sar format

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BANK OF INDIAHEAD OFFICECREDIT MONITORING DEPARTMENT

Branch Circular No. 99/66

Subject: Advances/CrMD/2005-06/3

Date 21.07.2005

Ref:HO:CrMD:RSA:05-06

THE ZONLA MANAGERS,ALL ZONES.

THE DEPUTY GENERAL MANAGER,THE ASSISTANT GENERAL MANAGER,THE CHIEF MANAGER / SENIOR BRANCH MANAGER,BRANCH MANAGER / MANAGER,

ALL INDIAN BRANCHES.

(FOREIGN BRANCHES FOR INFORMATION ONLY)

Revised guidelines for examiningStaff Accountability Aspect

~~~~~~~~~~~~~~~~~~~~~

As per extant guidelines Staff Accountability aspect is required to beexamined when a Standard Asset slips to Sub-Standard, Doubtful or Loss AssetCategory. Various guidelines/instructions have been issued in the past as regardsexamination of Staff Accountability Aspect. In the light of the experiencegathered so far, it has been decided to revise the existing guidelines. The freshguidelines being issued now shall supersede all previous guidelines/instructions.

Point of Reference :- The Branches should submit Staff Accountability Reportimmediately, and in no case later than 90 days, after an account slips fromStandard to Sub-Standard/Doubtful or Loss category.

Format for submission of SAR :- The format for submitting StaffAccountability Report shall be the same as conveyed vide Branch CircularNO.98/70 dated 14.7.2004. The revised copy of the same is enclosed by way of

Annexure-I for ready reference. However, please note importantly thatadditional information to be furnished in part III of the format in caseof Quick Mortality Accounts shall be submitted in respect of those

accounts only which become NPA within one year of original sanction.

Staff accountability report in respect of accounts with outstanding amountup to Rs.1 lac or in respect of accounts covered under Govt. sponsored schemesmay be submitted in the statement form to the competent authority onquarterly basis as per annexure II which should cover all accounts up toRs.1.00 lac which slipped during the quarter. However, cases ofmalafide/malfeasance should be looked into separately by the competentauthority.


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Authority to examine Staff Accountability Aspect :-Staff AccountabilityAspect shall be examined at Zonal Office level as under:-

(Rs.in lacs)

Authority AmountO/S(FB+NFB)

General Managers posted as Zonal Managers in Zones Up to 500.00

A) Deputy General Managers posted as Zonal ManagersB) Deputy General Managers posted as second lineofficers in Zones headed by General Managers

Up to 200.00

A) Assistant General Managers posted as ZonalManagersB) Assistant General Managers posted as second lineofficersi) in Zones headed by Deputy General Managersii) in Zones headed by General Managers where no

Deputy General Manager is posted

Up to 100.00

Chief Managers posted as second line officersi) in Zones headed by Assistant General Managersii) in Zones headed by Deputy General Managers whereno Assistant General Manager is posted

10.00

General Managers posted at Head Office shall have the authority toexamine staff Accountability upto aggregate fund-based and non fund-basedlimits of Rs.1000.00 lacs. Instructions regarding examination of Staff

Accountability by an authority who is one level above the delegated authority forsanction of advance in question shall continue. However, review of observationsunder Post Sanction Review System by any delegatee shall not be construed asreview of the proposal. Examination of SAR in all such cases shall be done by thedelegatees within the monetary limits mentioned hereinabove.

In respect of all sanctions above the level of General Manager, the StaffAccountability aspect shall be examined by the M.Com.

Notwithstanding the above cut off limits, Staff Accountability in an NPAaccount should be examined by an authority who is one level above the authoritywho sanctioned the last proposal. However, such higher authority should nothave earlier been a party to sanction or recommendation of the account inquestion. Further, such higher authority should not have confirmed/ratifiedactions of the lower authority for grant of ad-hoc/over-limit or purchase ofcheques etc. in respect of the account in question. In such cases the SAR shallbe examined by the next higher authority. Thus, for example, if an account hasearlier been sanctioned by the Chief Manager of a Branch and if in such accountad-hoc/over-limit has been allowed/confirmed/ratified by the AGM/DGM/GMposted in administrative/controlling/zonal office, the SAR shall be examined byan authority next to such AGM/DGM/GM.

General Guidelines for examination of SAR

Head Office Vigilance Department has recently issued a Circular Letter No2004-05/141 dated 9.10.2004 which deals at length with various aspects ofexamination of Staff Accountability. Some excerpts of the Circular Letter aregiven from point i) to vi) herebelow:-

i) The Bank is a commercial organization and not a regulatory body, wheredecisions are taken on the basis of available data and each decisioncontains some element of fair banking risks. In the process, there is

possibility for genuine errors of judgment/decisions taken on purely


