A GUIDE TO OFFICERS
CREDIT RELATED LAPSES
ALL INDIA BANK OF BARODA OFFICERS' ASSOCIATION
“”Inspired by exhortation of our respected leader Sri K.K. Nair, General Secretary that always help “COLLEAGUES IN CRISIS”. We have made efforts in preparing this guide which is dedicated to the younger members who are facing serious challenges in handling the credit portfolio.
While handling disciplinary cases of officers and assisting them for preparation of explanations, defending their cases through defence assistant, preparation of statement of defense, we have observed that had our officers been bit careful in following laid down system and procedures at the time of extending loans it could have averted problems at a later date both to the Bank and Individuals.
In course of the above an urgent need was felt to create awareness in the minds of youngsters particularly beginners in credit with an objective to serve the institution's interest along with securing their future from being subjected to vagaries of disciplinary proceedings.
A thorough study of numerous allegations leveled to officers related to irregularities/lapses which ultimately has culminated to charge-sheet has been made. We have covered in minute details the allegations subject wise starting from KYC, Appraisal of loan proposal, pre sanction inspection, documentation, legal examination of property title deed, valuation of property, vetting of documents, mortgage of property, registration of charges, disbursement of loan, end use verification, PSR to higher authority, monitoring and follow up. There is exclusive mention of allegations related to unethical banking practices, frauds related to car loan, tractor loan, Baroda Kisan Credit Card, Excess drawings , loans against NSC and LIP, Fraud through Inter SOL Cheques.
We advise members to have a thorough reading of this Guide and exercise due care in discharging their responsibility in credit matters. It will be a real tribute to our organization's ever continuing practice to keep members apprised on the areas of concern of banking related matters to help them perform efficiently and “Grow with the bank” which is our avowed philosophy.
ZONAL SECRETARY (BIHAR, ORISSA,JHARKHAND ZONE)””
Place : NEW DELHI
Date : 1.1.2016
AREAS OF CONCERN
These days all who matters Hon'ble Finance Minister, Governor Reserve Bank of India and MD & CEO of Banks are expressing serious concern on deteriorating asset quality, Unprecedented slip back and poor recovery in loans resulting in sharp increase in NON PERFORMING ASSETS and steep fall in PROFIT.
Mere talking of quality credit growth will not ensure the quality until we sincerely follow laid down systems and procedures. Experience tells that good health of asset and its consistent performance much depends upon how much attention has been paid at the time of identification of borrower and his stake in the loan, properly carrying out pre sanction inspection, appraisal, documentation, disbursement, ensuring creation of asset, post disbursement monitoring and follow up. The most important role and responsibility of officers looking after credit is to ascertain genuineness of borrower, guarantors, collateral security and to ensure end use of fund.
We have word of CAUTION for officers involved in RECKLESS FINANCE because whenever a Branch Head/Credit Officer has indulged in reckless finance they have invited problems. There are instances which show lack of care about risks involved and loans have been disbursed without observing bank norms, laid down systems and procedures. Processing of loan applications, documentation, disbursement and monitoring were dealt with in a casual manner. Some have even diluted the basic tenet of lending, know your customer at grave risk and loss to the bank on one side and loss of image and dignity of officers on the other side.
We have come across instances where officers on probation have also been served explanations for the lapses inadvertently either due to lack of knowledge or blindly putting their initials/ recommendation without understanding its implications. Credit phobia amongst officers due to fear psychosis is also a prime reason that officers are reluctant to either accept responsibility of Branch Head or Credit In charge. They are also averse to learn / acquire knowledge in credit. Sanctioning loans without observing bank norm, system and procedure, rule and regulations is fraught with disastrous consequences.
We express our serious concern on the cases where officers are involved in unethical banking practices putting in bank fund at stake. There are reported cases of personal gains putting a question mark on the credibility/integrity of officer. On analysis of disciplinary cases it has been found that mostly they are due to non compliance, inadequate skill set and at times even complicity.
In the above back drop we need to understand the meaning and purpose of "Examination of Staff Accountability". There is policy to carry out Examination of Staff Accountability when a loan A/c turns NPA, immediately after two quarters of the account becoming NPA. As per our Recovery Policy Staff accountability will be examined in case of quick mortality (i.e. account becoming NPA within one year of sanction). Likewise when a fraud takes place there is examination of staff accountability. The purpose of carrying out examination of staff accountability to ascertain whether there is motivated and reckless decision or flagrant violation of rules, guidelines and policies of the bank or working against the interest of bank or misusing their position of authority.
