check list of today

7/28/2019 Check List of Today

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Check list of today:

Check list of today What is credit? What is processing? What do you understand with the

term Diligent? What steps are to be taken for diligent processing? Effects of diligent

processing. What is appraisal? What steps are to be taken for diligent appraisal? Effects of

diligent appraisal. Does ethics plays a vital role in diligent processing and appraisal?Accountability in the time of corporate governance where ethics are the most important now

a days. 8/26/2011 6

Meaning, Nature and Type of credit:

Meaning, Nature and Type of credit Meaning? Nature of credit: Short term Long term Types

of credit: Cash credit Packing Credit Book debts/receivables Hyp of stocks Pledge of stock

Short Term loan Demand loan Bill discounting/purchased Demand bills Usance bills

Indigenous bill purchased Foreign bill purchased Term Loan Corporate Loan Factoring Bank

Guarantee Letter of Credits 8/26/2011 7

WHAT IS PROCESSING?:

WHAT IS PROCESSING? What is required? KYC-WHY? Your self Your staff Your

higher-ups Your customer Conduct of account with your bank or the other bank Check list

effects Check list of documents required for a particular type of proposal. 8/26/2011 8

DUE DILIGENCE :

DUE DILIGENCE Meaning: Due Diligence is the process of evaluating a prospective

business decision by getting information about the financial, legal, and other material

(important) state like reputation of the other party Due diligence is used most often when

buying a business, as the buyer spends time going through the financial situation of the

business, legal obligations, customer records, and other documents. The prospective buyer

wants to validate his/her opinion of the business to see if it is truly a good decision If you

don't do your "due diligence" in a business situation, you may end up buying something that

isn't as you thought it was, or you may end up in a business relationship that will cause you

trouble. It may be costly to perform due diligence, because it usually involves the services of

a professional like you, your book of instructions and your advocate 8/26/2011 9

PROCESSING WITH DUE DILIGENCE :

PROCESSING WITH DUE DILIGENCE Completion of documents as per check list

Financial statements of allied concerns. Grouping of financial data as per requirement of the

Bank so as to make them comparable for analysis. Working out financial ratios Verification

of signatures, documents submitted by the borrower Compliance of KYC norms Credit

Reports from other banks for the borrower and the allied /group concerns. Factual position of

utilization of capacity of the unit Wages Electricity Total production Visit reports of the units

Inspection observations by Internal/External auditors Credit Risk Rating of the Borrower inaccordance with the guidelines of the Bank. Knowledge of the project/product in relation to


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future growth. (FICCI, Chamber of Industry; District Industry Centre, SIDBI, Exim Bank

Coverage of Risk by any of the organization like ECGC or CGTFC 8/26/2011 10

EFFECTS OF DILIGENT PROCESSING:

EFFECTS OF DILIGENT PROCESSING Merits: All information at a glance Quick decision

Easy while appraisal is conducted Customer satisfaction Convenient for processing,

appraising Recommending & sanctioning authority. Demerits: More papers more problems

while scrutiny is done. Number of comparisons are to be made which makes the proposal

complicated Decision also may be delayed Customer may feel frustrated 8/26/2011 11

APPRAISAL :

APPRAISAL Meaning Whether the proposal is worth for sanction in relation to financial risk

of the Bank involved keeping in view various factors: Very Good Good Satisfactory

Unsatisfactory 8/26/2011 12

Diligent appraisal :

Diligent appraisal No column if left blank NA Not applicable Not available Interpretation Pre

sanction visit report of all the units Financial ratios vs standard ratios fixed by the Bank Risk

rating of the borrower Other income Conduct of account of each type of facility availed

Conduct of account of allied concern with you or with other banks Returning of Cheques/

Bills/ LC/ BG Legal aspect/scrutiny of title deeds in original by the advocate on penal.8/26/2011 13

Diligent appraisal :

Diligent appraisal Recommendations: Amount of loan /Limit recommended Margin Nature of

Security primary or collateral Value of security primary or collateral. Rate of interest/

Commission or other revenue/Charges Other terms and conditions superfluous conditions

Insurance waiver Documentation Release of limits Monitoring of accounts 8/26/2011 14

Effects of diligent appraisal:

Effects of diligent appraisal Merits: Proper sanction No subsequent amendments in terms and

conditions Chances of NPA is too less Proper pricing of the funds deployed thus increasing

profitability of the branch/bank No accountability on account of not application of due

diligence Demerits Consume more time for taking final decision. Difficult / Hard/

Unfavorable decisions have to be taken No room left for enjoying the powers but exercising

the powers more diligently and judiciously. 8/26/2011 15

Ethics v/s diligent processing and appraisal :


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Ethics v/s diligent processing and appraisal Corporate governance Disclosures Transparency

Risk Weightage NPAs Human ResourcesDevelopment and their Motivation/De-Motivation

8/26/2011 16

Accountability :

Accountability Accountability in the time of corporate governance where ethics are the most

important now a days Can we afford non accountability If processing and appraisal is done

with due diligence, there is no accountability on account of judgment of error. 8/26/2011 17
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