Handbook of Credit Monitoring.pdf

AV AR R Mr R M Mr K A V I...

AV AR R Mr R M Mr K A V I A R A R KU I R UM M M r A V A R K V KU I R M M r A Mr A V A R KU V I R R R U M Mr A A A R r K V I RR UM K U M I M R A M A M rK AV r A V A R KU I R M R M M r A V AR A R r KU V I R R KU M U M M R A M A r V r K V I R U M R A K I HANDBOOK M R A M A r A V A R R K U I M R M M A r A V A R KU U I M R M M r A V r K V R KU I R M R A M A r A V A R R KU I M R M M A r A V A R KU K U I M R M M r AV M ON r K U M A R R A AV V I M r KU M A R R R A V I M r K U U MA R R A V I M r K U M A R R R A V Mr R M A M r K A V I A R R K U I R M M CREDIT r K U M M A A R R A V I M r r KU M A R R A V V I M r K UM A A R R R A V I M r KU KU M AR R AV U M RA M r AV r K V I R U I M R M Mr MONITORING K U M A R R R A A V I M r KU M A A R R A V I M r r K KU M A R R A V V I M r K U M A R R R A V R U M M R A M A A K I M r A V A R KU r K U V I M R R U M M r R AV A A K I M R M M r A V AR A R r KU V I R R KU M U M M R A M A r V r K V I R U M R A M A A r K V I R R M M A A A R r KU V I R R KU M K UM I M R A UM A M r Mr A V A R K V I R R K U M I Mr R A M A r A V A R K U I M R M r A V A R K U M R M Mr A R r KU V I BARODA APEX ACADEMY U M M R A K I R GANDHINAGAR Mr R AV A R UM  A R K V I R U M M r A A r K V I K U I R U M M A r A V A R K I R R M R M M r A V A A R K U I R U M M M r A V A R K V I K U I R M M r A r A V Handbook A R CreditK U I R M R M M r A V A R A R K U I R U M M M r monitoring A V A R K V I K U I R M M r A r A V A R K U I R M R M M r A V A R R U I R M M A M rK A V A R r K U V I K U I R U M M A V R R Mr R A M A M r K A V I A R R K U I R M U MA M r R A V M A R r K U V I r K V I R U M R A M A A r K V I R R R U M M R A M A A r K V I R U I U M M R A A r K V K V I Bank of BarodaKU R M M R A M r A A r V I R R U MBaroda Apex M Academy, R A M A M AR r K 6 th A V Floor, IGH – 4, A R K U I U I M R M M r A V r K V Near Udhyog R Bhavan, Sector K U – 11, I R M R A M A r A V A R R U Gandhinagar – M 382011, R M A r K I V India R U I U M M R A Gujarat, A r K V K V I R U M M R A M r A T – 079- A 23973201 K r -240 V I R R R Email – [email protected] M M R A M A A rK V I R U I U M M R A A r K V K V ICredit Monitoring R M U Up to 31.03.2024 M R A M r A A Handbook: Updated r K V I R R R U M M R A M A A r K V I R U I U M M R A A r K V K V I R U M M R A r A M Note - “The information A r K V I R R R only and KnotUfor M M A A contained in this handbook is confidential, privileged and intended strictly for internalAcirculation I any public use/consumption. R R U M M M A V rthis handbook is general A K V I U The Information K This handbookVshouldI not be construed contained in R in nature M and prepared for r learning M purpose A r only. A A R as substituteK Ufor the Guidelines/Circulars/Book I of R MInstructions. All R M decisions should strictly M r be taken in accordance A V with the Guidelines A specified in theR A K U Rof Instructions/Manuals/ R I by the BankRfrom time to time. Query, U M if Circulars/Book M any, may be taken up withM r A V SOPs etc. issued A K K U I R the concerned vertical.” M M r r A V A R K U I M R M M r A V A R K U I R r V R K UM I M R A U M A Mr A V A R K R M M r A R K U I U M M r R AV rK VI R  AV AR R Mr R M Mr K A V I A R A R K U I R UM M M r A V R A K V K U I R M M r A V R U R Mr R A M A M r K A V I A R A R K U I R UM r V R K K UM I M R A U M A Mr A V R R Mr A R R A Foreword V K U M A I M r K R A V I U MA R M M r V A for comingM upA R K V K U I congratulate team Apex Academy I R with a Mr A newV Rof “Credit Monitoring” U R Mr A K I version of Hand Book R A r V R A R The Handbooks