COMMON LAPSES :-
Non appraisal of loan proposal- Loans have been sanctioned without proper assessment and due diligence
Non-adherence to compliance
At no cost one should compromise compliance, compliance is a "Zero Tolerance Area". Performance under pressure should not lead to compromise on compliance.
CASUAL KYC :- There should not be casual approach while ascertaining genunity of KYC documents. KYC verified from the original document must be recorded.
IMPERSONATION :- Impersonation by borrower/guarantor is on rise. We need to exercise all precautions to foil the attempt of impersonation by borrower/guarantor.
ACCEPTANCE OF FAKE TITLE DEED /FAKE LAND POSSESSION CERTIFICATE: - Borrowers have been found successful in availing loans by depositing fake title/ LPC deed of self or guarantors. All precautionary measures to be adopted for screening the title deed/ LPC.
INFLATED VALUATION OF LANDED PROPERTY/BUILDING :- In order to avail higher amount of loan borrowers have been found to submit the inflated valuation of property/security. Borrowers are managing valuers, Bank officers not making independent assessments/enquiry about prevailing market rates.
NON CREATION OF ASSET :- Loans are sanctioned/disbursed for creation of asset but there are cases that asset has not been created. There are reports of diversion of funds. Cash disbursement through SB accounts leads to misutilisation of loan. The cheques/drafts issued in favour of dealers / agencies have been encashed by opening fake accounts.
ALLEGATIONS LEVELED UNDER DIFFERENT SEGMENTS :-
KNOW YOUR CUSTOMER /ANTI MONEY LAUNDERING
Not ensuring compliance of KYC-AML Guidelines to verify the copy of KYC documents with the original.
• KYC documents are not found on record.
• Not observing KYC norms and carrying out due diligence as per bank's set guidelines / procedure.
• KYC documents of the borrower/guarantor were not verified from the original.
• Fabricated ITR was accepted without verifying its authenticity.
• Did not obtain account opening forms and KYC documents from customers but allowed large value transaction in those account without satisfying upon the intent/purpose, genuineness of transaction from customers, thus violating KYC-AML policy guidelines of the bank.
• Did not maintain proper records of all cash transactions of the value of Rs Ten Lacs and above under PMLA (Prevention of money laundering of Act 2002)
• Did not ensure due diligence when the transaction in the account appears to be suspicious in nature failed to report to higher authority about suspicious Transaction Report STR as per PMLA rules.
• Pre sanction inspection and post sanction has not been carried out as per norms of bank.
• Shops/outlets- were found' closed during the course of unit inspection implying thereby that no such activity is being carried out by the respective firms.
• Pre sanction Inspection report prepared without personally visiting loan applicants house, business place and units.
• Shops/outlets were not found/traceable during the course of unit inspection as per the recorded address available with the branch, implying thereby that the credit facilities have been sanctioned to fictitious/non-existent firms.
• Verification of IT Returns by CA/ Income Tax Advocate not done.
• It is observed that pre-sanction reports are of same font and size. Only the date, address, purpose etc. has been changed, It is not cleared from the inspection report that the units/securities have been actually visited or not. The pre-sanction inspection of charged property and post sanction inspection report are not found on record.
• Sanctioning credit facility to the borrower living at far off place about 60 kms. from the branch - subsequently informed that borrowers are traceless.
• Pre-sanction inspection was not carried out before enhancement of facility,
• The company was having its registered office at X PLACE and business is also located at X PLACE but credit facility has been recommended at Y place without recording any justification.
OBTAINING QUOTATION :-
• No quotation obtained for purchase of machinery/asset.
• Quotation has not been obtained from authorized dealer/agency.
• The quotation submitted by borrower is highly inflated. Branch did not verify the genuineness of the quotation from the authorized dealer.
• Not obtaining valuation report and completion certificate from bank's empanelled valuer.
• Sanctioned the loan in contravention of bank's guidelines where in the valuation report obtained it is clearly mentioned that plot property offered for mortgage is without demarcation.
• Marketability and Valuation of the mortgaged property was not 'satisfied upon independently before sanctioning loan.
