-banking assets in the possession of a bank. ii. IO may refer to Circular No.NB.DoS.HO.POL.4474/J.1/2009-10 dated 12 January 2010 and RBI Circular No.RPCD.CO.RF.BC.No.26/07.07.1/2009-10 dated 29 September 2009 addressed to StCBs/CCBs and accordingly firm up his observations. (For the guidance of IOs, an extract from the ACD circular No. ACD.BR.683/A.11(9)66/67 dated 26 August 1966 forwarded as Annexure to circular dated 12 January 2010 are reproduced below: 1. “Notwithstanding anything contained in section 6, no cooperative bank shall hold any immovable property howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the acquisition thereof or from the commencement of this Act, whichever is later or any extension of such period as in this section provided, and such property shall be disposed of within such period or extended period, as the case may be; Provided that the co-operative bank may, within the period of seven years as aforesaid, deal or trade in any such property for the purpose of facilitating the disposal thereof: Provided further that the Reserve Bank may in any particular case extend the aforesaid period of seven years by such period not exceeding five years where it is satisfied that such extension would be in the interests of the depositors of the co-operative bank.” 2. In terms of the above provision of the Act, a co-operative bank is precluded from holding any immovable property howsoever acquired, for any period exceeding 7 years from the acquisition thereof or from the commencement of the Act whichever is later, unless such property is required for its own use. The Reserve Bank in a particular case may extend the period of 7 years by such period not exceeding 5 years where it is satisfied that such extension would be in the interests of the depositors of the bank. Accordingly, 179 the co-operative banks are required to dispose of the immovable property not required for their own use within the aforesaid period. 3. In this connection queries have been raised by some banks and others as to whether a co-operative bank having several building/s but occupying for the time being, only one or two buildings for its use or a bank having a building but using only a portion of such building can let out the building/s or portion of the building not used by it. The position has been examined by the Legal Department and their views in this regard are given below: (i) The word ‘required’ imposes an element of necessity from the point of view of the co-operative bank concerned. Where the entire portion of a building held by the bank is not put to its own use and a portion the property could be regarded as ‘required for its own use’ would be to consider whether at least a substantial part of the property is required by the bank concerned. It would have to be decided on the facts of each case. Whether the portion of the building in the use of the bank and the rest of it not in such use, are such that the building can be regarded as substantially in the use of the bank and no general rule can be applied. In considering whether the property could be regarded as so required for the own use of a bank, the following factors would be relevant:  whether the property in question was purchased by the bank for its own use;  whether it could have acquired the property required for its own use without acquiring the portion let out;  when was the portion not in use of the bank let out and the reason for such letting out;  whether the bank requires or would require and let out portion for its use presently or in the reasonable future and for that purpose, taken steps to recover the possession thereof; and  whether the bank can dispose of the portions not required for its own use without in any way affecting its right to have interest in the portions required for its own use. (ii) The mere fact that the bank has let out a substantial portion of the property in question would not by itself indicate a contravention of section 9 although it may be a material fact in determining whether the property is required by the bank for its own use or not. (iii) Buildings could be regarded as being held for “its own use” also in cases where they are used by the bank in accommodating its staff. 180 4. Some or all the general tests indicated by the Legal Department could be applied to a case where a co-operative bank is having several buildings but using only one or two building/s for its own use and the rest of them vacant or let out or to a case where a co-operative bank is using only a portion of a building and the remaining portion let out, so as to decide whether the buildings, or floors, or space not utilised by a bank for the time being could be regarded as for ‘its own use’. within the meaning of Section 9 of the Banking Regulation Act (As applicable to cooperative societies) or whether the bank could be directed to dispose of such property without in any way affecting its right to have interest in the buildings or floors or space required for its own use. For instance, in the case of ‘A’ bank Ltd., which is having several buildings in the same compound or locality but using only one or two building/s for the time being can be advised to dispose of the buildings not used by it within a period of 7 years if they are not required for its own use within a reasonable period and if such disposal does not in any way affect its right to have interest in the building/s required for its own use. Similarly, in the case of “B” bank Ltd. having a building with several floor/s but using only a portion of its or one or two floors if the bank has used a substantial portion of the building, the whole building could be regarded as for its own use and the portion or floors not used for the time being can be let out. As stated earlier, a decision will have to be taken on the facts of each case, including the reasons for constructing the building/s or the circumstances in which they were acquired. “ 3.7. Compliance with the provisions of Section 19 of B R Act, 1949 (AACS) Inspecting Officers shall examine the bank’s compliance / non-compliance with Section 19 of the B.R. Act, 1949 (AACS) keeping in view the Act provisions, RBI instructions etc. For the purpose of guidance an extract from the circular Ref. No.NB.DoS. HO. POL. 4095 /J-1/2009-10 dated 09 December, 2009 is furnished below: “As per the extant instructions of RBI, a cooperative bank should offer to make its contribution to the shares of a cooperative society only if the By-laws of the recipient society provide for the retirement of share capital contributed by it. The retirement of the share capital contributed by a bank to the shares of any society should be completed in 10 equal annual instalments commencing from the cooperative year immediately following the year in which the concern commences business or production. Further, a cooperative bank should not, except with the permission of the Reserve Bank, contribute to the share capital 181 of a society if it is situated outside its area of operation. As regards investment in the shares of IFFCO / KRIBHCO, banks may follow the instructions issued by the RBI in this regard. The above restrictions will not apply to holdings by cooperative banks of shares in non-profit making cooperative societies such as those formed for the protection of mutual interests, (e.g., Cooperative Banks’ Association) or for the promotion of cooperative education, etc., (e.g., State Cooperative Union), or housing cooperatives for the purpose of acquiring premises on ownership basis, etc. It was, however, observed that many State and District Central Cooperative Banks had invested in the shares of other cooperative societies/institutions and could not secure retirement of shares as stipulated by the RBI, due to either non -existence of such provisions with the recipient society or the concerned society has become defunct resulting in the bank's non-compliance to the provisions of Section 19 of the Banking Regulation Act 1949 (AACS). Many banks had therefore sought clarification from us as to whether they could write off the bad investments. The issue was examined by us in consultation with the Reserve Bank of India. It is clarified that the respective State Cooperative Societies Acts / Rules / Bye- laws of the banks invariably contain relevant provisions for write off of bad loans / bad investment / asset loss with the due permission of the Registrar of Cooperative Societies. StCBs / CCBs may therefore, take necessary action accordingly.” Further, as per HO circular No.NB.DoS.HO.POL/1590/J-1/2018-19 dated 12 March 2019 treatment to be given to investment in shares of cooperative societies has been specified. It is reiterated that retirement of shares in other cooperative societies is mandatory and even if the investment in shares are treated as performing, the bank would be termed as not complying with the provisions of Section 19 of the Act ibid if the share is not got retired. 3.8. Compliance with Section 20 of the B R Act, 1949 (AACS) While reporting compliance or otherwise of the said provisions, IOs to examine and appropriately report in IR: - (a) Whether the Director/s indicated above was / were director when the facility was sanctioned to him / her / relative? Whether the director concerned was present in the Board Meeting / EC meeting / Loan committee meeting in which the Loan was sanctioned and 182 if so, whether he had abstained himself during the discussion and approval of loan? (a record in this regard should be there in the proceedings of the Board Meeting). (b) Whether the bank has made necessary disclosures in the Notes on Account to its Balance Sheet, as per RBI instructions vide RPCD.CO.RF.BC.No.44 / 07.38.03 / 2005-06 dated 10 October 2005. (c) whether the bank had submitted monthly return in the prescribed format to RBI indicating all unsecured loans and advances granted to the directors / relatives? (d) Security obtained for such loans / facilities, if any. And its adequacy. Whether entire facility is unsecured or only part of it is ‘unsecured’ due to inadequate security. 