LFAR & RESTRUCTURING OF ADVANCES - nirc-icai.org LFAR 18032016.pdf · vis a vis main report to be...
Transcript of LFAR & RESTRUCTURING OF ADVANCES - nirc-icai.org LFAR 18032016.pdf · vis a vis main report to be...
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RAJESH SETHI
(18.03.2016)
LFAR &
RESTRUCTURING OF
ADVANCES
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VIS A VIS MAIN REPORT
TO BE PREPARED BY BANK BRANCH
AUDITOR OR BY BRANCH
MANAGEMENT
EXHAUSTIVE COVERAGE
LFAR
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LFAR
QUESTIONNAIRE FORMULATED BY
RBI
SPLIT INTO 4 PARTS
• ASSETS
• LIABILITIES
• PROFIT AND LOSS ACCOUNT
• GENERAL
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LFAR - ASSETS
CASH
• CASH BALANCE BEING WITHIN
PRESCRIBED LIMIT
• CUSTODY OF CASH
• PERIODICAL CHECKING
• ADEQUACY OF INSURANCE
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LFAR - ASSETS
BALANCES WITH RBI, SBI AND/OR OTHER BANKS
• BALANCE CONFIRMATIONS
• BRS
• CASH TRANSACTIONS
• REVENUE ITEMS
• OLD ITEMS REMAINING UNEXPLAINED/UNADJUSTED
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MONEY AT CALL AND SHORT NOTICE
INVESTMENTS
• HELD BY BRANCH ON BEHALF OF HO
• PHYSICAL VERIFICATION THEREOF
• RECEIPT OF INCOME THEREON
• MATURED OR OVERDUE
INVESTMENTS
LFAR - ASSETS
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LFAR - ASSETS (ADVANCES)
LARGE ADVANCES
CREDIT APPRAISAL
• MAIN OBJECTIVE TO ENSURE THAT
ASSUMPTIONS BASIS WHICH LOAN
WAS SANCTIONED CONTINUE TO
HOLD GOOD
• ANY LAPSES IN OBTAINING LOAN
APPLICATION FORMS
• CREDITWORTHINESS
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LFAR - ASSETS
SANCTIONING/ DISBURSEMENT -
DOA
• STRICT ADHERENCE THERETO TO
ENSURE NO SANCTION BEYOND
DELEGATED POWERS
• NO DISBURSAL WITHOUT
COMPLIANCE OF TERMS AND
CONDITIONS
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LFAR - ASSETS (ASSETS)
DOCUMENTATION
• EXECUTION OF ALL DOCUMENTS AS
PER SANCTION TERMS
• NO DEFICIENCIES IN DOCUMENTS
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LFAR - ASSETS (ADVANCES)
• HO INSTRUCTIONS FOR PREPARATION/RENEWAL OF PROPOSALS TO BE SCRUPULOUSLY FOLLOWED
• LOAN BEING USED FOR THE PURPOSE SANCTIONED
• NO UNEXPLAINED OVERRUNS IN COST OF PROJECT
• RENEWAL OF LOAN DOCUMENTS
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LFAR - ASSETS (ADVANCES)
REVIEW/ MONITORING/ SUPERVISION
(RMS)
• PERIODIC BALANCE CONFIRMATIONS
• ACCOUNTS OVERDUE FOR
REVIEW/RENEWAL
• OBTENTION OF STOCK, BOOK DEBT
AND FINANCIAL STATEMENTS
REGULARLY
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LFAR - ASSETS (RMS)
• OBTENTION OF STOCK AUDIT
REPORTS IN MAJOR ADVANCES
• NON-CORPORATE ENTITIES ENJOYING
LIMITS BEYOND Rs 10 LAKH
• PERIODIC PHYSICAL VERIFICATION
• DEFICIENCIES IN SECURITY VALUE
• UNAUTHORISED OVERDRAWINGS
BEYOND SANCTIONED LIMITS
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LFAR - ASSETS (RMS)
• INADEQUATE INSURANCE
COVERAGE
• COMPLIANCE OF HO INSTRUCTION
FOR LEASE FINANCE ACTIVITIES
• PROMPT RECOVERY OF CREDIT
CARD DUES
• ADVANCES CLASSIFICATION PER
RBI NORMS
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LFAR - ASSETS (RMS)
• DISAGREEMENT WITH BRANCH
CLASSIFICATION - MOC
• PENDING LEGAL ACTION FOR
RECOVERY/ RECALL OF ADVANCE
• PROMPT REPORTING OF NPA TO HO
• STATUS OF REHABILITATION
PROGRAMME
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LFAR - ASSETS (RMS)
• STATUS OF PENDING ECGC/ DICGC CLAIMS
• OBTENTION OF VALUATION REPORTS ONCE IN 3 YEARS FOR FIXED ASSETS CHARGED IN RESPECT OF NPAs
• COMPLIANCE OF HO RECOVERY POLICY IN COMPROMISE/ SETTLEMENT/ WRITE-OFF/ WAIVER CASES OVER 50 LAKH
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LFAR - ASSETS (RMS)
INVOKED GUARANTEES
DEVOLVED LCs
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LFAR - OTHER ASSETS
STATIONERY AND STAMPS
EXISTENCE OF ADEQUATE CONTROL OVER
• TDRs
• DRAFTS
• PAY ORDERS
• CHEQUE BOOKS
• TCs
• GCs
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LFAR - OTHER ASSETS
SUSPENSEACCOUNTS/ SUNDRY
ASSETS
• EXPEDITIOUS CLEARANCE OF
ITEMS
• OLD ITEMS REQUIRING PROVISION/