• Exaggerated value of the 'property given by the empanelled – valuer accepted without verification / market feed back.
MARGIN MONEY :-
• Not stipulating the margin as per Bank guidelines.
• Accepted fake money Receipt fro dealers / Agencies without verifying its authenticity.
• Another loan sanctioned making provision for Margin Money.
• As per terms of sanction, company was to bring margin up front, but same was not ensured and disbursement was made directly to the credit of current account of the company.
• Not obtaining bank prescribed loan application from.
• Loan applications are not signed by the applicants .
• Sanctioning authority did not ensure that photograph of applicants on loan application is obtained.
• Borrower is placed/located far away from the branch beyond the monitoring area of the branch.
• Net worth of borrower is not supported by documentary evidence.
• All Income Tax return are filed on single day at the time of sanctioning of the loan.
• Financials are not signed by the proprietor/firm.
• Net worth of borrower and guarantor not ascertained/F 135 casually filled/\no income proof obtained.
SANCTION OF LOANS
• Sanction terms & conditions not conveyed to Borrower/ Guarantors, Acceptance in writing not obtained from Borrowers/ Guarantor.
• Sanctioning OD facility under BTL Scheme to the firm within two years of existence, without obtaining deviation/permission from RO.
• Facility released without preparing appraisal note working capital assessment not done, over looking unjustified sales turn over, current ratio below the bench mark level.
• Sanctioning two retail loans against the security of same property without obtaining deviation/permission from RO. Moreover accepted present market value within three years of registration of the property.
• Sanctioned loan without recommendation of credit officer posted in branch. Thus flouted four eye principle of bank.
• Enhancing the limit within seven months. Without proper justification and when the turnover in the account was not satisfactory.
• Drawing power is not regulated on advance value of stocks and book debts.
• Violation of DLP-Adhoc allowed at branch level. Excess is allowed in new account within a period of 12 months. Excess has been allowed 5 times instead of maximum provision of three times. Excess allowed beyond eligibility. Excess allowed in BTL which is against the bank's guidelines. TOD allowed in newly opened current account when the conduct of the account was not satisfactory, high value cheques were frequently returned in the account for financial reasons .
• Stocks value was found very less, during the course of unit inspection which does not commensurate with the limit sanctioned.
• Fixed deposit kept as collateral security has been prepared by debiting the loan account directly by first transferring the loan amount to their other account.
• Lease/rent agreement for business establishment where loan will be utilized is not obtained.
• Appraisal of assessment of loan is not found on record.
• Balance sheet and financials have been obtained from the same CA.
• Sanctioning various credit facilities to a defaulter of other banks/financial institutions as per CIBIL Report, CIBIL Report over looked.
• Sanctioning credit facility to a firm, whose loan account was NPA in bank's other branch and subsequently adjusted through compromise debiting the-fresh loan account.
• In many advance accounts cross guarantee has been obtained from various loan account holders and they informed that they had .signed the documents since their loan was under consideration.
• While processing/sanctioning the loan against property, not obtained identity proof/ income proof/insurance and. assessment of the eligibility of the Loan.
• Before sanctioning loan repayment capacity of the borrower was not assessed.
• The borrower proposal was not assessed properly, resulting in thereby sanctioning of credit limit over and above eligibility.
• The age of co-borrower is above 60 years.
• Sanctioning personal loan to employee of other bank without obtaining no objection from the said bank and also not informing their employer.
• LIPs to be obtained as liquid security as per terms of sanction were not obtained. LIP obtained as liquid security is not assigned in favour of Bank.
• While processing/sanctioning the loan against property, branch did not obtain identity proof/income proof, insurance and assessment of the eligibility of the loan.
• Sanctioned without proposal/appraisal/income tax return/deduction allowed more than 60%/no rating/no margin stipulated/charge not noted with RTA.
• Credit report/Bank account statement was not obtained from existing banker before sanction of credit facilities. Credit report of associate concern if any was not obtained and satisfied upon.
• CIBIL search not carried out default observed in CIBIL report overlooked.
• Enhancement was made when the loan account was running in excess, enhancement was allowed in spite of large number of cheques being returned unpaid.
• Legal, opinion obtained was not in bank's format and not in the letter pad of advocate.
• The proposal was not signed by processing/appraising/ sanctioning officer.