3.10 Compliance with the provisions of Section 26 and Section 26 A of the B.R. Act, 1949  Details of Depositors Education and Awareness Fund (DEAF) and various compliance requirements under the same were contained in circular No.NB.DoS.HO.POL/1092/J-1/2013-14 dated 20 August 2014.  IOs may familiarise with various formalities such as segregation of unclaimed deposits, submission of return to RBI, remittance of funds to the RBI etc., including settlement of subsequent claims, if any, from the depositors.  Further as instructed vide circular No.NB.DoS.HO.Pol/2812/J-1/2018-19 dated 13 November 2018, observations of RBI with regard to implementation of guidelines under the scheme, details of the aspects to be examined during the course of inspection were indicated.  It is reiterated that the inspecting Officers should, particularly examine the aspects given in para 5.5.11 under Deposits and give the comments only regarding compliance or otherwise of Sections 26 and 26A of the Act ibid giving details in para 5.5.11 of this Report. IOs may cover the following in detail in the IR: (a) Whether the bank had registered under DEAF Module on E-Kuber Portal? (b) Systems put in place for identifying unclaimed deposits. (c) Transfer of unclaimed deposits to DEAF. (d) Submission of various forms / returns. (e) Submission of reconciliation certificates. (f) System for addressing customer complaints. (g) Refund of deposits to customers / claimants. (h) Audit of the records maintained by the bank. 183  Vide circular DBOD. No. DEA Fund Cell.BC.126/30.01.002/2013-14 dated 26 June 2014 RBI had specified that the rate of interest payable by the banks to the depositors/ claimants on the unclaimed interest bearing deposit transferred to the DEA Fund shall be at 4% simple interest per annum until further notice. Vide Circular RBI/2-18=2018/191 (DBR.DEA fund Cell.BC.No. 110/ 30.01.002/2017-18) dated 07th June 2018 the rate of interest on such deposits would be 3.5% simple interest per annum with effect from July 01, 2018. The settlement of all claims received by the banks on or after July 01, 2018 will be at this rate until further notice. 3.13. Compliance to Section 35A of the B. R. Act, 1949 (AACS) (A) Compliance to Know Your Customer (KYC) / Anti-Money laundering (AML) guidelines IO should verify the bank’s compliance or other-wise to the various instructions / guidelines issued by the RBI under Section 35A of the B. R. Act, 1949 (AACS) in respect of adherence to KYC / AML / CFT and invariably comment on the following: {also refer to RBI Master Directions issued vide DBR.AML.BC.81/14.01.001/2015-16 dated 25 February 2016 and also to the updated version of Master Directions issued by the RBI on 29 May 2019 and subsequent if any) Banks are also required to submit a quarterly report in ENSURE to the NABARD within 15 days from the close of the quarter as instructed vide circular No.NB.DoS/HO. Pol/1462/J-1/2016-17 dated 12 July 2017.} As per circular No.NB.DoS.HO.POL/2568/J-1/2017-18, dated 28 September 2017 addressed to the banks, the amendments to PMLA (maintenance of records) Rules 2005, was communicated as per which, amount received from government grants may not be considered for deciding the limit on balance in case of Small Accounts. [Care: The following comments may be given only in para 5.5.4 Deposits. Here comments only compliance with Section 35A of the Act ibid can be given with a reference to para 5.5.4. (The following questions can be deleted from here to avoid repetition_) i. Whether the Bank has a Board Approved Policy on KYC/AML containing Customer Acceptance Policy and Customer Identification Procedures etc.? ii. Whether internal instructions were issued to the branches on the approved KYC / AML / CFT guidelines for follow-up? 184 iii. Whether adequate efforts were made by the bank to complete the KYC procedures in respect of existing as well as old accounts, as per the instructions of RBI? iv. Whether the Bank had nominated the Principal Officer and his details were communicated to FIU, GoI/ NABARD and the functioning of PO is satisfactory? v. Whether the bank had registered itself and its Principal Officer with FIU- IND? vi. Whether the CTRs were submitted to FIU on-line in time? If not, provide details of the month for which CTRs submission was delayed or not submitted. (even if no cash transactions of Rs. 10 lakhs and above was found, a Nil return has to be submitted to FIU) vii. Whether the bank had the necessary software to identify transactions which could be suspicious? Whether there is proper system in the bank to identify / conclude the transactions as suspicious from the transactions flagged by the software? Whether STR and CCRs were submitted promptly as and when such cases were detected? Whether NTR were submitted to FIU-IND? viii. Whether the bank has nominated ‘Designated Director’ to oversee the implementation of KYC / AML in the bank ix. System of periodical updation of KYC documents of existing customers, Risk Categorisation of customer as per RBI instructions. x. Whether the bank had taken steps to preserve records as per the provisions of PMLA-2002? xi. Whether any operational deficiencies as illustrated below were observed: (a) Violation of KYC procedures in opening new accounts observed in branches visited highlighting non-adherence to Customer Identification Procedure and Customer Acceptance policy. (b System of monitoring transactions of Rs. 10.00 lakh and above and reporting to FIU as per the provisions of PMLA-2002 (even if there are no transactions – Nil return is required to be submitted to FIU), leading to violations of statutory provisions. (c) Suspicious transactions, Counterfeit Currency Transactions in the bank which were not reported to FIU. No software in place.? (d) System of checking the adherence to KYC/AML guidelines in the branches by the internal inspection / audit department officials xi. Any other violation of the RBI Master Directions indicated above. If the above deficiencies or any of the above deficiencies are observed, the bank could be termed as ‘KYC / AML non-compliant’ and consequently non-compliant with Section 35A of the B. R. Act, 1949 (AACS). 185 [IOs should have examined a sizable / adequate number of accounts, and observed violations in sizable number of these accounts. IOs must have sufficient data to prove that there were violations. Instances quoting account number, number of accounts and name of branches in which such violations were noticed may be recorded.] (While defects in brief may be indicated in this paragraphs for the purpose of indicating compliance/non-compliance to the provisions of KYC/AML, details in this regard including some instances, details of accounts verified by HO / branch inspection teams etc., may be furnished in the Chapter on Deposits.)} Guidelines on the following were also issued by RBI under Section 35A of the B R Act, 1949 (AACS). IOs should, therefore, examine the compliance or otherwise of these guidelines and accordingly report compliance with the provisions of Section 35A of the B R Act, 1949 (AACS). B. Adherence to IRAC norms C. Obtaining declaration regarding own money from staff for payment of additional interest on such deposits. 3.20. Compliance on Inspection findings of NABARD (IO has to examine whether the bank had taken up any exercise for identifying defects similar to the defects observed in the previous Inspection Report. If yes, IO may collect and appropriately report data / information regarding major items of compliance. The extent to which the bank has rectified the defects pointed out in the previous IR / implemented the suggestions made in the previous IR and accordingly rate the bank's compliance) 3.23 Any other Act/Rules (say Payment & Settlement Systems Act, 2007- levy of charges as per RBI circular dated 8.10.2008, Income Tax Act, Gratuity Act, etc., GST Act, as applicable). 3.24. Whether the bank had displayed the information related to “Citizen Charter” to implement Codes of Standard and Fair Practices in its operations, as advised vide NABARD letter No. NB. DoS. HO. POL /1662/J.1/2008-09 (Circular No.128/DoS.27/ 2008) dated 31 July 2008. 186 The Board of Supervision which had taken note of the persistent violation of statutory provisions and also variations in the supervisory and audit ratings of some banks had directed that the Inspecting Officer may make ‘root cause analysis’ of all types of variations, violations and observations in the financial position of the banks and furnish his specific comments. Regional Offices may ensure that detailed analysis is carried out by the IOs and specific comments are furnished in the Inspection Report. In case external agencies are involved, the same should be taken up by the RO with them for ensuring that such violations do not recur. 4.2. Cash and Bank Balances i.2.1 Examine whether: i. The bank had framed rules for carrying out transactions relating to custody of cash, limit for retention of cash balance overnight by the Head Office and branches, procedures for periodical verification of cash by officers not connected with the custody / work and whether such verification has been recorded in the cash balance book. ii. The bank has obtained / not obtained insurance cover for cash at counters, cash-in-safe, cash-in-transit and whether it has taken "Bankers’ Blanket" policy from reputed insurance company. The currency of the insurance policy as on date, timely renewal may be commented. iii. Examine whether clean note policy of RBI was followed and furnish comments accordingly. (sorting of currency, and supplying only good quality notes – not soiled notes – to the public, bundling of packets with paper - non-stapling the currency bundles, educating the members of public / bank staff not to write anything on the currency notes, etc.) iv. Whether the Bank has maintained Cash Receipts Register, Cash Payment Register, Cash Balance Book, Key Register, Cash Remittance Register and Token Register? Any discrepancies observed in maintenance of the required registers? v. Whether any cash shortages were observed? If so, the details and action taken by the bank may be clearly indicated. It may also be indicated whether the bank had made full provision for cash shortage, if not, IO may treat it as erosion and reckon the same as short provision. 