ADVA NCES Dos and Donts

PROCESSING
Do's

Keep a check list of required forms documents particulars to be obtained from the prospective borrowers and give them a copy of the same to enable them to produce all the required data at the time of submission of the loan application. On receipt of the same, acknowledge and enter in the loan applications received & disposed register. Give them a definite date and time when they should approach you again to enquire about the fate of the application. Scrutinize the papers along with the application and in case you need any clarifications further documents, note down all of them and inform the applicant to submit them in one lot.

Don'ts

Don't make the applicant run around number of times. Don't depend on the consultants to furnish the required data. Instead, keep in touch with the applicants to elicit the required information.

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VERIFICATION OF DOCUMENTS
Do's

Ensure that the KYC formalities are completed. If the applicant is a Company, obtain a copy of certificate of incorporation, the Memorandum and Articles of Association, Copy of Resolution passed by the Board of Directors, Certificate of Commencement of Business (in case of public limited companies) and verify them thoroughly to know about the objectives of the company, place of Registered office, borrowing powers of the company, authorized persons to sign the documents, affixation of common seal of the company, etc. Conduct a thorough search in the office of the Registrar of Companies to know about the previous borrowings of the company, and subsisting charges. If the applicant is a partnership firm obtain a copy of the Partnership Deed and Partnership letter. Partnership Deed to be registered with the registrar of firms. If the applicant is a trust, obtain a copy of the Trust Deed and also a copy of the Resolution passed by the Trustees, and bye-laws of the trust. If the applicant is a Society, obtain a copy of the Byelaws of the Society and a copy of the Resolution passed by the Board of Directors. Do follow the KYC (Know Your Customer) norms in respect of all the above cases. If any property is offered as security, obtain all the original documents and submit the same to the Bank's approved legal advisor for Title investigation Report (TIR), to know about the genuineness of the documents, ownership,
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transferability and marketability of the properties in question. TIR to be obtained on standard format only.

Obtain Valuation Report from the Bank's approved Engineer Valuer and critically examine the same. Obtain Search Reports from Bank's approved Company Secretaries and carefully verify them for existing charges if any.

Don'ts

Do not proceed with processing of the loan application unless you have verified the above documents and are satisfied about the genuineness of the applicant, guarantors, and the securities offered. Do not read only the last para of the Title Investigation Report and create the equitable mortgage. Instead read thoroughly the entire legal opinion and if there are any flaws conditions mentioned in the opinion, arrange for obtention and rectification of the flaws and then only accept the property as security and create mortgage.

PRE SANCTION INSPECTION

Do's

Visit the Business Premises of the company firm, Registered Office if situated elsewhere other than the factory premises, the Promoters' Directors' residences, guarantors' residences and also the properties offered as security and make enquiries about the genuineness of the ownership and prepare a rough sketch indicating the close by landmarks and file the same along with the
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application for future reference. Measurement of the property is a must.

Make a note in the Original Application, the date, time and your observations if any, of the pre-sanction inspection. This is very very important. Prepare a report and submit the same to your immediate senior and after his verification file the same along with the original application. Carefully verify the properties, along with the legal opinion and valuer's report. Enquire in the neighbourhood about the applicant, guarantors etc. Verify whether all the licenses required for doing the business are obtained by the applicant. (Viz. SSI Certificate, Sales Tax/VAT Certificates, Power sanction, Water and Sewage board approvals, NOC from pollution control authorities, etc.) If existing unit, verify all the records to know about the performance of the unit, orders on hand, suppliers/buyers particulars, discretely enquire with the employees about the performance of the unit, existing borrowings if any with other banks, salary/wage dues if any etc. If term loan is involved, opinion report about the suppliers to be obtained from their bankers. Pre sanction inspection is a must. Don't avoid it. It is also necessary to to note down the date of pre-sanction inspection, observations if any, on the file.
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APPRAISAL
Do's

Analyse the Balance Sheet thoroughly and read the Directors' Report and Auditor's Report to find out if there are any qualifying remarks. Avoid highly ambitious projections, arrive at meaningful and achievable targets and accordingly arrive at the sanctionable limits after due discussions with the borrowers. Stipulate covenants which are possible to implement. Obtain the necessary opinion reports from all concerned and compile opinion reports on the guarantors and the borrowers and keep them in the file before sanctioning the limits. If any querries are raised by the sanctioning authority, obtain satisfactory replies from the applicants and advise the same at the earliest to the sanctioning authority. Prepare the control forms and submit the same to the respective authorities as soon as the loans are sanctioned. Ensure that the approved control forms are received at the branch and file the same along with the security documents. Reply to the queries raised in the control form without fail.