K UMare not substitutesI Mfor guidelines orRA U M A M r V R K U M but areRaA guiding material M andAserve r A V r K V I Book of Instructions, R U I M R M R asA ready reckoner for A r day to day activities. K They serve as V R R a one-stop solution M U for all queries ofIa M R A M A A r K V user/reader. R K U K UM I M R A U M A Mr A V r A V Credit Monitoring A R has become an integral K part of I R R M R M M r A V A A R K U lending activity. Banks have a great I responsibility to R U M M M AV and to recover maintain ther quality of the assets A Rthe K V K U R I and other duesRin time. Therefore,UitMrequires I M r A r V interest A A K R R M R M M r Users, apart A V A A R K U sustained upgradation on part of its I Book, should RalsoR contents. M UM from M taking r advantage of A this R V Hand A r KU V K I V for its continuous R improvement. KU M M R A Mr A I contribute R A M r A V A R R I trust all thoseK Uwho were given the I Mtask of updation ofR M M A r have put in their AVefforts meticulously ARto K U U I M this handbook R M Mr A V r K V R and solution document K U for all I R M R A make it A a ready reckoner M r A V A R U M R M M AR day to day queries r K in Credit Monitoring A V I R area. However A KU U scope IforM R M the Mr A V r K V improvement is always R inevitable, as U such K inputs with VI R M R A are requestedMtoAshare their valuable r A R M asset’. RA users A R K U I U M M Apex team M r to make this handbook A V a ‘valuable A R K V r KU V I R R K U M Sinha Sunil I Mr R A M R A M A r A V A R R K U I M Head-Apex Academy R M M A r A V A R K U U I M R M Mr A V K V R U R Mr R A A r K V I R A R K UM I M R A U M A M M r A V A R K K U I R M M r r A V A R K U I M R M M r A V A R K U I R r V R K UM I M R A U M A Mr A V A R K R M M r A R K U I U M M r R AV r K V I R M R A A R UM  AV AR R Mr R M Mr K A V I A R A R K U INDEX I R UM M M r A V A R K V K U I R M M r A V R U R Mr No. K I Chapter Topic Page R A M A r A V No. A R U M R 1 A RCredit Monitoring r K V I R 2 K UM K U2M Preventive I MVigilance R A U M A Mr6 A V V R R Mr 3 R A Early M M K Warning SignalsA& Red FlaggedrAccounts A V I 22 A R 4 ARNon Cooperative K UBorrower I R U M M M r A V A R K40 V K U V I R R U M Mr46 R A Mr 6 5 Credit Monitoring Tools A A r K V I R R R CERSAI U M M R A 65 M A 7M A r K V I R 71K U U M Income Recognition, A Asset classification R A & provisioning M r A V r K 8 V I R U I M R M R A Restructuring A of Advance Account r K V 105 R M U for Resolution RPrudential Framework R A Mof Stressed Assets M A 9 A r K V I R 116 U U10M Insolvency A 2016 M& Bankruptcy Code, A K V R M Mr A 119 K V I R U R Mr R A M A M r K A V I A R A R K U I R U M M M r AV A R K V K U I R M M r A r A V A R K U I R M R M M r A V A R A R K U I R M UM M r R A V A R r KU V K V I R U M M R A Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K V K U V I R R U M Mr R A Mr R A M A M r K A V I A R A R K U I R M M M r AV A R KU V r K U V I R R K U M I Mr R A M R A M A r A V A R R K U I M R M A r V R K U K UM I M R A U M A Mr A V V R R Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K V K U V I R R U M Mr R A Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K K U I R M M r r A V A R K U I M R M M r A V A R K U I R r V R K UM I M R A U M A Mr A V A R K R M M r A R K U I U M M r R AV 1|P a g e r K V I R M R A A R UM  AV AR R Mr R M Mr K A V I A R AR Monitoring r K U I R Chapter 1UM 1. Credit M M A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I A R A R K U I Learning R Outcome M M r A V A R K U U I M R M M r A V K V R U R  Mr R – What Ais Credit Monitoring M A M r K A V I AR