187 vi. RBI Master circular on Detention and impounding of counterfeit Notes -18 para 10 modified as per which whenever a branch receives a counterfeit note, the same should not be returned to the party, but to be impounded and a report has to be made to the RBI as well as FIU. For more details, a reference may be made to NB.DoS.HO.POL/2694/J-1/2018-19 dated 29 October 2018 and RBI Master circular on the subject may be made and defects if any should be clearly brought out in the IR. vii. Whether the branches have been provided with note counting machines, ultra-violate lamps, counterfeit / fake note detectors etc., to reduce risk thereof. viii. Safety and security arrangement for the branches and for cash counters, location of cash counters, vaults etc., in the branches and access to outsiders near such areas may be examined and commented. ix. Whether the bank had deposit account with other banks? If so, whether permission of the RCS is required to be taken as per the State Cooperative Societies Act / Bye laws and whether the same was obtained to open accounts with other banks (other than RBI/ SBI/ StCB and CCBs and notified banks) and periodical reconciliation of bank accounts carried out? (IO should give details) x. Inoperative bank accounts – whether any current accounts with other banks has remained inoperative? If so the reasons may be examined and suggestions may be furnished. xi. Reconciliation of inter-bank account – periodicity, any large differences found and action taken by the bank. xii. Fixing limit for drawal of cheques. xiii. Operational instructions issued to the branches and discrepancies if any, observed in the branches may be clearly brought out. xiv. Please comment on:  Management of CRR- excess balances, if any.  Inoperative bank accounts.  Reconciliation of bank account  Fixing limit of drawal of cheques.  Custody of cash/ cheque book. 188 xv. Whether the bank is providing funds/ borrowings to/from the Apex bank or any other commercial/private sector bank to make good shortfall in clearing, if so, whether is it charging/ paying any interest on it. 4.2.2. Examine whether the bank had placed deposits with (a) Urban Banks (b) Public Sector undertakings (c) Companies (d) Corporations (e) NBFC etc. Placing of deposits with the above institutions is not permitted as per the RBI circular No.RPCD.CO.RF.BC.69/07.02.03./2005-06 dated 21 March 2006. IO should examine the above and in case any such instances have come to the notice, furnish details in the IR including the action taken by the bank to withdraw the deposits. In case bank has not placed deposits with any of the above institutions, no comments should be made (such as bank has not placed deposits with Urban banks etc.) 4.2.3 Whether the bank has placed any deposits with the State Government Treasury and bring out the details. (As per RBI instructions, StCBs and CCBs are not permitted to place deposits with the Government, as it amounts to financing the State Government which is not the legitimate function of the bank.) 4.2.4. Outsourcing of Cash Management – Reconciliation of Transactions Vide circular No.RBI/2018-19/183 (DCM)Plg) No.2746/10.25.07/2018-19) dated 14th May 2019 RBI has advised the banks that the recommendations of the Committee on Currency Management (Chair: Shri D.K. Mohanty, ED, RBI) relating to timely reconciliation of transactions (i.e. ATM cash replenishment) between the bank, the service provider and its sub-contractor have been examined. IO may verify whether as indicated therein: a. Cash indents by the Service Provider are being made at least a day in advance (T-1 where T is the day of cash loading), in consultation with the chest /nodal branch. Comments on the multiple points of cash withdrawal, if it is present However, metropolitan centres may have two points of cash withdrawal. b. Whether Reconciliation of transactions is being done between the bank, the service provider and its sub-contractors at least on a T+3 basis. c. In the event of a dispute or the reporting of alleged / attempted breach of security / laid down procedures, access to video footage of the ATM may be provided by the bank to the service provider and its sub-contractors on request. 189 2. Comments may be made on the outsourcing arrangements for cash management between the bank and their service provider and its sub-contractors and whether the bank had ensured that the service providers and its subcontractors have a. put in place an efficient digital records management system for data retrieval and reconciliation. b. create and maintain a data base of employees at industry level through any unique mode / code of identification by the Self-Regulatory Organization to ensure that they possess unblemished records. Inspecting Officers are advised to examine the above with reference to the bank being inspected and incorporate their comments suitably in the Inspection report. 4.3. Investments 4.3.2. Investment Policy  Whether the bank has formulated an investment policy and duly approved by the Board? (RPCD.RF. BC. 17/A4-92/ 93 dated 04.09.1992). Please note down the date of Board Meeting in which the policy was approved.  Whether the Investment policy has been periodically updated? If so, when the last updation was carried out and what are the major changes incorporated and approved by the Board? Whether the changes are in accordance with the RBI / NABARD instructions? Pl indicate the Board Meeting details when the policy was last reviewed.  Scrutinise the latest investment policy document to find out whether it contains any provisions which are not in conformity with the instructions of RBI on investment of SLR and non-SLR funds.  Whether the investment policy specifies the manner in which investments have to be made, delegation of powers, procedure for investments, constitution of Investment Committee, accounting of investments, valuation of investments and whether the same are in accordance with RBI guidelines.  Whether the Board / Investment Policy has fixed any prudential limits for non-SLR investments within the overall limits fixed by the RBI?  Whether Investment policy envisages an appropriate system by the Funds Management Section in the following areas:  Calculating the interest rate sensitivity of the investment portfolio.  Preparing short term and medium term interest rate forecast for information of the Investment Committee/ Board, on the basis of 190 discussions with the market dealers / paper reports/ other policy announcements.  Based on interest rate forecast, whether formulating appropriate investment strategies.  Addressing interest rate risk, market risk, operational risk, etc. and steps required to control the risks.  Whether the investment policy contained a clause that the Investment Committee will be held accountable for their actions.  Keeping a close watch on the risk profile of each of the investment assets in the portfolio. 4.3.3. Investment Committee  Whether the bank had constituted an Investment Committee? If so the composition and whether the composition is in accordance with the Policy?  Whether the Investment Committee had met regularly as and when required and whether the investment decisions were taken only in the Committee?  Whether any decision taken by the Investment Committee was not in accordance with RBI guidelines? If so, details thereof and action to be taken by the bank.  Whether any decisions of the Investment Committee were taken by circulation agenda? If so the need for the same.  How does the bank assess the investible surplus and nature of surplus funds? - whether the cash flow statement reflected the actual position?  Whether the cash flow statement is used while taking investment decisions?  What manner by which the bank had arrived at surplus funds and placed the same before Investment Committee.  Whether the investment committee had examined the “alternative and better yielding avenues” available for investments before taking decision?  Delegation of powers to various officials, adherence thereto, violations, if any, noticed, etc., should be clearly brought out in the IR  Procure the proceedings of the Investment Committee meetings - Note down the important decisions. In the absence of the same, look into the office notes approving the investment decision and comment. 4.3.4. Investment Portfolio 4.3.4.1. SLR Investment IOs to comment on whether the bank had adhered to RBI instructions regarding SLR investments in approved securities (RBI Circular dated 21 July 2014) as 191 advised vide HO internal circular dated 29 September 2016 and also the RBI / NABARD instructions in this regard in the light of the RBI circular dated 04 October 2017 4.3.4.2 Trading in Securities Please examine and comment on the following aspects:  Whether the bank was trading in securities?  Obtain the list of the officers who are working in the Investment Department, their age, experience, qualifications, length of stay in the Department, delegation of power, etc.  Find out the details of segregation of duties i.e. Front Office, Bank Office and Mid Office.  Whether the bank has maintained records of Demat / CSGL account and tallied the position on a daily basis, account for transfer forms issued, received and whether balances as per bank's books reconciled at quarterly intervals with balances in the books of banker and whether such reconciliation checked by Internal Audit/ Inspection Department of the bank?  