Don'ts

Don't stipulate conditions which are impossible to fulfil by the borrowers. Don't conceal any negative information which you come to know while appraising. Bring it along with mitigating factors to the notice of the sanctioning authority for their consideration.
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Don't disburse the loan without completing all the formalities.

DOCUMENTATION
Do's

Keep ready all the documents that are required to be obtained from the borrowers/guarantors. Ensure that the documents are stamped as per the Latest State Stamp Act as applicable to the place of execution. Prepare the sanction letter in two perfectly identical original sets and advise the borrower to return one of them signed by the borrowers guarantors and third party mortgagors, if any in acceptance of the terms and conditions. In respect of companies obtain the necessary board resolution for execution of the documents and the common seal of the company may need to be affixed if called for in the Articles of Association. Ensure that the documents are properly filled in and are complete in all respects before they are executed by the borrowers, guarantors & third party guarantor if any. Ensure that the signatures of the borrowers and the guarantors are obtained at all the places that are necessary. Rubber stamps of the unit and common seal of the company have to be affixed in your presence and properly witnessed. Ensure that the authorized official on behalf of the bank signs the security documents wherever necessary and signatures of witnesses are obtained at stipulated places.

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Ensure that the documents are executed in our own premises and the documents are dated and the place of execution is marked on all the documents. In case if the documents are to be executed elsewhere than the branch, ensure that the documents are stamped as applicable to the place of execution and the fact that the documents are executed elsewhere has to be noted in the Cash Credit Register/Term Loan Register. In case of Partnership firms obtain Partnership letter in the prescribed format duly signed by all the partners. All documents to be signed by all the Partners. In respect of Hindu Undivided family, HUF letter to be obtained. Enter the documents in the Documents Execution Register. If any property is offered as security, Equitable mortgage or Registered Mortgage as per the terms of sanction has to be obtained. In case of equitable mortgage prepare form A and obtain the signatures of the borrowers or guarantors as the case may be and enter the details of execution in the EM Register chronologically. Hand over Form A to the mortgagors and ask them to post the same to the bank's address. In case of extension of Equitable mortgage, enter the same in the EM Register and obtain form B duly signed by the borrower/guarantor as the case may be. Please note EM can be created only at notified centres. So, before execution of EM ensure that the Centre is notified for that purpose. If not, create the EM only at the nearest Notified Centre and obtain a copy of the recital and file the same along with the documents.

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Obtain all the documents mentioned in the TIR in original and number the same serially and retain the same alongwith other security documents safely. Serially number all the security documents and ensure that they are properly secured and stored in a safe place. (Either in the Strong Room or in a fire proof safe).

Don'ts

Do not release the limits without completion of all the formalities All a) b) c) the formalities means : Security Documentation Mortgage Creation Charge filing in ROC, in case of Borrower Companies, and execution of proper documents as stipulated by the sanctioning authority.

Do not obtain blank documents for eventual completion. Do not encourage piece meal execution of documents. All the borrowers and guarantors should be present at the time of execution of the documents. Do not hand over the documents to the borrowers for execution elsewhere. As far as possible the documents should be executed in your presence. Do not obtain Photocopy of the documents. Do not understamp the documents or use invalid stamps. Do not obtain unnecessary documents. Do not create EM on the basis of Certified copies/photo copies of the title deeds. Do not accept conditional legal opinion.
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DISBURSEMENT Do's

Ensure that all the terms and conditions stipulated in the sanction note are complied with by the borrowerIguarantor. Recover all the charges stipulated viz. processing fee, EM charges, upfront fee etc. In case of term loans issue BCsIInter office instruments in favour of the suppliers and send the same direct to the vendors along with a covering letter by registered post. Ensure that the entire margins stipulated by the bank are brought in upfront by the borrowers and a certificate to this effect is obtained from the auditors wherever necessary. In respect of companies ensure that the charges are registered with the Registrar of Companies within the stipulated time and proof by means of a search report of such registration is obtained and retained along with the documents. Ensure end use of funds.

Don'ts

Do not release the funds without completion of all the formalities and compliance of all the stipulated terms and conditions and covenants by the borrower as per the sanction letter. Do not send the DDs for supply of machines through the borrower. Send them by registered post alongwith a covering letter. Do not deviate from the laid down instructionsIstipulations. In case any deviation is required then bring it to the notice of the sanctioning authority in writing and only after obtention of their approval proceed ahead.
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Do not allow excess drawings without prior approval from the sanctioning authority.