• Less Collateral liquid security was accepted against the stipulated collateral liquid security in the sanction. While taking over loan collaterals were diluted /released without prior permission from the competent authority.
• Extension of equitable mortgage created without payment of stamp duty.
• Credit Report from the previous banker was not obtained.
• BTL limit was sanctioned to the firm when its housing loan was not satisfactory.
• Did not ensure to obtain and physically verify the list of machineries installed at the unit by visiting unit , obtaining bills/invoices and also did not verify the same with the project report of the unit
• Ownership of the original title holder was not. Verified
• Released credit facility without rectification of discrepancies observed in document vetting report such as nature of land, genuineness of title deed, chain of title to obtain khatian from Nagarpalia, mutation order etc in violation of bank's guidelines.
• Tenanted property was taken to secure the facility in contravention of the guidelines of the scheme.
• Agriculture land was accepted as security in contravention of the guidelines of the scheme. Did not ensure to obtain land conversion certificate before creation of equitable mortgage.
• The principal borrower was more than -70- years of age, which is against bank`s stipulation yet, the facility was considered without obtaining prior permission from the competent authority for such deviation.
• The discretionary lending power was transgressed while sanctioning the facility.
• Out of two properties offered as security, one fake title deed in the name of proprietor of the firm was accepted for mortgage. Property substituted without prior sanction of higher authorities
• Did not obtain lease/rent agreement of shop/ establishment at the time of sanction of the loan facility. Did not ensure registration of firm under shop and establishment act by obtaining requisite license or Sales Tax/VAT return.
• The property which was not demarcated and was under deep water as per the valuation Report was accepted for mortgage.
• Second enhancement was made without proper justification No proposal was prepared for sanction of the said enhancement. No application for further enhancement was submitted by the party.
• Letter from other Bank shows that post dated cheques given towards payment of monthly installment have bounced frequently and charges have been recovered from the account. However, this aspect was not considered at the time of sanction of the proposal.
• Term loan of Rs. 600 lacs was. bifurcated into two parts without seeking any modification or deviation approval from the competent authority.
• The company had accumulated loss and its take over was against basic tenets of credit.
• Excess allowed in the account has been regularized by enhancement of limit, which is irregular.
• Processed and recommended under SME OD against land and building scheme against bank's norms as the firm was engaged in real estate finance.
DOCUMENTATION / VETTING OF DOCUMENTS /REGISTRATION OF CHARGES
• Not ensuring vetting of security documents and also not registering charges with ROC in respect of adhoc limit sanctioned and disbursed.
• Documents were incomplete and kept blank.
• Security document is got executed only in personal capacity of the borrower in a proprietorship account.
• Documents are incomplete/partially blank/not signed by borrower and guarantor.
• Facilities were released before vetting of documents by bank empanelled advocate.
• Non-registration of charge with ROC for corporate guarantee before disbursement and wrong confirmation of regarding compliance of all terms and conditions while seeking disbursement authority.
TITLE DEED & MORTGAGE OF PROPERTY :-
• Creation of mortgage before disbursement of the facility was not done.
• Not ensuring creation of equitable/registered mortgage before releasing the facility.
• Not ensuring extension of mortgage before releasing the facility.
• Extension of equitable mortgage without payment of stamp duty as per requirement.
• Mortgaged property obtained as collateral security is not identifiable/having clean.
• Mortgage has been created without rectification of the observations pointed out in the legal opinion report, - title is not traceable and no paper is produced which establishes the chain of title - portion of land will be half as mentioned in deed, no specific area with boundary is mentioned.
• It is observed from legal opinion report that advocate has not made a search with office of Sub Registrar and not verified original title deed, such incomplete report taken in to consideration.
• Legal opinion of the property /security is obtained after releasing the facility contrary to Bank Guidelines.
• Not obtaining annexure A and/or Annexure B while creating mortgage.
• Property obtained as security from a person, who is neither borrower nor guarantor in the loan account - violation of the banks laid down guidelines in case of housing loan.
• Creation, of mortgage without obtaining the required documents per legal opinion of advocate.
• Accepted, laminated title deed for creation of equitable mortgage against bank's established procedures.
• Equitable mortgage was created by depositing fake title deed and impersonating the real owner of the property which was challenged by the real owner later on.
• Mortgage created by obtaining obsolete deed.