Whether specific “trading policy” has been framed by virtue of which the trading portfolio could be selected on the basis of deliberate plan / strategy (First In and First Out - FIFO/Last in and first out - LIFO or weighed average method for arriving at the cost of securities sold and accounting of profit/loss on sale of security). The trading policy should specify stop loss policy of the bank, the permissible level of purchase price to market price variations, etc. In terms of circular No. RPCD.RF.BC.98/07.37.02/2001-02 dated 30 May 2002, StCBs and CCBs were advised as under:  All State/Central Co-operative Banks (SCBs/DCCBs) should necessarily hold their investments in Government Securities portfolio in either SGL account (with RBI) or Constituent SGL account (with a scheduled commercial bank/State Co-operative Bank/Primary Dealer/Stock Holding Corporation of India) or in a dematerialised account with depositories viz., National Stock Depositories Ltd. (NSDL)/Central Depository Services Ltd. (CDSL)/National Securities Clearing Corporation Ltd. (NSCCL).  All future purchases/sales transactions, with effect from July 1, 2002 has to be compulsorily through SGL/CSGL/Demat accounts. The banks could indicate to the concerned Regional offices the difficulties, if any, envisaged in complying with the above requirement.  No further transactions should be undertaken in physical form with any broker with immediate effect.  Banks may ensure that brokers approved for transacting in Government Securities are registered with the debt market segment of National Stock 192 Exchange (NSE), Bombay Stock Exchange (BSE), Over the Counter Exchange of India Ltd. (OTCEI).  Only one constituent SGL (account) or dematerialised account should be opened for a constituent by the entity mentioned at (i) above. 4.3.4.3. Non-SLR investments Permitted Non-SLR investment avenues In terms of RBI circular No. DCBR.BPD.BC.No.01/19.51.026/2016-17 dated 14 July, 2016 the following changes have been made in the Non-SLR investments of StCBs and CCBs “With a view to providing greater flexibility to State and Central Co-operative Banks (StCBs / CCBs), the extant guidelines have been reviewed and it has been decided that StCBs / CCBs shall make investments in Non-SLR instruments subject to the following conditions:” Prudential Limit Total Non-SLR investments shall not exceed 10% of the total deposits of a bank as on March 31 of the preceding financial year. Instruments StCBs / CCBs may invest in the following instruments: (a) "A" or equivalent and higher rated Commercial Papers (CPs), debentures and bonds. (b) Units of Debt Mutual Funds and Money Market Mutual Funds. (c) Shares of Market Infrastructure Companies (MICs), e.g. Clearing Corporation of India Ltd. (CCIL), National Payments Corporation of India (NPCI), Society for World-wide Inter-Bank Financial Telecommunication (SWIFT). Restrictions (a) Investment in perpetual debt instruments is not permitted. (b) Fresh investments in equity of All India Financial Institutions (AIFIs) will not be permitted. The existing share-holding in these institutions may be phased out over a period of three years and till the time such investments are held in the books of the bank, they will be reckoned as Non-SLR investments for the purpose of computing the limit prescribed above. (c) Investment in units of Mutual Funds, other than units of Debt Mutual Funds and Money Market Mutual Funds, is not permitted. The existing investments in units of Mutual Funds other than Debt / Money Market Mutual Funds should be disinvested. Till the time such ineligible investments are held in the books of the bank, they will be reckoned as Non-SLR investments for the purpose of computing the limit prescribed above. The banks shall review their risk management policy and ensure that they do not have disproportionate exposure in any one scheme of a Mutual Fund. 193 (d) Investment in unlisted securities shall be subject to a minimum rating prescribed above and shall not exceed 10 percent of the total Non-SLR investments of a bank at any time. Where banks have already exceeded the said limit, no further investment in such securities shall be made. Investment in Non- SLR debt securities (both primary and secondary market) where the security is proposed to be listed on Stock Exchange(s) may be considered as investment in listed security at the time of making the investment. If such security is not listed subsequently within the period specified, the same will be reckoned for computing the 10 percent limit prescribed for unlisted Non-SLR securities. In case such investments under the unlisted Non-SLR securities lead to breach of 10 percent limit, the bank will not be allowed to make further investments in Non- SLR securities (both primary and secondary market) till such time its investment in unlisted securities is brought within the limit of 10 percent (e) Investment in deep discount / zero coupon bonds shall be subject to the minimum rating as stated above and comparable market yields for the residual duration. No investment shall be made in zero coupon bonds unless the issuer has created a sinking fund for all accrued interest and keeps it invested in liquid instruments / securities (government bonds). (f) Non-SLR investment, other than in units of Debt Mutual Funds and Money Market Mutual Funds, and CPs, shall be in instruments with an original maturity of over one year. (g) All fresh investments under Non-SLR category shall be classified under "current" category only and marked to market as applicable to these categories of investments. (h) All Non-SLR investments shall be subject to the prudential limits prescribed for single / group counter-party exposure. StCBs / CCBs may invest in Certificates of Deposits (CDs) issued by scheduled commercial banks (other than Regional Rural Banks and Local Area Banks) and select All-India Financial Institutions that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by the Reserve Bank of India. Investment in CDs will be treated as inter-bank deposits and shall not be reckoned for computing the limit on Non-SLR investments prescribed above. Non-permitted Avenues for Non-SLR investments i. Fresh Investment in PSU bonds as per circular dated 14 July 2016 ii. Deposits with Urban Cooperative Banks iii. Placing Deposits with PSUs/Companies/Corporations/NBFCs etc., (Circular No.RPCD.CO.RF.BC 69/07.02.03/2005-06 dated 21 March 2006) iv. Placing deposits with State Government Treasury v. Kisan Vikas Patra vi. Investing funds in Leasing Companies 194 (Internal circular No.NB.ID.HYD.POL/2931/J-1/93-94 dated 24 August 1993) Regulatory requirements In terms of RBI circular No. RPCD.CO.RF.BC.65/07.02.03/2003-04 dated 23 February 2004, the following guidelines were issued to StCBs and CCBs with regard to classification and valuation of securities: a. Banks should not invest in Non-SLR debt securities of original maturity of less than one-year. b. Banks should undertake usual due diligence in respect of investments in non-SLR securities. Present RBI regulations preclude banks from extending credit facilities for certain purposes. Banks should ensure that such activities are not financed by way of funds raised through the non-SLR securities. c. Banks must not invest in unrated debt securities, unlisted shares of All- India Financial Institutions. With a view to imparting clarity and to ensure that there is no divergence in the implementation of the guidelines, some of the terms used in the guidelines are defined below. d. A security will be treated as rated if it is subjected to a detailed rating exercise by an external rating agency in India which is registered with SEBI, and is carrying a current or valid rating. The rating relied upon will be deemed to be current or valid if i) The credit rating letter relied upon is not more than one month old on the date of opening of the issue, and ii) The rating rationale from the rating agency is not more than one-year old on the date of opening of the issue, and iii) The rating letter and the rating rationale is a part of the offer document. iv) In the case of secondary market acquisition, the credit rating of the issue should be in force and confirmed from the monthly bulletin published by the respective rating agency. Securities which do not have a current or valid rating by an external rating agency would be deemed as unrated securities. e. The investment grade ratings awarded by each of the external rating agencies operating in India would be identified by the IBA/ FIMMDA. These would also be reviewed by IBA/ FIMMDA at least once a year. f. A ‘listed’ debt security is a security which is listed in a stock exchange. If not so, it is an ‘unlisted’ debt security. g. A non-performing investment (NPI), similar to a non-performing advance (NPA), is one where i) Interest/ instalment (including maturity proceeds) is due and remains unpaid for more 90 days. 195 ii) The above would apply mutatis mutandis to preference shares where the fixed dividend is not paid. iii) In the case of equity shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non-availability of the latest balance sheet, those equity shares would also be reckoned as NPI. iv) If any credit facility availed by the issuer is NPA in the books of the bank, investment in any of the securities issued by the same issuer would also be treated as NPI. h. The Securities Exchange Board of India (SEBI), vide their circular dated September 30, 2003, have stipulated requirements to be complied with by listed companies for issuing debt securities on a private placement basis and listed on a stock exchange. According to this circular any listed company, making issue of debt securities on a private placement basis and listed on a stock exchange, has to make full disclosures (initial and continuing) in the manner prescribed in Schedule II of the Companies Act 1956, SEBI (Disclosure and Investor Protection) Guidelines, 2000 and the Listing Agreement with the exchanges. Further, the debt securities should carry a credit rating of not less than investment grade from a Credit Rating Agency registered with the SEBI. Internal assessments i. Since non-SLR securities are mostly in the form of credit substitutes, banks are advised to (i) subject all their investment proposals relating to non-SLR securities to credit appraisal on par with their credit proposals, irrespective of