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Credit Delivery Process At Punjab National Bank

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Since the IP is name of partners, it is proposed to stipulate that before seeking disbursement of loan, partners to lease the same in the name of firm for the period of bank loan and EM of leasehold rights be created in bank’s favour before release of facility. Further BM to ensure that land is identified and proper chajra is available.

It is further being stipulated that the search is made in data base of CERSAI to ensure that no prior encumbrance exists over IP.

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  1. BM to ensure that the search is made in database of CERSAI to ensure that no prior encumbrance exists over IP.
  2. EM created to be duly registered with CERSAI and applicable charges be recovered from party.
  3. Mutation to be got done in the revenue records favour of the bank, before a copy of the same be kept on Branch’s record as per extant bank guidelines.

Investigation of title has been got done by advocate sh. Sanjeev Kumar Dhir who vide his search report dated 17/08/2015 has submitted that:

Above IP’s are mutated in the name of Owners who have clear, valid and marketable title over the said property and are competent to create EM by deposits of title deeds.

IP is not agricultural and is enforceable under SARFAESI First /second / third and pari passu charge: not applicable (sole banking)

Post sanction credit appraisal:

Supervision and Follow-up of bank credit has assumed considerable significance particularly after introduction of new norms of assets classification, provisioning and derecognition of interest income on NPAs, affecting profitability. System of supervision and follow up can be defined as the systematic evaluation of the performance of a borrowal account to ensure that it operates at viable level and, if problems arise, to suggest practical solutions. It helps in keeping a watch on the conduct and operational/financial performance of the borrowal accounts. Further, it also helps in detecting signals/symptoms of sickness and deteriorations, if any, taking place in the conduct of the account for initiating timely corrective actions to check slippage of accounts to NPA category. Some of the important goals of monitoring are listed as under:

  1. To keep a watch on the project during implementation stage so that there are no time & cost overruns.
  2. To ensure that the funds released are utilized for the purpose for which these have been provided and there is no diversion of such funds.
  3. To evaluate operational and financial results, such as production, sales, profit/loss, flow of funds, etc. and comparing these with the projections/estimates given by the borrower at the time of sanction of credit facilities.
  4. To ensure that the terms and conditions as stipulated in the sanction have been complied with.
  5. To monitor operations in the account particularly cash credit facilities which indicate health of the account.
  6. To obtain market report on the borrower, to gather information like reputation/financial standing etc.
  7. To detect signals and symptoms of sickness or deterioration taking place in conduct/performance of the account.
  8. To ensure that the unit’s management and organizational set-up is effective.
  9. To keep a check on aspects like accumulation of statutory liabilities, creditors, debtors, raw-material, stocks-in-process, finished goods, etc.
  10. To ensure charging of applicable rate of interest/penal interest/ commitment charges as per bank’s guidelines.

Documents required to be witnessed

  1. Assignment on the instrument itself, e.g. a life insurance policy.
  2. Assignment by a separate instrument.
  3. Mortgage deed.
  4. Guarantee deed.
  5. Conveyance deed.
  6. Gift deed.
  7. Will.

Central Registry of securitization asset reconstruction and security interest in India (CERSAI) The central registry has been established vide government of India notification dated 31/03/2011 under the SARFAESI act 2002. The object of registering particulars with the central registryis to complie data relating to secured transaction which can be searched by any person on payment of prescribed fees. All equitable mortgages must be registered with CERSAI.

Vetting of loan documents

All the loan document in respect of sanctioned limits of sanctioned limits of Rs 2 crore and above vetted from the local approved advocate, first before their execution but before disbursement of the loans.

Legal compliance certificate

The recommendations of the Mitra Committee on legal aspects of Bank frauds envisaged inert alia, establishment of an in house legal compliance certification process from each desk especially from each management category staff for making them accountable. Accordingly, based on RBI guidelines, all branches, including LCB’s are to submitted by branches in case of renewal of credit limits of Rs. 10 lacs & above in respect of fresh sanction to respective controlling office within 7 days from the end of the month in which the facilities are disbursed certifying the compliance of all the formalities contained therein.

Limit sanction statement – lss

Sanctioning Authorities are required to submit all limits sanctioned, whether fresh/ renewal/ reduction/ enhancement or adhoc in the prescribed format of Limits Sanctioned Statement as on the last day of the month to the next higher authority for monitoring as under:

Incumbents of branches to submit the Statement of Limits Sanctioned to the respective Circle Offices/FGMOs (to whom they are reporting).The designated Chief Managers posted in ELBs shall exercise their vested powers and such cases shall be reported every month to respective controlling Offices along with facilities sanctioned by the Incumbent Incharge.

Branches may extract the LSS report from the EDW Server and submit the same to Circle Office after making necessary modification in it wherever required along with required Annexure/Appendix.