Understanding A R K U I R U M  Nursing the Supervision M M r of Bank Credit A V A R K V  U– Credit MonitoringI Process Determine the Follow Up procedure K R of Bank Credit M M r A AV of “Prevention AisRBetter than Cure”r K U R Mr I  Ensuring  Recognizing R the significance M M A V A R  A U RCredit MonitoringKProcess I R U M Strengthening the M Credit Monitoring M rpractices A V A R K V  U Tag the strong AttendKto Credit MonitoringI R M M r A Mr methods ofRCredit AV Monitoring MAR KU R  r V I R  Nurturing R U M R A M A  A Developing strategy K to prevent slippage r V I R U U M M R A A r K V K I R U M M R A Mr R AV M A r K A V I A R U M R M M AR r K A V I A R K U U I M R M M r A V K R U R Mr R AV M A r K A V I A R R K U I M R M U MA M r R A V M A R r K U V K V I R U M R A Mr R A M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U R Mr R M M r K A V I A R AR K U I R U M M M r A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U R Mr R M M r K A V I A R A R K U I R U M M M r A V A R K K U I R M M r r A V A R K U I M R M M r A V A R K U I R M M r A V A R r KU V I R R U M M R A M A M rK A R r KU V I U M M R A 2|P a g e K I R Mr R AV A R UM  AV AR R Mr R M Mr K A V I A R A R U K 1.0 CreditVMonitoring I R UM M M r A R A K V K U I R M M r A V R U R Mr A A K I 1.1 Credit Monitoring - Prevention Is Better Than Cure R M M r A V A R A R K U I R U M M Credit Monitoring M r part of Credit is an important A VManagement in any A RBank. Banking means K V K U deposits fromI the public for the purpose accepting R of lending. ItUisM M r obligatory for Banks to make A V R R Mr payment A of these deposits on demand timely paymentRto depositors, we need M Afund r K contractual or after expiry of the i.e. timelyM period.I For making V equilibrium AR AThe A R U K lent by the bank return of money lent. I is also returned back R U M will be maintained M M r only if the money A V A R well in time. K V K U I R M M r A AV continue toMfollow ARup till the totalr money U I borrower. R R Mr ofTherefore, As we know that lending of money has its own risk, Bank should be very cautious at the time R K is repaid byVthe lending and should Credit Monitoring hasU R become inevitable forM safeguarding the R A interest. MA A r K V I R bank`s U U Msense, Credit monitoringM R A A r K V K In real I starts from the moment bank M identifies R important andKifUselection of borrower the borrower. M In credit A Mr decision, appraisal V A of the borrowerMisAvery V I is done R R properly at the R part will alsor be easy. A well begun A is half-done.MA R U beginning, then the monitoring Ksignificant changes I M R M A track small-small r A V in the financial A R of the borrower K U U in the account If we carefully I M R time of first default, M situations M r A V K V R U R Mr situation K for this, Banker Vis Isupposed to R or turnover or the activity at the it may be easy to curb the and canA R M A stage itself.rBut be handled at the incipient A A R U and need to pay fullM R M remain in touch A with the borrower r K V I attention on monitoring. R U M U entire banking M R Aproblem of rising M A K r the V K Nowadays I industry is facing the U NPAs, which has shaken M A Mr and taking corrective entire Indian banking AVsector. A The monitoring R part can play aKvital role in prevention r V I of slippage R R R R measures at the U M very beginning M of the problem. R A M A K I U MA M r R A V M A R r K U V K V I R U M R A Mr The main objectivesR A of follow-up and M A M r K A V I AR A R K U supervision of I bank credit are: R M M M r A V A R sanctioned for KU V K U To ensure that Ithe bank