the fact that the proposed investments may be in rated securities, (ii) make their own internal credit analysis and rating even in respect of rated issues and that they should not to entirely rely on the ratings of external agencies, and (iii) strengthen their internal rating systems which should also include building up of a system of regular (quarterly or half-yearly) tracking of the financial position of the issuer with a view to ensuring continuous monitoring of the rating migration of the issuers/issues. Fixing of prudential limits j. The Board of Directors of banks should fix a prudential limit for their total investment in non-SLR securities subject to existing limits prescribed by RBI. Role of Boards Banks should ensure that their investment policies duly approved by the Board of Directors are formulated after taking into account all the relevant issues specified in these guidelines on non-SLR investments. Banks should put in place proper risk management systems for capturing and analysing the risk in respect of non- SLR investments and taking remedial measures in time. The Board should devise a system to ensure that the limits prescribed in paragraph 8 above are scrupulously complied with. The Boards should 196 appropriately address the issue of ensuring compliance with the prudential limits on an ongoing basis. Boards of banks should review the following aspects of non-SLR investment twice a year: i. Total business (investment and divestment) during the reporting period; ii. Compliance with the prudential limits prescribed by the Board for non-SLR investments; iii. Rating migration of the issuers/issues held in the bank’s books and consequent diminution in the portfolio quality iv. Extent of non-performing investments in the non-SLR category. Demat Form StCBs/DCCBs should make investment in non-SLR securities in dematerialized form only. 4.3.6. Transaction in Constituent’s SGL (CSGL) A/c  In case the CSGL account is opened with a scheduled commercial bank or State Co-operative Bank, the account holder should open a designated funds account (for all CSGL related transactions) with the same bank.  In case a CSGL account is opened with any of the non-banking Institutions indicated above, the particulars of the designated funds account (with a bank) should be intimated to that institution.  The entities maintaining the CSGL/designated funds accounts are required to ensure availability of clear funds in the designated funds accounts for purchases and of sufficient securities in the CSGL account for sales before putting through the transactions.] (Examine whether the bank has adhered to the above aspects and furnish comments in the IR.)  Comment on maintenance of SGL / CSGL Account and investment securities / instruments in demat form, physical custody of securities.  Reconciliation of demat a/c.  Examine how the bank purchase the securities from the primary or secondary market.  How they deal with the purchase and sale of securities - engaging dealer / broker or contacting some other agencies.  Ascertain their membership / dealing details with FIMMDA, Stock Holding Corporation of India / CCIL, DP A/c / Demat A/c / SGL / CSGL A/c with the agencies; obtain full details including all debit and credit transactions effected by the bank during the period covered by inspection.  Methods of payment, cheque issued whether in the name of the counter party or the broker - obtain full details. Obtain the details regarding maintenance of excess CRR (date and amount of excess CRR) and link it to the date on 197 which the securities are sold by the bank. If it is noticed that securities are sold despite the bank having excess liquidity / CRR, note down the details of the transaction and ask the bank to give the reason for such action. IO has to satisfy that the steps had been in the interest of the bank  Obtain the information about the internal Auditor / Concurrent Auditor who was auditing the investment portfolio and go through the Audit Report. All Audit Reports are to be read and the deficiencies pointed out may be noted down. It should be checked with the Action Taken Report / Compliance submitted by the bank. Whether in the subsequent quarter, similar mistakes were committed or not to be examined and commented upon.  Examine how the Investment Committee had acted on the Audit Report and seriousness attached to the compliance part. Obtain details of securities purchased and sold during the period covered by the present inspection.  How the price of the securities was ascertained by the bank - through electronic media / platform, from the website of FIMMDA/from the website of NDS or from the broker. (This has to be examined in detail. Whether the non-SLR investments were traded in the market - if not traded, how the bank arrives at the price - why they had gone for purchase of such security /ies is to be ascertained.  Whether the securities were purchased at a premium within short duration from the date of issue.  Examine earnings from the trading portfolio for the last 2/3 years, premium amortised in respect of scrips shifted to HTM, depreciation assessed in stock of current category. The bank is having a reporting system to report to the top management on a weekly basis, the details of transactions in securities/ other investment transactions. The bank’s Internal Audit Department has audited the transactions on an on- going basis and reported the deficiencies, if any, to the management of the bank. Transaction entered through any individual brokers exceeded/not exceeded 5% of the total investment transactions during the year reasons have been recorded/not recorded by the bank. The bank has followed the accounting procedure, valuation of investments, etc., as per RBI norms (RPCD.BC.154/07.02.08/94-95 dated 23 May 1995, and RPCD.CO.RF.BC.66/ 07.02.03 / 2003-04 dated 23 February 2004) and provisions made thereon towards depreciation/ loss. Excess premium paid in respect of permanent investment amortised over the remaining period of maturity of security (to be valued at cost and if cost price is higher than face value). During the period covered by the present inspection, the bank had amortised an amount of Rs. _____. 198 The bank has undertaken/not undertaken half yearly review of its investment portfolio (as of 30 September and 31 March) and placed before the Board within one month and whether the approved report forwarded to the RBI/ NABARD by 15 November and 15 May. (Banks are required to submit Half Yearly Review of Investment Portfolio through ENSURE as per circular No.NB.DoS.HO.POL/191/J-1/2018-19 dated 6 April 2018 as per the format prescribed. IO may check the same and ensure that the details are furnished correctly). Excess premium paid in respect of permanent investment amortised over the remaining period of maturity of security (to be valued at cost and if cost price is higher than face value). Examine whether the interest on investment is collected regularly and there is no revenue leakage. 4.3.7 Concurrent Audit and furnishing of Certificate of Holding to RBI Please examine whether the following instructions of RBI has been adhered to by the bank:  In terms of circular RPCD.No.RF.BC.17/A.4-92/93 dated 04 September 1992 the treasury transactions of all State and District Central Co-operative Banks should be separately subjected to a concurrent audit by internal auditors and the results of their audit should be placed before the Chief Executive of the bank once in every month. These audit reports are to be forwarded to Regional Offices of RBI and NABARD.  In terms of circular No. RPCD.RF.BC.No.107/07.02.03/2001-02 dated 18 June 2002, the concurrent auditors shall also certify that investments held by the bank as on the last reporting Friday of each quarter and as reported to the Reserve Bank of India are actually owned/held by it as evidenced by physical securities or the custodian's statement. Those banks not having the system of concurrent audit may have the above certification furnished by an auditor appointed by Registrar of Co-operative Societies.  The above Certificate should be submitted to the Regional Office of RPCD having jurisdiction over your bank within 30 days from the end of the relative quarter. In case the bank has undertaken/undertaking Repo transactions, IO has to examine these transactions as per the guidelines issued to the cooperative banks vide RBI vide circular IDMC.38100/11.08.10/ 2002-03 dated 24 March 2003 and master circular dated 1 July 2008. 4.3.8 Engagement of brokers In terms of circular No. RPCD.C.O.RF.BC.93/07.37.02/2001-02 dated 06 May 2002, the following instructions were issued to StCBs and CCBs under Section 35A of the B.R. Act, 1949 (AACS) with regard to transactions in securities and 199 engagement of brokers. IO may therefore examine the following aspects and bring out violations if any clearly. IO may also recommend for regulatory action by the RBI for any violation of the following instructions: a) StCBs and CCBs should not undertake any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis; b) StCBs and CCBs may preferably seek a Scheduled Commercial Bank (SCB), a Primary Dealer (PD) or a Financial Institution (FI) as a counterparty for their transactions. Preference should be for direct deals with such counter parties. It will be desirable to check prices from the banks or PDs with whom the state/central co-operative banks may be maintaining constituent SGL Account (CSGL); c) StCBs and CCBs should take advantage of non-competitive bidding facility provided to them for acquiring Govt. of India securities in the primary auctions by RBI; d) If a deal is put through with the help of the broker, the role of the broker should be restricted to that of bringing the two parties to the deal together. Under no circumstances, banks should give power of attorney or any other authorization to brokers/intermediaries to deal on their behalf in the money and securities markets; e) Only brokers registered with NSE or BSE or OTCEI should be utilized for acting as intermediary. A disproportionate part of the business should not be transacted with or through one or a few brokers. Banks should have a list of approved brokers. A limit of 5 per cent of total transactions (both purchases and sales) entered into by a bank during a year should be treated as the aggregate upper contract limit for each of the approved brokers; f) Brokers should not be used in the settlement process at all, viz. both fund settlement and delivery of security should be done with the counter-parties directly. CSGL Accounts should be used for holding the securities and such accounts should be maintained in the same bank with whom the cash account is maintained. For all transactions delivery versus payment must be insisted upon by the bank(s); g) All transactions must be monitored to see that delivery takes place on settlement day. The funds account and investment account should be reconciled on the same day before close of business; h) Dealing and back-up functions should be property segregated. Officials deciding about purchase and sale transactions should be separate from those responsible for settlement and accounting; i) All investment transactions should be perused by the Board at every meeting; j) The banks may keep a proper record of the SGL forms received/issued to facilitate counter-checking by their internal control systems/NABARD Inspectors/other auditors. 