In case where the LSS is not received within 10 days of the close of the month to which it relates, the Controlling Offices to generate the LSS report from the EDW Server for overview and thorough scrutiny.

Stock statement & inspection of stocks

Stock Statement: Form is to be used for obtaining Stock Statement from all borrowers enjoying Cash Credit (Hypothecation) and Packing Credit limits. In case such limits have also been sanctioned against Book Debts, position of the Book Debts is to be obtained from the borrowers in the Form.

Stock Inspection

  1. 1Stocks charged to the Bank by way of pledge/hypothecation in various loan accounts are required to be inspected and physically checked/verified by the Incumbents once in a month or more often if so required in a particular case or subject to the stipulations, if any, made by a Competent Authority in the letter of sanction.
  2. Monthly inspection/checking may be carried out alternatively by the Incumbent Incharge, Manager and the Assistant Manager/Officer.
  3. Whereas checking may be entrusted to the Assistant Manager/Officer as permitted under the instructions, it shall continue to be the personal responsibility of the Incumbent Incharge to ensure that the checking has been done in all cases every month or as per stipulations made in the letter of sanction.
  4. During periodical inspections, the Incumbents should satisfy themselves that the security is intact both qualitatively and quantitatively, is readily marketable, has not become old or obsolete and has not deteriorated in any way.
  5. A report of physical inspection/verification of stocks is to be submitted as per Inspection Report Form in case of all C/C(H) and P/C accounts with limit of Rs.5 lacs and above.
  6. For accounts below Rs.5 lacs, there is no need to submit this report and the existing practice of recording the necessary information about inspection in the Stock Statement should be recorded on Form itself.
  7. The reports must not be signed as a matter of routine or mere formality, but they should be based on inspections actually carried out.

Annual stock audit

Stock audit shall not be a substitute for regular stock inspection. However, in respect of accounts where Stock Audit is got done, the periodicity of stock inspection by the Incumbents may be made on quarterly basis as in some large borrowal accounts monthly verification of stock is not possible.

Applicability

All borrowals accounts enjoying Fund Based & Non Fund Based (NFB) working capital limits of Rs.5 crores and above from our Bank. All NFB limits, which are being used for Working Capital Funding like LC, SBLC, BG for purchase of goods for sale and BGs for mobilization Advances are to be included within threshold limit of Rs.5 crore for stock credit, but Capex LCs, Bid Bond Guarantees etc. need not be included in NFB limits for the purpose of conducting stock audit.

In case of borrowers enjoying fund based working capital limits less than Rs.5 Crore also, Stock Audit may be got done in emergent cases and/or where bank‘s interests demand. However, for modalities of stock audit, prior concurrence of the concerned Circle Head be obtained.

Annual Stock Audit should be compulsorily conducted in all „B2 to C3‟ risk rated accounts and NPA accounts enjoying fund based and non fund based working capital limits of Rs. 3 crore and above.

Frequency of conducting Stock Audit in NPA Accounts

Time schedule

    1. Completion of the process of the process of appointment of stock auditors. 31st august

    2. Completion of stock audit and submission of the report. 30th November

    3. Compliance of the observations of the stock audit report and its closure. 31st December

The observation pointed out by the stock auditors should be removed maximum within 90 days.

Fee structure for the firms conducting stock audit

Amount of limit Stock Audit fee The limit should include fund based working capital limits and LC limit. Rs. 500/- per Rs. 1 crore value of the stock including stock imported under LC and book debts with a minimum of Rs. 10000/- and maximum of Rs 50000/-

Incumbents of the LCB’s / circle heads & above may consider payment of enhanced fee, depending upon the volume of work, number of depots, Manpower employed, traveling, boarding & lodging expenses. However, the entire fee inclusive of all expenses to be incurred by auditors for stock audit of one borrower including travelling, boarding etc. will not exceed Rs. 2 lacs.

Penal interest

In order to instill a sense of credit discipline among the borrowers, RBI has permitted banks to levy penal interest over and above the sanctioned rate of interest in case of noncompliance of various terms and conditions. Broad areas of noncompliance where bank charges penal interest are:

  • a) Default in repayment of loans
  • b) Irregularities in cash credit accounts
  • c) Non submission of stock statements and other financial data
  • d) Default in adhering to borrowing covenants
  • e) Nonpayment of demand bills on presentation and not acceptance of usance bills on due dates.
  • f) Excess borrowings arising out of excess current assets
  • g) Non submission of information under the quarterly information system/ quarterly monitoring system.

Rate of penal interest

  • 2% above the sanctioned rate where there is irregularity and default and noncompliance of terms and conditions as given earlier.
  • 2% above the sanctioned rate where adhoc limits are sanctioned.
  • 3% above the sanctioned rate in case of noncompliance of terms and conditions in adhoc limit.

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