credit is R used for the purpose it M has been M r A AVof Funds), MAR U R Mr (i.e. End Use R M r K A V I A R AR  To keep a close watch K inUthe borrower's I activity and particularly toRsee if the project U M M M r A V A R K V K U has been started I in time, R M M r A Vthe performance ofAthe U sales, profitI etc. and R unit in terms of production R Mr  To evaluate R A M r K M plan, A V A R alsoR A to see if the borrower K U is in line with the Ioriginal R U M MTo appreciate theM r A V A R K V K U I management capability, R M M r A V R U R Mr  To get R A information A factors like reconomic relating to external M M K situation, government A V I AR A R policies etc. and K U I R U M MTo detect signalsM of rsickness at their early A Vstage in order to A R K V K U I R M take corrective actions M r to A AV AR U R Mr avoid sickness. R M M r K A V I A R A R K U I R U M For better credit monitoring,rwe have to keep ourV eyes and ears openR K U M of the bank. It M R A M A and follow the different r r K guidelines corrective measure V I is easy to find out R any adverse U features in its beginning and I Mmay take M R A at once. A r K V U M M A There is A R a need to strengthenK the credit monitoringIprocess at the branchR M M r A A R Vbe proper flow of informations level. Proper credit K U their financial monitoring should be emphasized. I There should R U M from the units M r regarding A V A R area, annual accounts, stock reports K etc., which would enable the R M M r AR K U I M M r A V K U I R 3|P a g e Mr AV A R R R UM  AV AR R Mr R M Mr K A V I A R R banker toAknow the need based U K I R U M quick M remedial action. Mr credit requirement of A V borrowers and warning A R signals for taking K V K U I R M M r A Vthe borrowers could Rbe successful inKdiversion U Idue to non- R R Mr Itadherence R is observed that A M A M r A of funds V A Rto the laid down norms K U and guidelines. I A of the branchr can keep a watchAonV the following points, R U M M If credit officer M A R credit portfolio ofKthe V K U branch may remain I almost healthy. R M M r A V R U R Mr R A M AProcess: M r K A V I AR A R 1.2 Credit Monitoring U K formal due diligence I R U M MTo Carry out independent M r A V A R of DIN No., PANKNo. V K U CIBIL, RBI defaulters I R M (i.e., verification M r A AV (i.e., collecting R U R Mr I list, Probe 42 Search Engine ECGC caution list etc.) and informal R A market informationrabout K the borrowers,Vcredentials R due diligence the R M promoters, position ofUthe industry in the economy, M R A performanceMA of A K r leader. instead I Group company V of completely relying R on the information U U Metc.) before sanction/disbursement, M R A A r K V K I /appraisal of consortium U M M A Mr  To check A V A R r K V I of the R R R R independently, U M the veracity of the M viz. MCA portal, Ainternet, MarketMA invoices/quotation/credentials R K through various Isources, M A suppliers and its promoters intelligence, even if, rit is already done by A V A R K U U I M R the Leader of the Consortium. M M r A V K R V consortiumAmeeting on regularKbasis including timely U R Mr  Convene R Aquarterly M M r V I sharing / R A IRAC statusMA R exchange of complete information U A other issues as rperKextant guidelines. I in respect of R conduct of the account, U M and M A V A R K V K U Timely submission I R M M r A AV Papers for R U R Mr A K I of Stock Statements, QMR, information demanded by Bank, AuditedR Financials M Renewal. M r A V A R R Aease the submission K U I R U M MTo M r of stock statement A Vby borrowers, ourAR K V K U I R M Bank has developed M r an A