200 Trading and settlement in debt securities As per the SEBI guidelines, all trades with the exception of the spot transactions, in a listed debt security, shall be executed only on the trading platform of a stock exchange. In addition to complying with the SEBI guidelines, banks should ensure that all spot transactions in listed debt securities are reported on the NDS and settled through the CCIL from a date to be notified by RBI. 4.3.10 Classification, Accounting and Valuation of Securities (c.f. DCBR.BPD.(PCB/RCB)Cir.No.1/16.20.000/2018-19 dated 06 July 2018 addressed to the StCBs and CCBs is reproduced below for the information and guidance of IOs ) Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks - Spreading of MTM Losses and Creation of Investment Fluctuation Reserve (IFR) by Co-operative Banks Please refer to circular UBD.No.BPD.PCB.Cir.12/09.29.00/2003-04 dated September 04, 2003 on 'Guidelines for Investment Fluctuation Reserve' issued to Primary (Urban) Cooperative Banks (UCBs), and circular RPCD.No.RF. BC.17/A.4-92/93 dated September 04, 1992 on 'Investment Portfolio of Banks – Transactions in Securities' and subsequent instructions in this regard issued to all State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs). 2. With a view to addressing the systemic impact of sharp increase in the yields on Government Securities, it has been decided to grant UCBs which are not mandatorily required to create Investment Fluctuation Reserve (IFR) in terms of Para (2) of the aforesaid circular dated September 04, 2003 (i.e. UCBs with aggregate DTL less than ` 100 crore as on March 31, 2017), the option to spread provisioning for mark to market (MTM) losses on investments held in AFS & HFT category for the quarters ended December 31, 2017, March 31, 2018 and June 30, 2018 only. The provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss was incurred. It has also been decided to grant similar option to all StCBs / DCCBs in respect of investments held in Current category. 2.1. All eligible co-operative banks that utilize the above option shall make suitable disclosures in their notes to accounts providing details of a) the provisions for depreciation of the investment portfolio for each of the quarters ended December 2017, March 2018 and June 2018 made during the quarter / year; and b) the balance required to be made in the remaining quarters. 3. Further, with a view to building up adequate reserve to guard against market risks, henceforth, all co-operative banks shall build IFR out of realized gains on sale of investments, and subject to available net profit. All UCBs, 201 irrespective of their DTL, shall be required to maintain IFR as prescribed in para (i) of circular UBD.No.BPD.PCB.Cir.12/09.29.00/2003-04 dated September 04, 2003 on 'Guidelines for Investment Fluctuation Reserve'. All StCBs / DCCBs shall also be required to maintain IFR on similar lines, minimum threshold in which shall be computed with reference to their investment in Current category. 3.1. A bank may, at its discretion, draw down the balance available in IFR in excess of 5 percent of its investment in AFS & HFT / Current category (as applicable), for credit to the balance of profit / loss as disclosed in the profit and loss account at the end of any accounting year. In the event the balance in the IFR is less than 5 percent of its investment in AFS & HFT / Current category (as applicable), a draw down will be permitted subject to the following conditions: a) The drawn down amount is used only for meeting the minimum Tier I capital requirements by way of appropriation to free reserves or reducing the balance of loss, and b) The amount drawn down is not more than the extent to which the MTM provisions made during the aforesaid year exceed the net profit on sale of investments during that year. 3.2. The IFR consisting of realised gains from sale of investments held in AFS & HFT / Current category (as applicable) will be eligible for inclusion in Tier II capital. (IOs may also refer to RBI circular No.DBR.No.Ret.BC.90/12.02.001/2017- 18 dated 04 October 2017 addressed to all banks including StCBs and CCBs which is reproduced below ) Section 24 and Section 56 of the Banking Regulation Act, 1949 - Maintenance of SLR and Holdings of SLR in HTM Category Please refer to our circulars DBR.No.BP.BC.65/21.04.141/2015-16 dated December 10, 2015 and DBR.No.Ret.BC.71/12.01.001/2016-17 dated June 7, 2017 on the captioned subject. 2. As announced in the Fourth Bi-monthly Monetary Policy Statement, 2017- 18 on October 04, 2017, it has been decided to reduce the SLR requirement of banks from 20.0 per cent of their Net Demand and Time Liabilities (NDTL) to 19.5 per cent from the fortnight commencing October 14, 2017. A copy of the relative notification DBR.No.Ret.BC.91/12.02.001/2017-18 dated October 4, 2017 is attached. 3. Currently, the banks are permitted to exceed the limit of 25 per cent of the total investments under HTM category, provided the excess comprises of SLR securities and total SLR securities held under HTM category are not more than 20.5 per cent of NDTL. In order to align this ceiling on the SLR holdings under HTM category with the mandatory SLR, it has been decided to reduce the ceiling from 20.5 per cent to 19.5 per cent in a phased manner, i.e. 20 per cent by December 31, 2017 and 19.5 per cent by March 31, 2018. 202 Also Refer NB.DoS.HO.POL/3116/J-1/2017-18 date 27-10-17 4. As per extant instructions, banks may shift investments to / from HTM with the approval of the Board of Directors once a year, and such shifting will normally be allowed at the beginning of the accounting year. In order to enable banks to shift their excess SLR securities from the HTM category to AFS / HFT to comply with instructions as indicated in paragraph 3 above, it has been decided to allow such shifting of the excess securities and direct sale from HTM category. This would be in addition to the shifting permitted at the beginning of the accounting year, i.e., in the month of April. Such transfer to AFS / HFT category as well as sale of securities from HTM category, to the extent required to reduce the SLR securities in HTM category in accordance with the regulatory instructions, would be excluded from the 5 per cent cap prescribed for value of sales and transfers of securities to / from HTM category under paragraph 2.3 (ii) of the Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks. Also Refer NB.DoS.HO.POL/3116/J-1/2017-18 dt 27-10-17 Please also examine the following aspects and comment: (i) Approved Securities (SLR securities)  Each time a security is acquired, the bank should immediately record whether it is for investment account (Permanent) or for trading account (current) and accordingly account for them in the respective accounts.  Approved securities should be bifurcated into ‘Permanent’ and ‘Current’. Permanent investments are those which banks intend to hold till maturity and current investments are those which banks intend to deal in i.e., buy and sell on a day to day basis. On this basis, banks should classify the existing investments in approved securities into two categories. Inter-changing the investments from one category to another could be undertaken at the beginning of the year with the prior approval of the Board in which case depreciation if any, will have to be fully provided for.  In normal course, such securities under ‘permanent’ category should not be sold in the market and are to be redeemed on maturity only. However, in case of exceptional circumstances, if such securities are to be sold, profit on sale of investments in this category should be first taken to the Profit & Loss Account and thereafter be appropriated to the ‘Capital Reserve’. Loss on sale will be recognized in the Profit & Loss Account in the year of sale. (also refer to the RBI circular dated 04 October 2017 indicated above regarding sale of securities from HTM category).  Approved debt securities classified under ‘Permanent’ category should be carried in the Balance Sheet at book value (cost) or at market value at the discretion of the bank subject to their following a consistent account policy. 203  If the investments are carried at book value, the difference between the acquisition price and the redemption price should be accrued over the period from acquisition to the redemption date and should be recognized as income or expense. (ii) Other securities (Non-SLR)  Approved debt securities classified under ‘Current’ category should be carried in the balance sheet at market price or cost whichever is lower i.e., Mark-to- Market norms will apply.  