• Title deed number of the property was not mentioned in the search report/legal opinion submitted by the advocate and the same was accepted with such deficiency.
• Title deed number of the property has been mentioned as X instead of Y in the search report/legal opinion submitted by the advocate and the valuer and the same was accepted.
• Equitable mortgage was created on the strength of a fake title deed.
• Unregistered sale deed was accepted for mortgage.
• The title documents of the substituted mortgaged property was subsequently found fake.
• The agriculture land which was required to be converted into non-agriculture land before disbursement but the same was not complied with before sanctioning loan.
• Property of Co-operative Society was mortgaged without obtaining no objection from Co- operative society.
• Disbursement of credit facility in full without obtaining additional collateral security as per terms of sanction.
• Releasing of credit facility without rectification of discrepancies observed in document vetting report such as nature of land. Genuineness of title deed. chain of title to obtain khatian from Nagarpalika, mutation order etc.
• Not ensuring infusion of fund and also not obtaining CA certificate which was a precondition of disbursement. Not incorporating the above condition in the sanction letter although it was mentioned in the sanction advice.
• Not ensuring calculation of drawing power as per stocks.
• Disbursement of fund in cash to unrelated party. Transferring fund in current account of the firm dealing in unrelated items.
• Disbursement of fund in newly opened SB/A/c. subsequently withdrawn in cash and remitted through RTGS to unrelated entity.
• Not obtaining activity clearance as required and released the facility.
• Releasing credit facility without obtaining legal opinion. Not obtaining copy of POA and back papers/mother deed.
• Did not ensure creation of charge of the collateral security with Registrar of Companies (ROC) before disbursement.
• Releasing credit facility without verifying the genuineness of title deed and mutation order.
• Releasing the credit facility without verifying the genuineness of agreement for dealership with the company.
• Initial disbursements were made by transfer to the account - cases of diversion and/or siphoning of fund/non-genuine transaction.
• The availment of entire limit was allowed within two days in cash without proper justification.
• Indulged in reckless finance - sanctioned more than 500 Personal loan accounts out of which 40% of Personal loan accounts turned to NPA.
• Post disbursement inspection was not done within reasonable time after the disbursement to verify the end use of fund.
• Facility was sanctioned -by RM/DRM (higher authority), but disbursement authority was not obtained prior to disbursement of the facility.
• Lending beyond the annual lending cap earmarked for the branch.
• Continuous excess were allowed flouting the bank's norms.
• Cheque purchase was deliberately done to avoid showing the account as NPA. A cheque of Rs. X lacs was purchased on Y date and proceeds was credited in the account. The said cheque was returned unpaid on a later date.
• Disbursement of Term loan has been made in personal account and subsequently all disbursement has been made in cash.
• Release of working capital without disbursement of term loan.
END USE VERIFICATION & POST SANCTION MONITORING :-
• Firm's account was closed from the proceeds of Cash credit of the firm where turnover in the old account was not satisfactory.
• Not ensuring end use of fund. Initial disbursement was made either in cash and/or transfer to the account of some common persons not related to the nature of activity. It appears a case of diversion and/or siphoning of fund.
• Registration of firm under shop establishment act/license, Sales Tax Return not found on record to whom loans has been sanctioned.
• Stock statement register is not maintained by the branch and also details of stocks value not entered/updated in finacle to derive drawing power and hence drawing power is not regulated on the strength of latest stocks value. Submission of stock statements in most of the Cash Credit accounts is also very irregular.
• Vehicle loan accounts have been processed and. sanctioned without conducting pre/post sanction inspection to verify end use of bank's fund.
• In education loan progress report from the institute not obtained, \money receipt from the institute not obtained before release of instalment.
• Stage wise inspection/post disbursement inspection not carried out/disbursement not supported by documentary evidence and insurance not obtained in housing loan accounts.
• Collateral security substituted but permission for substitution of collateral security was not taken from the competent authority.
• It was pointed out in periodical inspection report that the machinery of the mill sold out and the mill is closed, however due diligence and normal prudence was not exercised and sanction/disbursement was allowed without verifying the end use.
• Entire amount of loan was transferred to SB account of the borrower No.
• Bill/receipt was obtained from the borrower. End use of the loan was not verified.
• Physical Inspection of the property charged to the Bank not carried out.