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commercial considerations and in good faith after following theprocedures. Such errors and decisions need to be examined with anabsolute professional approach.

ii) The aim of the Bank in conducting the exercise of staff accountability is to

safeguard the larger interests of the Bank. To that end, the first step thatought to be taken should be to identify the areas where the rules andprocedures designed to protect the interests of the Bank were not beingfollowed. It should be borne in mind that negligence arises when there isa duty and duty is defined in terms of the laid down rules and procedures.

iii) Thus the negligence/omission/ commission should be examined withreference to the laid down rules and procedure. More importantly it shouldbe critically examined if the loss would have been avoided had the specificomission / commission not occurred. This step is crucial in linking theomission/commission to the cause for the loss. If this step is not carriedout, the exercise would end up only as a list of all deviations from therules and procedures without indicating their relevance to the loss.

iv) Once the specific omission and commission of the staff, which have adirect causative relationship to the loss suffered by the Bank areidentified, the stage then comes for examining whether there is anyvigilance angle. The vigilance angle examination entails examinationwhether there is a possibility that the officials omission and commissioncould be due to his lack of integrity or motivated / reckless performanceof duties. The grounds on which the possibility of lack of integrity,

motivated or reckless performance of duties is ruled out are to bejustified. If these grounds are acceptable, then it becomes a non-vigilance case and such cases are to be dealt with due application ofprescribed Rules/Regulations for such action under relevant provision ofemployees conduct Regulations/Settlement.

v) The final step in the examination of staff accountability would be taking adecision on the nature of action that should be taken against the errantstaff. The nature of omission / commission, the circumstances underwhich it occurred, the track record of the person involved, the extent ofrelationship of the omission/commission to the causes of the loss, and the

kind of message that is sought to be conveyed to others in respect of suchlapse(s) are the relevant factors that should be weighed before taking adecision on the future course of action.

vi) Punishing employees/officers should be a secondary step. The aim ofpunishment should be to instill a sense of guilt and resultant repentanceon the part of the staff / official who committed the lapses, so that infuture, he will conduct himself in a more responsible fashion.

Further, while examining the staff accountability aspect, the competent

authority should take into consideration the job role/area of responsibility ofdifferent officials which are broadly brought out as under :-

a) Appraising authority:- Appraisal is carried out at the grass root level atBranch/CBB/LBD. At times techno-economic appraisal is also carried out bytechnical officer. It should be the responsibility of the appraising authority forproper scrutiny of financial statements, projections, status and credentials of theproponents available from the market or other sources and all other basicaspects of the proposal such as whether the business is within the framework ofthe credit policy of the Bank/norms prescribed by Reserve Bank of India,Government and other regulatory bodies. All material facts and figures should be

clearly brought in the proposal. Further, the appraising authority should ensure


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that the name of the borrower does not appear in the wilful defaulters listcirculated by RBI or in special approval/caution list of ECGC.

b) Recommending Authority: - The recommending authority shall beresponsible for cross checking important aspects of the proposal stated as above

and specifically giving views on acceptability of the proponents and the proposalbeing within the framework of policy guidelines of the Bank/RBI/Government ofIndia etc., and adhering to the norms prescribed in that regard. It should ensurethat deviations, if any, in prescribed norms/procedures are clearly brought out.

c) Sanctioning Authority:- Sanctioning authority at branch level shall beresponsible for adhering to the norms prescribed under Delegation ofPowers/Credit Policy of the Bank, acceptability of the credit risk/proponents andthe norms prescribed by RBI, Government and other regulatory bodies.

Sanctioning authority at controlling office level shall be responsible foradhering to the norms prescribed under Delegation of Powers. However, asregards, adhering to the norms prescribed in the Credit Policy of the Bank,prudential norms, acceptability of the credit risk/proponents and the normsprescribed by RBI, Government and other regulatory bodies the sanctioningauthority shall be responsible from macro level point of view as the sanctioningauthority has to rely on the certification/data/details provided by the branchesfor which they are fully responsible.