in house V digitalized platform for R obtaining the stock U and book debt statement from R Mr customers. R ADigitalized portal for M AStock and Book Debt statement fromM r Kstatement is anAintegrated I Vbasis portal and auto A R R for obtaining Stock & Book Debt A of DP afterrvalidation U K by BranchVHead, customers on real time I various other R R U M M updating M U auto remindersI to borrowers For further R A A parameters like debtors r K V K /creditors /insurance details/ Penal Interest Calculation/ U Mdue dates in CBS along M with R A Mr R AV M AR details, r K please refer I BCC:BR:114:154 A V Dt. A R 07.03.2022. U M R M M AR r K V I A Inspection of the R Aunit on regular intervals K U U Carry I M R M M r / A V K out post-disbursement Stock AuditV inspection/ Rconcurrent auditor Uas per stipulatedI norms and R Mr A A K / Unit Inspection by R deficiencies, if any, detected M be critically M examined r and sorted out V Aturnover with theMA immediately. R A  Keep R K U I R U/ M close watch on the M r account like routing A V regular inspection A Rof stock / book debt of turnover & relative K V K U other assets. I projected turnover, diversion of fund through R M M r A V R U R Mr  PromptRaction A M A on early warningM r K V I signals, viz. poor turnover, principal / A A R R U to be initiated A on loan notr Ksettled on dueAdate, I repeated instances R U M M interest M V A R ofadverse K Advance Bills V K U reports etc. I outstanding for more than 10 days, Rinvocation of BG / M LC liability, M r market A AV AR U R Mr R M r K A V I A R A  TimelyR repayment of interest K U and instalmentsI M R U M M M r A V A R K U K  Regular I policywith R provides timelyUhelp M to the borrower inMgenuine r Mr A V conversation A R the borrower K V I cases within R the guidelines M of the bank. M r A A R Review of the facility K U I R  Timely r V R K UMCompliance ofIterms M R A U M A Mr A V and conditions A R K R M M r A R K U I U M M r R AV 4|P a g e K I R Mr R AV A R UM  AV AR R Mr R M Mr K A V I A R A R KU I R UM M M r  Comparison of performance with projections A V R A K V K U I R M M r A Mr  AnalysisRofAthe V R KU R  Transactions in the account A r V I R R U Mof the unit with Industry M trend R A M A A r K performance V I R U U M M R A A r K V K In the coming chapters V I we will discuss preventive R vigilance / U M various monitoring M tools which R A Mr will be useful forRbetter A Credit Management.M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U R Mr R M M r K A V I A R A R K U I R U M M M r A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K V K U I R M M r A AV R U R Mr R M A M r K A V I A R AR K U I R U M M M r A V A R K V K U I R M M r A AV R U R Mr R M A M r K A V I A R R K U I R M U MA M r R A V M A R r K U V K V I R U M R A Mr R A M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U R Mr R M M r K A V I A R AR K U I R U M M M r A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I A R A R K U I R U M M M r A V A R K V K U I R M M r A V R U R Mr R A M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U R Mr R M M r K A V I A R A R K U I R U M M M r A V A R K K U I R M M r r A V A R K U I M R M M r A V A R K U I R M M r A V A R r KU V I R R U M M R A M A M rK A R r KU V I U M M R A 5|P a g e K I R Mr R AV A R UM  AV AR R Mr R M Mr K A V I A R A R KU I R UM M M r A V R A K V K U I R M M r A V R U R Mr R A M A M r K A V I A2 R A R K U I R Chapter U M M M r A V A R K V K UPreventive IVigilance R M M r A 2. V R U R Mr R A M A M r K A V I AR A R K U I R U M M M r A V A R K V K U I R M M r A AV AR U Learning Outcome R Mr R M M r K