• There was diversion of fund by preparing banker's cheque in favour of other firm by debiting loan account.
• On number of occasions cheques were returned "unpaid, but the said fact was
• Suppressed while reviewing the account.
• The earlier housing loan was closed from the proceeds of the present loan.
• Purpose of loan was for construction of house whereas as per valuation report house was already constructed and some repairing was going on.
• Credit sanctioned under DLP by the Branch Head not sent to regional Authority for PSR as per stipulations.
• Did not ensure to submit compliance report of PSR observations made by the Regional Authority.
• Not ensuring proper asset classification in ASCROM as per IRAC norms.
• The account was NPA as on X date, but it was shown as standard in ASCROM
UNETHICAL BANKING PRACTICES
• Unauthorised banking transaction between customer/ borrower account and staff account as well as staff related account.
• Unauthorisedly debiting Bank G/L Head A/c and crediting personal account of staff.
• Unauthorisedly debiting/misuse of P/L A/c not entitled for personal gains of staff.
• Unusual transaction in SB A/c of staff unable to furnish acceptable justifications about the source.
• Debiting depositor's institutional or individual account without obtaining their written mandate/authority letter.
• Remittance from customer's account through NEFT/RTGS without obtaining authority letter.
• Non maintaining secrecy of password looking to its sensivity resulting in misuse of password by colleagues.
• Fixed deposit made out of loan amount disbursed and accepted as collateral security.
• Margin Money contribution from borrower not obtained as per terms of sanction or manipulation by extending other loan.
• Disbursement of entire loan amount in cash against terms of sanction.
• Debiting borrower's cash credit / overdraft account without their cheque/authority letter, the unavailed portion of credit and crediting current /SB A/C particularly at the time of quarter end for the purpose of artificially inflating business figure which is termed as WINDOW DRESSING.
• Manipulation of ASCROM data, Loan A/c turned NPA as per IRAC norms being shown as standard account.
• Branch Manager misused his power as sanctioning authority allowed middlemen/agents instrumental in arranging loan to applicants, who did not directly approach to the branch for availing loan.
LAPSES IN HOUSING LOAN :–
• No appraisal/sanction, valuation of the property not obtained, legal opinion not obtained, documents not property filled in, loan granted more than the eligible limit, deduction allowed for more than 60%, income tax return obtained for two year only, equitable mortgage not created, stage wise inspection/post disbursement inspection not carried out, disbursement not supported by documentary evidence and insurance not obtained. Construction not made as per approved plan.
• While giving sanction of housing loan to borrowers did not ensure due diligence of the transactions disbursement proceeds of housing loan accounts. Cash withdrawals were allowed through newly opened SB accounts.
• No stage wise inspection before disbursement, disbursement without verifying progress of construction, no bill/voucher obtained, no certificate from Architect/ Civil engineer obtained.
LAPSES IN CAR LOAN :–
• Proof of residence – Wrong address submitted – not verified during pre-sanction inspection.
• Proof of employment/business – Borrowers submitted fake copies of ID Cards/Form No. 16/Salary slips issued by the employer. It was not verified with the employer.
• Not verified the place/existence of business, sales tax returns/VAT returns/balance sheet, statement of account related to business unit.
• Borrower's existing banking relationship/connection. SB account of the borrowers were opened on the date of sanction of loan. Borrowers who posed to be salary earners were not having salary account with the branch. Borrowers posed as business man did not have the business account with the branch.
• Quotation – The quotation submitted by the borrowers were highly inflated. Branch did not verify the genuineness of the quotation from the dealers.
• Due diligence of the dealer – Did not enquire about the genuineness of quotation/invoices.
• No up front margin recovered from the borrowers. No receipt of margin available in account.
• Statement of bank accounts of the borrower on verification found to be fake.
• ITRs were not verified – found to be fake.
• The copy of Income Tax challan tas payers challan has not been obtained.
• CIBIL report of the borrowers were not generated and satisfied upon.
• The loan amount was directly credited to accounts of dealers by transfer instead of issuing BC/DD with superscribe that the loan has been granted by us for purchase of vehicle.
• No letter was issued to dealers informing them that the remittances pertained to car loan disbursement.
• Not obtained photograph of car/vehicle of borrower along with financed car/vehicle as per bank's guidelines.
• RTO registration found fake.