Wherever there are deviations from the prescribed norms the sanctioningauthority should give his specific comments/views on acceptability of the same or

otherwise.

d) Compliance of terms/disbursement/documentation:- In respect ofaccounts with sanctioned limit below Rs.50 lacs, the Manager and the dealingofficer shall be jointly and severally responsible for any lapse as regardscompliance of terms of sanction, documentation and creation of securities etc.

In respect of accounts with sanctioned limits of Rs.50 lacs and above, thedealing officer, incharge of credit department and the Credit Processing Officershall be jointly and severally responsible for any lapse as regards compliance ofterms of sanction, documentation and creation of securities etc.

Other relevant aspects :-a) In respect of an account which had run satisfactorily as standard asset for

a period of 3 years and above (i.e. from the date of first sanction) and nograve and serious irregularities/deficiencies like CPA not done anddocuments not vetted as also those mentioned in Section A of theInternal Audit Report (as per Annexure-III) were noticed during theperiodical reviews/audits etc., the examination of Staff Accountability

Aspect may be restricted to the last internal audit prior to the accountslipping into NPA category. The examination of accountability aspect for

the earlier period may be waived in such cases. However, this aspect ofwaiver of earlier period and the justification therefor should be clearlybrought out in the Staff Accountability Report.

b) Once the staff accountability aspect has been examined and concluded bythe competent authority as stated above, this fact should be clearlybrought out in the legal memorandum/write-off/compromise proposals asthe case may be, along with the conclusions of the examining authority.

c) If there is a long time gap, say more than two years, between theexamination of staff accountability and the subsequent submission of legal

memorandum/compromise or write-off proposal in the account, there


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should be specific comments on the staff accountability aspect coveringthe intervening period, particularly in relation to increase in outstandings,dilution of securities, lack of follow up and reporting along with theconclusion of the examining authority.

d) Staff Accountability should be basically viewed from the point of view thataccount has turned sticky or bad, not because of staff involvement butdue to business failures or due to the deliberate attempt on the part ofthe borrower in diversion of funds and suppression of the information. Inother words, when the Bank wants to look into the Staff Accountabilityaspect, it is not with a view to find out which staff is responsible for theaccount turning sticky or bad/irregular but basically to find out that thishas resulted due to the external environment, business failures ordeliberate attempt on the part of the borrowers and not due to staffinvolvement.

e) Timely addressing of the accountability is of immense importance and cangive a correct picture of the staff accountability aspect for the loan turningsticky or bad/irregular. It is, therefore, essential in the interest of all that atime schedule as mentioned in the earlier part of the circular ismeticulously followed.

Submission of closed SAR to CVO :- In terms of Circular Letter Ref. No.VIG:MISC:895 dated 24.05.2003, a copy of staff accountability report as andwhen finalised/closed in respect of NPA account wherein the sanctionedlimit/outstanding is Rs.100 lacs & above shall continue to be submitted to Chief

Vigilance Officer for scrutiny from vigilance angle.

The above mentioned guidelines come into force with immediate effectand all fresh referrals made to the Zonal Office after 01.07.2005 for looking intoStaff Accountability Aspect in respect of accounts with outstandings above theaforementioned limits should be sent to Head Office for consideration.

(S.A.BHAT)

GENERAL MANAGER


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ANNEXURE I

Staff Accountability Report

Ref.No. :

Date:Branch :

Account :

Part I - Profile :

1 a Name :

b Constitution :

c Established in :

d Principal person :

e Group affiliation, if any :

f If consortium, namesof other banks with

status of the account

:

2a

Nature of business,goods manufactured,

dealt with, etc.

:

b activity

ceased/continuing

:

3 a Advance since :

b Last credit rating anddate of evaluation

:

c NPA since :

d Documents valid upto :

4 a Original sanction : Authority: Date :

b Original limits Fund Based Non-fund based

c Last sanction Authority : Date :

d Limits last sanctioned Facility Present

outstandin

g

a)

b)c)

d)

e)

Total

e Provision held :

f Uncharged interest :

g Exposure to other

group borrowers

: Rs. Asset Code:

5 a Security (in brief) withvalue

: Principal :Collateral :

b Guarantors : Name Worth

Basis of worth :


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Part II - Staff Accountability details :

6 a Whether assets and liability statements were obtained from

borrowers/guarantors and their credentials verified throughindependent sources :