All other securities other than ‘Approved’ i.e., non-SLR securities are also required to be classified as ‘Current’ category and depreciation or MTM should be fully provided for.  The carrying value of securities under current category should be revalued at market prices on a quarterly basis. The gains / losses arising out of this revaluation should not be taken to interest income / expense account. Instead, revaluation gains / losses should be segregated by entering them in a specific account. The net amount of gains / losses from trading of debt securities shall be taken to the income statement. (iii) Valuation of unquoted securities  As regards valuation of unquoted securities procedures to be followed for arriving at the periodical mark to market valuation in respect of non-SLR investment, particularly unquoted securities/ bonds to be followed.  As indicated in Circular No.NB.DoS.HO.POL/4584/J.1/2009-10 dated 20 January 2010, the instructions contained in para 3.6 and 3.7 of the Master circular No.DBOD.BP.BC.3/ 21.04.141/2009-10 dated 1 July 2009 issued by RBI to Commercial Banks may be followed by the IOs for valuation of unquoted securities. Investment in Shares of other cooperative institutions  Section 19 of the Banking Regulation Act, 1949 (As Applicable to Cooperative Societies) stipulates that no cooperative bank shall hold shares in any other cooperative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf. However, nothing contained in the Section applies to:- A. shares acquired through funds provided by the State Government for that purpose. B. in the case of a Central Cooperative Bank, the holding of shares in the State Cooperative Bank to which it is affiliated.  In pursuance of the powers conferred by Section 19 read with Section 56 of the said Act, the Reserve Bank has specified the extent and conditions subject to which cooperative banks may hold shares in any other cooperative society. 204  As per the extant instructions of the RBI, a cooperative bank should offer to make its contribution to the shares of a cooperative society only if the By-laws of the recipient society provide for the retirement of share capital contributed by it. The retirement of the share capital contributed by a bank to the shares of any society should be completed in 10 equal annual instalments commencing from the cooperative year immediately following the year in which the concern commences business or production. Further, a cooperative bank should not, except with the permission of the Reserve Bank, contribute to the share capital of a society if it is situated outside its area of operation. As regards investment in the shares of IFFCO / KRIBHCO, banks may follow the instructions issued by the RBI in this regard.  The above restrictions will not apply to holdings by cooperative banks of shares in non-profit making cooperative societies such as those formed for the protection of mutual interests, (e.g., Cooperative Banks’ Association) or for the promotion of cooperative education, etc., (e.g., State Cooperative Union), or housing cooperatives for the purpose of acquiring premises on ownership basis, etc.  It was, however, observed by us that many State and District Central Cooperative Banks had invested in the shares of other cooperative societies/institutions and could not secure retirement of shares as stipulated by the RBI, due to either non-existence of such provisions with the recipient society or the concerned society has become defunct resulting in the bank's non-compliance to the provisions of Section 19 of the Banking Regulation Act 1949 (AACS). Many banks had therefore sought clarification from us as to whether they could write off the bad investments.  The respective State Cooperative Societies Acts / Rules / Bye-laws of the banks invariably contain relevant provisions for write off of bad loans / bad investment / asset loss with the due permission of the Registrar of Cooperative Societies. SCBs / DCCBs may therefore, take necessary action.  IO may examine the investment of StCBs/CCBs in the shares of other cooperative institutions and action taken by the bank keeping in view the above and make comments accordingly in the IR. 4.3.11 Half Yearly Review of Investment Portfolio  The review should include, operational aspects of investment portfolio (such as purchases, sales, profit / loss, provision made for MTM etc.,), and bank’s adherence to laid down policy and procedures and RBI guidelines with regard to investments. 205  IO may examine the above aspects and furnish comments on the following:  Whether the Board of directors of the bank has undertaken half-yearly review within a period of one month from the close of the half-year?  Whether the review notes included all aspects of adherence to policy, RBI guidelines, purchases, sales, profit / loss, provision made for MTM etc?  Whether there was any delay in furnishing the review reports to the R.O. of NABARD? After examination of the Investment Portfolio as per the guidelines indicated above, the IO may draft the paragraphs on the following lines: 4.3.13 Disclosures in the “Notes on Accounts” to the balance sheet / financial statements Bank had complied with / not complied with the disclosure norms. Banks should adhere to the disclose norms of investments as per the RBI instructions, dated 23 Feb 2004 issued to StCBs/DCCBs regarding their non SLR debt investments as per the format prescribed and also disclose the details of the issuer composition of non - SLR investments and the non performing non-SLR investments in the ‘Notes on Accounts’ of the balance sheet compulsorily. This should be checked by the IO and any discrepancy should be clearly brought out in the IR. IO may refer to RBI circular No.DCBR,BPD.BC No.01/09.51.026/2016-17 (RBI/2016-17/14) dated 14 July 2016 on Investments in Non-SLR instruments by State / Central Cooperative Banks. StCBs / CCBs shall disclose details of issuer- wise composition of Non-SLR investments and non-performing investments in 'Notes on Accounts' in their balance sheet, as indicated in the Annex. 4.4.3.2. The sector wise distribution of outstanding loans as on the date of previous and present inspection was------ Also comment on a. the growth in the portfolio – whether growth in loan portfolio is commensurate with market trends b. whether growth in the portfolio is commensurate with growth in deposits c. C.D. Ratio of the bank net of refinance d. Efficiency of loans – whether or not the loans cover the cost and provide reasonable profit. - Average yield on loans in percentage terms less average cost of resources in percentage terms e. Diversification and its movement – whether growth under loans portfolio is in Sector which have low NPA or in sector with high NPA showing increase / decrease etc. Concentration of loans in particular sectors, loans under high yielding and low yielding loans, domination of loans portfolio under priority / social sector, etc. 206 4.4.4 Loans and Advances - Policy and Procedures 4.4.4.1 Policy Please examine bank’s lending policy relating to ST/MT/LT, etc., and comment on policy related aspects, coverage, adequacy and deficiencies, if any, covering the points illustrated below. : i. Existence of comprehensive Board approved credit policy of the bank / separate policy for each product, periodical review of policy whether being done, last such review done when? ii. Coverage of policy – products in brief, eligibility for availing loans / borrower appraisal – risk categorization of borrower, loan limits fixed, if any, rate of interest, security aspects prescribed, repayment period, moratorium if any, periodicity of charging interest, repayment schedules, share linkage etc., sanctioning authority / delegation of powers, etc. iii. Whether the bank has a Manual on Loans and Advances indicating in detail, various loan products, terms and conditions of sanction, disbursement procedures and post disbursement supervision.?. Deficiencies, if any in policy. iv. Security and Margin Norms – examine whether the security norms for agricultural advances was revised in accordance with RBI revised instructions vide RBI circular dated 07 Feb. 2019 and aspects communicated vide HO circular No.ND.DoS.HO.POL/1566/J-1/2-19-20 dated 17 July 2019. v. The Area of operations of the bank, not in tune with RBI / NABARD instructions etc.- policy decision if any, taken by the bank for financing outside the area of operation vi. Whether the bank has a policy on levying Foreclosure charges / pre- payment penalty on floating rate term loans and if so, whether the same are conforming to the guidelines contained in RBI circular No.RPCD.CO.RCBD. RRB.BC. No. 102/07.51.013/2013-14 dated May 27, 2014 read with RPCD.CO. RCBD.BC. No.84/ 03.03.01/2011-12 dated June 15, 2012 addressed to StCBs. Keeping in view the interest of the consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty and therefore, RBI had advised that StCBs and CCBs and RRBs will not be permitted to charge foreclosure charges / pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with effect from the date of circular. IOs may examine whether the bank has revised its policy in tune with the RBI instructions and comment on the same in the IR. vii. Whether bank has taken membership of all Credit Information Companies (CICs) – Whether policy indicate about making use of information received CICs while doing borrower appraisal, etc. 207 viii. ST (SAO) policy & procedures prescribed, if any, Implementation of KCC scheme., PAIS coverage etc., ix. Policy on implementation of crop insurance scheme /RKBY/ Fasal Bima Yojana etc., - coverage of members – non-members etc., x. Policy for compliance with SF/ MF financing norms, financing tenant farmers / oral lessee. xi. Policy on sanction / renewal of Cash Credits to societies and individuals. xii. General Credit Card Scheme/ Swarozgar Credit Card (SCC). xiii. Policy for financing SHGs and JLGs. xiv. Policy on financing of jewel/ housing/ consumer durables/ NFS loans and whether the policy is in accordance with RBI / NABARD guidelines xv. Discounting of cheques / purchase of cheques etc. xvi. IOs comments on the system adopted by the bank for loan price mechanism - Policy of fixing / revising interest rates on advances, how it is fixed and revised, whether based on market trends, ALCO recommendations, cost of funds etc., xvii. A table indicating changes in the interest rates on various advances during the period covered by the inspection may be furnished. xviii. Exposure limits to individuals/ units and sectoral exposure norms fixed by the Bank, if any, whether the same were in accordance with the RBI / NABARD Circular on CMA norms in this regard. xix. Implementation of Govt. sponsored schemes. xx. Any other policy issues relating to loans and advances. 