• Four eyes principle not observed.
LAPSES IN DEMAND LOAN AGAINST NSC SECURITY :-
• The NSCs pledged are reported to be fake , KYC verification of applicant and pre sanction inspection is casually done.
• No income proof/evidence of present activity of the borrower is obtained.
• The existing bank account statement of borrower not obtained and scrutinized while considering the sanction.
• CIBIL Report of the borrower not generated and verified before sanction.
• NSC submitted for pledge were not verified by deputing bank officials to concerned Post Office.
LAPSES IN DEMAND LOAN AGAINST LIFE INSURANCE POLICY SECURITY
• Did not ensure to obtain KYC documents.
• The LIPs assigned to Bank reported to be fake.
• Did not ensure that margin norms were in conformity with prescribed bank norms.
• LIPs for assignment not sent by registered post/bank officials to the respective LIC office issuing the policies to ascertain genuineness before sanctioning loan regarding policy holder.
• No income proof/evidence of present activity of the borrower is obtained.
• The standing and means of borrower who assigned the LIPs not assessed before sanctioning loans in Form No. 135.
• Latest LIC premium receipts were not obtained.
• Without obtaining KYC documents of borrower.
• KYC documents are different from the borrower details in loan applications.
• KYC documents not verified with original.
• Loans sanctioned/disbursed without verifying the genuineness of LPC (Land Possession Certificate) which were later on found fake.
• Loans were sanctioned/disbursed without verifying credentials of borrower – later reported as cases of impersonation.
• Did not ensure preparation of credit proposal/appraisal notes. Sanctioned loan in the villages which are situated far away from the branch. Economic Viability and Technical Feasibility report either not prepared or prepared perfunctorily.
• Not ensured source of deposit of margin money deposited by the borrowers/dealers in the savings bank account of borrowers for availment of tractor loans
• Accepted quotation of tractors, thrashers, trolleys and other implements from the tractor dealers but in fact dealers were not the real supplier/manufacturer of these machineries.
• Not ensured the delivery of trolleys, thresher, agri-implements to the borrower as per specifications mentioned in the respective quotations/invoices/bills
• The minimum land holding norms of our bank in respect of tractor loan have not been complied with while sanctioning all such tractor loans.
• Did not ensure margin contribution by the borrower.
• Allowed creation of FDR out of the bank loan disbursed.
EXCESS DRAWINGS / TEMPORARY OVERDRAFTS :-
• Excess drawing in one account was adjusted by allowing further excess drawings in another account deliberately violating all banking norms of lending.
• Granted temporary overdraft in contravention of bank's guidelines.
• Did not report about the TOD to competent authority – thus violating bank's guidelines.
• Allowed TOD in account in spite of the facts that there were return of cheques for financial reasons – thus TOD has been granted without exercising due diligence.
EDUCATION LOAN :-
• Appraisal not done.
• Rating not done
• Progress report from the institute not obtained.
• Money receipt from the institute not obtained.
• Loan sanctioned without obtaining the application form, Form 135 of borrow, ID proof and photos.
INTER SOL CHEQUE FRAUD
There are a good number of cases related to inter sol cheque frauds where officers have been subjected to explanation on the following points:-
• OFFSOL transaction report not generated /account holder not contacted / Name of persons contacted nor recorded.
• Signature uploaded in finacle were not tallied with the signature appearing on the cheque.
• Base branch/account holder not contacted for confirming the genuineness of the cheque before payment.
• Email was notsent to base branch for confirmation to ascertain genuineness of the cheque.
• Forged alteration on original cheque or fake cheque not ascertained.
• Cheque was not screened through Ultra Violet Ray Machine.
• Following features of cheque not checked.
a) Water Mark – Bank''s logo , Bank name, CTS India.
b) UV logo – 3 – logos
c) Bilingual regarding date, payee, amount account no.
d) Background colour – as per guidelines
e) Printed name and account no.
f) New Rupee symbol.
g) Printer's name and CTS 2010 identification
h) RTGS/NEFT/IFSC Code.
Our endeavour should be to maintain healthy credit portfolio. For avoiding disciplinary actions, we must be careful in observing bank's norms, rules and regulations and systems and procedure. Seeking excuse on the lapses in the name of ignorance and innocence will not help the institution. We believe and you will appreciate that “Prevention is better than cure”.