b Whether credit report/appraisal report submitted is complete in

all respects. Whether latest financial statements submitted incase of advances to firms and companies :

c Whether valuation/title search report was obtained from Bank's

approved valuer/lawyer :

7 Sanction :

a Name and designation of the last sanctioning authority :

b Whether sanction was made within the powers delegated to the

sanctioning authority, if not so, whether it was confirmed by the

competent authority :

c If it is an account taken over from another Bank, whether it was

a standard account (asset) at the time of takeover and whetherstatus report obtained from the previous bank :

d Whether it was clean advance or secured advance; if it was a

clean advance, any guarantee or collateral security obtained :

e Whether margin on securities were stipulated as per Head Officeguidelines :

f While sanctioning the advance, whether due care was taken toensure that all important financial ratios such as Current Ratio,Debt Equity Ratio, Debt Service Coverage Ratio and Interest

Service Coverage Ratio etc., were as per Banks norms.


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8 Documentation :

a i) Whether documents have been taken as per sanction terms and theywere properly vetted as per Bank's guidelines; if not, who is responsible

for this lapse :

ii) Whether CPA was carried out (wherever applicable) and the

same was properly closed. Also mention if the documents werevetted as per Bank's guidelines :

b In case of limited company advances, whether charges have beenregistered with ROC within the time frame, whether certificate from ROCobtained, if not so; who is responsible for this lapse :

c i) Whether the stipulated securities obtained and all the terms of sanctionhave been complied with before actual disbursements of the credit limitsand deviations if any have been authorised by the sanctioning authority.If not so, what are the terms of sanction which are not complied with andwho is responsible for this lapse :

ii) Whether extension of mortgage, if stipulated, was done forenhancement/other limits

9 Monitoring and follow up :a i) Whether there is any lapse in the monitoring of the account like

inspection of the movable and immovable assets, stocks etc. (alsomention dates of last three inspections) :

ii) In the event of any adversities noticed during inspection, whethertimely action to rectify the irregularities was initiated

iii) Whether timely renewal of documents obtained?

iv) Dates of last two inspections (if conducted), before the account slippedto NPA category, by any of the auditors i.e. Internal/statutory/Stock orConcurrent Auditors.

v) Observations of the above said auditors (Observations made by anyone of the abovementioned auditors during the aforesaid two inspectionsshould be given)

vi) Action taken to rectify the irregularities pointed out by auditors.

b Whether any overlimits/excesses allowed over the sanctioned limit were

duly reported and it was within delegated authority. If delegatedauthority exceeded, whether confirmation was sought and details of suchconfirmation. If not so, the details with reasons. Who has allowed suchexcesses with date of last overlimit allowed? :

c Whether DICGC/ECGC claim preferred. If not so, why? If rejected, why? :

d Details of any pending vigilance action in respect of the account:


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e Any other reason that is attributable to the Staff for the unit becomingsick/account becoming bad :

Part III :

10 Additional information in case of Quick Mortality of accountsi.e. the accounts becoming NPA within 1 year of original

sanction :

a Name anddesignation of first

sanctioning authority

:

b How the borrower'santecedents and his

experience/expertise/capability to run the

business financed by

the Bank wasverified ?

:

c How the technical/economic viability of

the business activitywas assessed ?

d Whether statusreport obtained from

the borrower'sexisting Bank

:

e Date of pre-sanction

inspection

:

f If the account istaken over from

other bank, whetherstatus report from

that Bank wasobtained prior to

sanction of the limit.

:

g If the borrower is/was enjoying credit

facilities from otherbank whether prior

NOC was obtained.

:

h Whether valuation/search report for

immovable property(if stipulated as

security) wasobtained before

disbursement

i What was the basisof assessment of

quantum of creditlimit granted to the

borrower ?

:


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j In case of third party

guarantor/mortgagorinvolved whether the

proposal wasdiscussed with them.

:

k Did post-sanctiondisbursal conform tostipulated terms of

conditions ?

:

l Was monitoring ofthe account including

inspection afterdisbursement

regular/adequate

:

m Was the borrower

regular in submittingstock/book debtsstatement and other

returns as perstipulation.

:

11. Branch comments :[Comments to include, inter alia, (a) brief background; (b) reasons for theaccount going bad - extraneous/internal; (c) early warning signals and stepstaken to counter them by the branch; (d) action taken by the borrower toovercome the problems encountered; (e) latest developments including chances