4.4.4.2 Comments on Loans and Advances – Systems and procedures: IOs to examine the aspects indicated below i. System of receipt and disposal of applications. ii. System of appraisal of borrower appraisal and loan proposal appraisal. Whether bank is making use of its membership of Credit Information Companies (CICs) for borrower appraisal. iii. Rating of borrowers if any adopted by the bank and its effectiveness iv. System of sanction of various types of loans and delegation of powers v. System of documentation. vi Systems relating to disbursement and other operational procedures vii. System of maintenance of various important Registers. viii System of post-disbursement supervision. ix. System of follow up and monitoring. x. System of filing of legal cases. xi. System of asset classification. xii. Compliance with the margin requirement. 208 [(a) – Existence & following of systems by the bank to be examined and commented while making observations regarding various types of loans under paragraphs 4.4.4.4 to 4.4.4.18. (b) – These aspects may also be kept in mind / made use of while assessing magnitude and direction of various types of risk & Credit Risk in particular Aspects to be examined related to Documentation  Identification of the Borrower as per KYC norms.  To ensure that the borrower is competent to enter into a legal contract.  In respect of a partnership firm, a copy of the Partnership Deed is to be obtained and held on record and ensure that the amounts borrowed by the firm are for the purpose of carrying on the firm's business as stated in the deed.  In respect of credit facilities to Companies, the following points have to be examined. a) Whether the company is a Private Limited Company or a Public Limited Company? Whether the provisions of the Bye-laws of the cooperative bank and the Cooperative Societies Act contain provisions for financing Private / Public Ltd companies and if so, any special conditions / procedure prescribed. Type of membership the company will take from the coop bank to be a borrower and share-linking, if any. b) That the Company has submitted the following: -  Certificate of Incorporation, in respect of Private Ltd. Company.  Memorandum of Association and Articles of Association.  List of Directors and Managers.  Names of the persons authorized to operate the Bank account.  Names of the persons authorized to execute the documents.  Names of the person in whose presence the common seal of the company will have to be affixed to the documents.  Names of the persons authorized to deposit the title deeds.  Certified copy of the resolution seeking credit facilities from the bank. c) Whether the credit facilities sought are within the borrowing powers of the company as restricted by its Memorandum or Section 293 (1) (d) of the Companies Act, 1956? d) Whether the borrowing is for the purpose of achieving the objectives of the company as stated in the Memorandum? Otherwise the contract will be un-enforceable at law and ultra vires. 209 e) Whether the Branch holds on record a resolution passed by the Board of Directors certifying that the borrowings including the proposed borrowings by the company are within the limits specified by the Memorandum / Companies Act or the limit sanctioned by the shareholders at the General Body Meeting? f) In case, a Company has offered its guarantee, whether the Company is expressly authorized by its Memorandum to stand a guarantor and the guarantee has been offered only after a resolution was passed by the shareholders and also a specific resolution was passed by the Board of Directors?  Whether in respect of advances to Societies, borrowing powers have been worked out as per the bye-laws, resolutions by the Managing Committee have been passed and taken on record?  Whether a No-objection letter ceding second charge has been obtained from the First Charge holder?  Whether a letter ceding Pari Passu charge has been obtained from other financial institutions?  Whether the borrower(s) / guarantors have duly acknowledged the Sanction letter and copy thereof is held by the Branch along with the document?  Whether, in respect of advances to Companies, the terms of sanction conveyed by the Bank have been accepted by the Company by means of a resolution passed by the Board of Directors?  Whether all the documents have been adequately stamped and properly cancelled prior to execution of the document?  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?  Whether Search of the Register of Charges maintained by the Company in terms of Section 143 of the Companies Act, 1956 was carried out to cross- check the particulars of the prior charges registered with the Registrar of the Companies under section 125 of the Companies Act and also to ascertain the particulars of other charges like pledge etc.?  When immovable property was offered as security, whether search was carried out at the Registrar of Assurances to rule out any prior mortgages/charges?  Whether latest Encumbrance Certificate was obtained? 210  Whether clearance from the legal advisor was obtained before creating the mortgage and the property was physically inspected by the branch functionaries?  Whether Mortgage has been properly created? While obtaining Simple mortgage, whether attestation of Mortgage Deed by two witnesses has been ensured?  Whether in respect of Equitable Mortgage, deposit of only Original Title Deeds by the owner of the property or by his authorized agent, creation of mortgage at a Notified Centre, entry of particulars in the Title Deeds Register and confirmation letter from the Mortgagor dated subsequent to the date of deposit having deposited the Title Deeds by means of a Registered Post have been ensured? Whether the Equitable Mortgage has been registered with the Sub-registrar’s office by means of registration of a Memorandum of deposit of title deeds  The following points are to be adhered to by the bank while obtaining the documents. a) That no amount was released until all the requisite documents were properly executed by all the parties concerned including the guarantor; b) That the documents were executed in the presence of the Branch Manager or any other Officer of the bank so as to be able to identify the borrower(s)/ guarantor(s) personally c) That all the blanks filled up were authenticated by the borrower under his initials. d) That each document and schedule attached thereto were completed in one sitting and in the same handwriting. e) That all types of cuttings, deletions, additions, alternations, modifications etc., were authenticated by the borrower under his full signature. f) That the documents were executed in the Branch premises and that the date and place of execution was mentioned by the borrower under his full signature. g) That in case of an illiterate borrower, the contents of the documents were explained to him in a language that he could understand. h) That the borrower has signed in full and in the same style throughout all the documents. i) That if a borrower had signed in left hand, a small note was annexed to the document recording that the borrower had signed in left hand. j) That the borrower's full signature was obtained at the end of each document and also at the end of each schedule attached thereto. 211 k) That in case there was a change in the ink or pen, a suitable endorsement was recorded at the same point in the document under the full signature of the executants. l) In case of documents to be executed by Companies, it is essential to ensure that the seal is affixed as required by the Article of Association. m) That the documents taken were entered in the Documents Execution Register, wherever necessary. n) That the documents were executed by the borrowers in the proper manner appropriate to their status/capacity. o) That in respect of Partnership Firm, all the partners have signed all the documents and that all the partners have also signed individual guarantee agreement. p) 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.  Whether as a post-sanction follow-up in respect of simple mortgage, Mortgage Deed was registered with the Registrar of Assurances within four months from the date of its execution?  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.  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?  Whether the Insurance Policies have been taken with "Bank Clause" wherever the policies were taken solely in the name of the borrower?  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?  Whether the Branch has obtained Revival Letter/Balance confirmation at periodical intervals?  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?  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 212 liability in tact so that the bank can also proceed against the other personal assets of the borrower?  Whether revival letters were obtained from both the borrowers and the guarantors or their duly authorized agents to extent limitation against both of them?  Whether in case of Joint borrowers, revival letters were obtained from all the joint borrowers, to extend the limitation against each one of them?  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.  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?  Whether the Branch had obtained agreements on a proper stamp paper from the legal heirs of the decea

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