INSPECTION & FOLLOW-UP Do's

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Maintain DAILY LIST. This is most important Ensure that the borrower submits the Stock Statements every month and scrutinize the same thoroughly and critically analyse. Do not write anything on the Stock Statements. Compare the stock statement with the previous month's statement to ascertain if there are non-moving stocks, sundry debtors beyond the cover period, long pending sundry creditors etc. Verify whether any machines are idling, if so the reasons therefor. Verify the electricity meter reading to understand the level of activity. Discretely verify from the employees whether the salaries and wages are paid in time. Verify the purchase and sale invoices and also the sundry debtors and sundry creditors registers. Verify whether the Bank's name plate is displayed at proper place and any other bank's Boards are on display. In respect of large advances it is always better to inform the borrower in advance about the date and time of inspection so that he can keep ready certain records and information for the purpose of inspection. Sometimes it may be necessary to make surprise visits also.
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Verify whether all the assets financed by the Bank are available in the unit. Ensure that the stocks and the machinery are insured for the correct value and our charge is noted on the insurance certificateIpolicy. A copy of the insurance certificateIpolicy should be sent to the borrower and his acknowledgement should be obtained. In case the borrower insists for covering specific risks the same thing should be done invariably. Verify whether the address of the unit is properly indicated in the policy. Whenever there is a change in the address the same should be informed to the Insurance company and necessary endorsements are made in the insurance policy. In case the stocks are sent for further process to other places, such addresses should also be informed to the insurance company and a suitable note is made in the policy to cover such stocks for the risks mentioned in the policy. Diarise the date of execution of the documents and ensure that the documents are revived before the completion of 21I4 years. Diarise the date of insurance and promptly renew the same with necessary changes if any before the due date. If vehicles are financed ensure that our charge is noted in the RC Book and a copy of the RC Book is kept along with the documents. Ensure that the vehicles are insured properly and a copy of the insurance policy is kept along with the documents. Ensure that our hypothecation clause is noted in Insurance policy as well.
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Ensure that the Financial Statements are obtained quarterly, half yearly and yearly and the same are critically analysed and put up to the controllers with your observations for their consideration and file the same in the unit's file. Obtain standing instructions for recovery of the Term Loan installments and Interest and ensure that the same are recovered without fail. If any SI could not be put through due to inadequate balance in the account, recover the same at the earliest and inform the borrower to arrange for funds. Depending on the size of the unit, decide a threshold amount up to which cheques can be passed without reference to you, and ensure that any cheque beyond the threshold amount should be referred to you before they are paid. This is to ensure the end use of funds. Scrutinise the Vouchers of your units without fail on a day to day basis, to ensure that the cheques are issued by the units for the right purposes. In case there is a need to allow excess drawings to the units, advise the units to submit their request in advance and after verifying about the genuineness of the request put up a note to the sanctioning authority for permission to allow the excess drawings. Submit excess drawings reports monthly before 10th of the next month to the authority concerned and get their approval. Ensure that such excess drawings are ratified by the companies in their respective boards, and obtain a copy of the resolution passed by the Boards ratifying the excess drawings, and retain the same along with documents.
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As and when the limits are due for renewal/review, obtain all the necessary financial documents in advance and arrange for renewing the limits before due date without fail. In respect of units financed by the Bank whenever you observe any negative features, or come across any information which is detrimental to the interests of the bank, bring it to the notice of the sanctioning authority. In case inspection is not possible due to the vastness of the unit's operations, multifarious products, spread over of manufacturing units at various places, stocks are maintained at various distribution points and meaningful inspection can not be conducted for any other reason, then obtain permission from the sanctioning authority for waiver of inspection. Obtain Audited Balance Sheet and critically analyse the same along with the projections made at the time of sanction of limits and submit a note to the sanctioning authority with your observations for their consideration. In case any corrective measures are to be initiated to rectify certain aberrations, initiate the same immediately without any loss of time. In case of multiple financing, put in place a mechanism to obtain and share the informations with regard to the unit at regular intervals. If any irregularities are pointed out by the Statutory Auditors, Credit Auditors, Risk Focussed Internal Audit, RBI Audit, Income leakage Audit and Concurrent Auditor, do rectify the same immediately. In case it is not possible to rectify, do bring it to the notice of the Sanctioning authority and obtain their approval for continuing the irregularity.
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Do maintain the correspondence systematically and ensure that the same is properly filed and secured and the files are readily available at any point of time. Do understand that there is no room for complacency in advances. Keep your ears and eyes open to the happenings in the units.

Don'ts

Do not allow excess drawings casually. Do not allow excess drawings as a routine. Do not be overawed by the size of the unit and allow drawings without taking proper care and ensuring end use of funds. Do not forget to insure the assets financed by the Bank for necessary risks and at regular intervals. Do not suppress certain information which is detrimental to the interests of the Bank. Do inform the same to the sanctioning authority without fail and obtain their permission for future course of action to rectify the position. Do not violate any of the laid down instructions.

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