of recovery and action proposed by the branch. Further, Branch should certifythat all the norms/guidelines stipulated in Banks Credit Policy have beenadhered to while sanctioning the advance.]

Manager/Chief Manager/

Assistant General Manager

12. Zonal Office comments :[Comments to include, inter alia, identification of staff lapse, if any, at the levelof branch, corporate branch {for Monitored accounts} and Zonal Office/Controlling Office with concluding remarks. Further, Zone should certify that allthe norms/guidelines stipulated in Banks Credit Policy have been adhered towhile sanctioning the advance.]

Zonal Manager

___________________Zone


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Annexure - II

Staff Accountability reporting statement in respect of accounts withTotal Outstandings (Fund Based plus Non-Fund Based) upto Rs.1.00lakh/Accounts covered under Govt. sponsored schemes

Sr.No.

Name of a/cnames ofborrowerswithworth/facility

Names ofguarantors withworth

Limit/date ofsanction/authority

Purpose& nameofschemeif any

ASHCode

NPAsince

Activitycontinuing/datestopped

Natureofsecurity&realisableval

uethereof/collateralsecurity

1 2 3 4 5 6 7 8 9

Doc.Validupto

LA/WLAapproved

Datesuitfiled

Amt.ofprov.made

Present O/S(FundBased+ NonFund

Based)

Int.ceasedsince

Amt. ofDICGCclaimreceived/receivable,if any

Remarksoutliningreasons fordefault andefforts madefor recovery

10 11 12 13 14 15 16 17


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Annexure -III

Grave and serious irregularitiesSr.No.

Type of Irregularities

1 a) Limits sanctioned without proper application in prescribe format

b) Limits sanctioned without obtaining credit report/despite adverse credit report fromprevious bankers.

2 a) Limits disbursed but proposal not prepared.

b) Advance sanctioned/disbursed beyond delegated authority and not reported toControlling Authority

3 Disbursement effected

a) Without pre-sanction/pre-disbursement inspection

b) Before compliance of terms of sanction, without the approval of CompetentAuthority

4 Double financing against same securities

5 a) Overlimit business sanctioned beyond delegated authority and not reported toControlling Authority

b) Security documents not obtained/charge not registered, where applicable, foroverlimit for a period of 30 days and above

6 a) Principal security documents not obtained/not available.

b) Renewal documents not obtained within stipulated period *

* (Recovery Certificate filed in respect of item (b) above

7 Principal security obtained but lien not noted/registered with concerned authorities(NSC/KVP/TDR of other branches etc.)

8 a) Security documents defective as regards stamp duty/execution

b) Security documents kept blank

9 a) Defective Mortgageb) Mortgage stipulated as pre-condition but advance disbursed without

compliance/without approval of Competent Authority.

c) Title Deed not obtained.

d) i) Title Deed/Report obtained but mortgage not created.

ii) Undertaking to create equitable mortgage obtained as per terms of sanction butmortgage not created though time limit permitted is over.

iii) Declaration of mortgage not sent to revenue authorities within stipulated periodin agricultural advances

10 a) Charge on vehicle not filed with RTO

b) Charge not filed with Registrar of Companies/Assurances/other CompetentAuthorities within stipulated period.

c) Lien on flats/shops/Ind. premises in CHS not registered with the society.11 Collateral Security released/not obtained/separate advance allowed there against

without prior approval of Competent Authority

12 NSC/KVP/Monies under Life insurance Policy pledged/assigned as securitymatured/fallen due for payment but proceeds not realized/credited to borrowalaccount.

13 a) Security not insured/Insurance not renewed

b) Security grossly under insured

14 Security grossly inadequate/overvalued.

15 a) Bills accompanied by lorry receipts of unapproved transport companies purchasedwithout proper sanction.

b) House bills/cheques purchased without specific provisions in sanction terms/priorapproval of Competent Authority

16 a) Bills returned unpaid remain overdue

b) Returned bills not found in custody of the branch though amount remainsoutstanding/unpaid

17 a) Purchase/Discount of clean bills under sanction of DP/DA limits

b) Overdue bills purchased/discounted/negotiated/receivable not transferred to relativeG/L A/c. Past due.

Inland

Foreign

18 a) Loss of security in pledge godown

b) Securities pledge i.e. shares/NSC/KVP/TDR etc. not traceable.

19 Decree expired/decree obtained but petition for execution not filed.

20 Gross violation/no-compliance of directives of Government/RBI

21 Refinance/subsidy not applied for though eligible


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22 De-mat of shares held in physical form as security not done.

23 Commitment under invoked guarantee not honoured/not reported to CompetentAuthority/approval not obtained for not honouring.

24 Any other major irregularities (specify) including accounts causing concern.

25 CPA not done

26 Documents not vetted