appraisal monitoring

P. R.Kulkarni, Managing Director, Fluent Consultants Pvt.Ltd., Pune 1

Critical Examination ofAppraisal and Monitoring

of Borrowers AccountsBy

Shri. P. R. KulkarniManaging Director

Fluent Consultants Pvt. Ltd., Pune

P. R.Kulkarni, Managing Director, Fluent Consultants Pvt.Ltd., Pune

2

Safety of Loan / Advance Money lent by the bank must be safe,

secured and should come back with interest as stipulated.

If the money are not safe and secured or does not come back as agreed, the legal recourse can be adopted successfully and amounts can be received.


3

Safety How achieved Pre-sanction appraisal to determine

bankability of each loan proposal Post-sanction control to ensure proper

documentation, follow-up and supervision


4

Pre-sanction appraisal Aspects for consideration

Loan application banks prescribed application for borrower and guarantor

Project report, if applicable Financial papers Asset-liability details of borrower and

guarantor


5


Title to the securities offered Information collected during discussions

with borrower and guarantor Site visit observations Information collected from references


6


Market reports about borrower and guarantor

Market reports about borrowers line of activity

Confidential reports called bankers Loan policy of the bank RBI directives, if any


7

Pre-sanction appraisal Interview of the Borrower

The missing links of information can be obtained, both for borrower and guarantor

Trade / business knowledge of the borrower can be ascertained

Business acumen and financial standing can be ascertained

Entrepreneurship characteristics such as commitment, drive and energy, goal setting, problem solving skills and risk taking capacity can be judged


8

Pre-sanction appraisal CAT principle

Consistency Adequacy Transparency


9

Security Type of property movable, immovable,

bank deposit, actionable claim Whether title is clear, marketable for

immovable property If stock is paid for movable Type of charge to be created mortgage,

hypothecation, lien, assignment Who will create charge only owner


10

What process note should contain

Details of borrower Details of business / activity Financial analysis Details of security Details of guarantor Visit / interview details Overall opinion about the loan proposal Recommendations


11

Credit Decision Credit decision is based on the judgment of

the person. The judgment is partially subjective and

partly objective. Careful analysis of all the factors is required Loan sanction letter / advice should be

carefully prepared incorporating all terms and conditions


12

Monitoring the loan account Monitoring starts immediately after sanction

and acceptance of sanction terms by the borrower and guarantor

Monitoring is at pre-disbursal stage and then at post-disbursal stage

No loan becomes bad overnight


13

Pre-disbursal Monitoring Compliance to sanction terms Proper documentation including charging of

security Noting of charge Insurance of security with bank clause Disbursement conditions /modalities


14

Operational Monitoring

Nature of operations Debit credit nature Stock statement submission and its

verification Security whether intact Insurance renewal Documents continuation from limitation point

Contd.


15

Operational Monitoring Drawing power availability Excess drawing Return of cheques Total turn over Conduct of business as projected Interest / EMI payment Consistency in operations

Contd. ..


16

Operational Monitoring NPA as per prudential norms NPA account overdrawn, no security,

operations stopped, DP not available Monitoring gives danger signals

immediately


17

Thank youLecture and presentation by

P. P. KulkarniManaging Director

Fluent Consultants Pvt. Ltd., Pune

Critical Examination ofAppraisal and Monitoringof Borrowers Accounts Safety of Loan / AdvanceSafety How achievedPre-sanction appraisal Aspects for considerationPre-sanction appraisal Aspects for considerationPre-sanction appraisal Aspects for considerationPre-sanction appraisal Interview of the BorrowerPre-sanction appraisal CAT principleSecurityWhat process note should containCredit DecisionMonitoring the loan accountPre-disbursal MonitoringOperational MonitoringOperational MonitoringOperational Monitoring