WRITE-OFF
• ANY UNUSUAL ITEM - NATURE AND
AMOUNT
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LFAR - LIABILITIES
DEPOSITS
• COMPLIANCE OF HO GUIDELINES
FOR INOPERATIVE ACCOUNTS
• UNUSUAL LARGE MOVEMENTS
POST BS DATE IN DEPOSITS
REMAINING UNEXPLAINED
• QUANTIFICATION OF
OVERDUE/MATURED DEPOSITS
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LFAR - LIABILITIES
OTHER LIABILITIES
• IDENTIFICATION OF 3 YEARS OR
MORE OLD ITEMS
• ANY UNUSUAL ITEM - NATURE AND
AMOUNT
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LFAR - LIABILITIES
CONTINGENT LIABILITIES
• CLAIMS NOT ACKNOWLEDGED AS
DEBTS OTHER THAN
CONSTITUENTS’ LIABILITIES
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LFAR - P & L
COMPLIANCE OF IRAC NORMS
EXISTENCE OF SYSTEM AS TO
COMPUTATION OF DISCREPENCIS IN
APPLICATION OF INTEREST ON
ADVANCES AND DEPOSITS
DETAILS OF EXCESS/ SHORT CREDIT
OF INTEREST ON ADVANCES
DETAILS OF EXCESS/ SHORT CREDIT
OF INTEREST ON DEPOSITS
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LFAR - P & L
DIVERGENT TRENDS IN MAJOR
ITEMS OF INCOME AND
EXPENDITURE NOT
SATISFACTORILY EXPLAINED
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LFAR - GENERAL
BOOKS AND RECORDS
• APPROPRIATE MAINTENANCE OF
BOOKS IN CASE OF MANUAL BOOKS
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LFAR - GENERAL
COMPUTERISED BRANCHES
• PRINTING OF HARD COPIES
• ACCESS CONTROLS
• DATA SECURITY MEASURES
• REGULAR BACK-Ups
• OFF-SITE STORAGE
• EXISTENCE OF DRP
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LFAR - GENERAL
RECONCILIATION OF CONTROL AND
SUBSIDIARY RECORDS
• STATUS AS AT THE YEAR END
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LFAR - GENERAL
INTER BRANCH ACCOUNTS
• FORWARDING OF DAILY STATEMENT
• TALLYING OF HO BALANCE IN THE SAID
STATEMENT WITH HO ACCOUNT
APPEARING IN BRANCH GL
• OUTSTANDING DEBITS IN HO ACCOUNT
• YEAR - END STATUS OF UNRESPONDED
QUERIES AS REGARDS UNMATCHED
TRANSACTIONS AND OLD ENTRIES
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LFAR - GENERAL
AUDIT/ INSPECTIONS
• CONCURRENT AUDIT OR ANY
OTHER AUDIT/ INSPECTION DURING
THE YEAR
• PERSISTING IRREGULARITIES -
PREVIOUS AUDIT, CONCURRENT
AUDIT, STOCK AUDIT, INTERNAL
AUDIT, RBI INSPECTION
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MISCELLANEOUS
• POSSIBLE WINDOW DRESSING
• MAINTENANCE OF FIXED ASSETS
RECORD
• ANY OTHER MATTERS WORTH
REPORTING
LFAR - GENERAL
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LFAR
BRANCH OBLIGED TO PROVIDE BORROWER-WISE DETAILS OF ALL ADVANCES OF Rs 2 CRORE AND ABOVE IN THE DETAILED SPECIFIED FORMAT COVERING 25 POINTS:
• NATURE OF FACILITIES
• NATURE AND VALUE OF PRIME AND COLLATERAL SECURITIES
• MARGIN
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RESTRUCTURING
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RESTRUCTURING
A RESTRUCTURED ACCOUNT IS ONE
WHERE THE BANK, FOR ECONOMIC
OR LEGAL REASONS RELATING TO
THE BORROWER'S FINANCIAL
DIFFICULTY, GRANTS TO THE
BORROWER CONCESSIONS THAT
THE BANK WOULD NOT OTHERWISE
CONSIDER
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MODIFICATION/ALTERATION OF
• REPAYMENT PERIOD
• REPAYABLE AMOUNT
• THE AMOUNT OF INSTALMENTS
• RATE OF INTEREST
RESTRUCTURING
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RESTRUCTURING
NO RESTRUCTURING WITH RETROSPECTIVE EFFECT
NON-VIABLE ACCOUNTS NOT TO BE RESTRUCTURED
FRADULANT CASES INELIGIBLE FOR RESTRUCTURING
BIFR CASES NOT ELIGIBLE WITHOUT EXPRESS APPROVAL
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W.E.F. APRIL1, 2015, A STANDARD
ACCOUNT ON RESTRUCTURING
WOULD GET CLASSIFIED AS SUB-
STANDARD
EXCEPTION IS CHANGE IN DCCO
(PAGE 11 TO 16 OF IRAC MC)
RESTRUCTURING
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PROVISION REQUIRED
• NORMAL 5% AND
• PROVISION FOR DIMINUTION IN
FAIR VALUE OF LOAN
RESTRUCTURING
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SMA
SMA-0 < 30 DAYS
SMA-1 31 - 60 DAYS
SMA-2 61 - 90 DAYS
CENTRAL REPOSITORY OF
INFORMATION ON LARGE CREDITS
(CRILC)
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Thank You