Main Audit Report - SDCC 2018 SSN

SDCC 2018 –Statutory Audit Report
INDEX
Sr Particulars Page No.
No.
1 Statutory Audit Report 2 to 4
2 Audit Memorandum to the Statutory 5

Audit Report
3 Brief Introduction 6 to 9
4 Long Form Audit Report 10 to 55
Annexure Attached Annexure No. I
5 Audited Balance Sheet & Profit & Loss 1

Account
6 Notes on Accounts 2
7 Audit Classification statement 3
Sankpal Kulkarni & Associates, Chartered Accountants

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Independent Auditors’ Report

(Under Section 81 (5-B) of The Maharashtra Co-operative Societies Act, 1960 read with Rule 69 of
Maharashtra Co-operative Societies Rules and Section 30 of the Banking Regulation Act, 1949)
To
The Members of
Sindhudurg District Central Co-operative Bank Ltd., Sindhudurg
Report on Financial Statements
1. We have audited the accompanying Financial Statements of Sindhudurg District

Central Cooperative Bank Limited, Sindhudurg Nagari, Sindhudurg, which
comprise the Balance Sheet as at 31st March 2018, Profit and Loss Account for
the year then ended, and Cash Flow Statement for the year ended and summary of
significant accounting policies and other explanatory information, incorporated in
these financial statements and the returns of 94 branches and Head offices audited by
us. The branches audited by us have been selected by the Bank in accordance with
the guidelines issued by the RBI/NABARD.
Management’s Responsibility for the Financial Statements
2. Management is responsible for the preparation of these Financial Statements in

accordance with the Banking Regulation Act, 1949 as applicable to Co-operative
Societies and the Maharashtra Co-operative Societies Act, 1960 and Maharashtra Co-
operative Societies Rules, 1961 (as amended by the Maharashtra Ordinance No II of
2013). This responsibility includes the design, implementation and maintenance of
internal control relevant to the preparation and fair presentation of the financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
3. Our responsibility is to express an opinion on these financial statements based on our

audit. We conducted our audit in accordance with the Standards on Auditing issued
by the Institute of Chartered Accountants of India. Those Standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement.
4. An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The Procedures selected depend on the
auditors’ judgement, including the assessment of the risks of material misstatement of
the financial statement, whether due to fraud or error. In making, those risk

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assessments, the auditor considers internal control relevant to the Bank’s preparation
and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of the accounting
estimates made by management, as well as evaluating the overall presentation of the
financial statements.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our Audit opinion.
Basis for Qualified Opinion
6. Attention is invited to non implementation of Accounting Standard AS-20 Earnings

per Share and AS-22 Accounting for Taxes on Income as prescribed by the Institute of
Chartered Accountants of India. Financial impact of non compliance of these
accounting standards on financial statements cannot be ascertained.
Qualified Opinion
7. In our opinion and to the best of our information and accordance to explanation
given to us, except for the effect of the matter described in the basis for qualified
opinion paragraph mentioned above, we state as under;
(i) The Balance Sheet and Profit & Loss Account of the Bank is drawn as per the
Banking Regulation Act, 1949 (as applicable to Co-operative Societies) as well as
the provisions of Maharashtra Co-operative Societies Act, 1960.
(ii) In our opinion proper books of accounts as required by the Maharashtra State Co-
operative Societies Act, 1960 and the Maharashtra Co-operative Societies Rules,
1961, have been kept by the Bank so far as appears from our examination of
those books;
(iii) In our opinion and to the best of our information and according to the
explanations given to us, said accounts subject to Para 3 to 6 above, read
together with significant accounting policies, and notes forming part of accounts
and our observations contained in the Audit Memorandum and Long Form Audit
Report, of the even date, gives the information required by the Maharashtra Co-
operative Societies Act, 1960 and Rules made there under and by the Banking
Regulation Act, 1949 as applicable to the Cooperative Societies, in the manner
so required, give a true & fair view in conformity with the accounting principles
generally accepted in India:
a) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st
March, 2018; and
b) in the case of Profit and Loss Account, of the Profit for the year ended on that
date;
c) In case of Cash flow statement, of the Cash flow for the year ended on that
date;

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Report on Other Legal and Regulatory Requirements
8. Subject to the limitations of the audit mentioned in paragraph above and our
comments, qualifications and observations contained in Audit Memorandum read
with other notes in annexure to the auditor’s report and Long Form Audit Report, we
report that:
a) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purpose of the audit and have found
them to be satisfactory.
b) In our opinion, proper books of account as required by the Maharashtra Co-

operative Societies Act, 1960 and Rules there under and the Banking Regulation
Act, 1949 have been kept by the Bank so far as appears from our examination of
those books and proper return/information, explanations are adequate for the
purpose of our audit, have been received from the branches not visited by us.
c) In our opinion, the financial statements dealt with by this report comply with
Accounting Standards prescribed by the Institute of Chartered Accountants of
India, as far as they are relevant to the Bank except AS 20 and AS 22.
d) The Balance Sheet and Profit & Loss Accounts dealt with by this report are in
agreement with the books of account and returns.
e) The transactions of the bank, which have come to our notice, have been within the
powers of the Bank.
Other Matters
9. The bank has been awarded ‘A’ Audit classification for the year ended on 31st
March 2018.
For Sankpal Kulkarni & Associates
Chartered Accountants
CA. Deepak S Patil, Partner

MRN: 108541 (FRN:121256W)
Place: Kolhapur
Date : 8th August 2018

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Audit Memorandum to the Statutory Audit Report
1. Disbursement of Loan in contravention of Exposure Limit fixed by NABARD.
For the year 2017-18, total exposure limit for institutional borrower was Rs.
4020.83 lacs & for individual borrower ceiling was Rs.60.00 lacs. Bank has
disbursed loans to following borrowers exceeding the exposure limit of the Bank
fixed by the RBI/NABARD as on 31st March 2018 is as under;
Name of Borrower Sector Total Exposure (in lacs)

INSTITUTIONAL BORROWER
Dr D Y Patil SSK Ltd, Gaganbavada Sugar 19960.57
Kumbhi Kasari SSK Ltd. Kuditre Dist Sugar 4944.00
Kolhapur
Sindhudurg Shikshan Prasarak Service 5141.45
Mandal
INDIVIDUAL BORROWER
Dhuri Pramod Ravindra 60.51
Sawant Gitanjali Shivram 61.20
Samant Devdatta Janardan 64.11
Mane Pradeep Gajanan 63.64
The Bank is sanctioning limits in violation of the guidelines of NABARD.
2. During the year under consideration we observed that Bank is not following its
own Loan Policy properly. Some commercial loans are considered as Agricultural
finance and benefit of Agricultural finance are given to commercial advances. (For
example Sindhu Krushi Bhumi Loan Policy). Further Bank is not cautious to
sanctioning loans to corporate customers and taking guarantee of the corporate
customers. Bank is not following procedure as per Company Act 2013.
Bank is not following proper procedures for apprising, sanctioning and

disbursement of advances. Higher amounts of loans should be sanctioned and
disbursed considering projection of the units, actual project and end utilization. In
case of Higher Loan amounts, documents executed by borrower should be vetted
from Third Party and assets acquired from the disbursement of loan.

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3. Monitoring of NPA
We observe that bank is not taking sufficient steps to early and continuous
detection of overdue /NPA accounts, which will help in making recovery at early
stage and avoid slippage of account in NPA category.
In case of Non-Agricultural loans, bank has not adhered to prudential norms. In

some cases, bank has wrongly allotted Yearly installment instead of Monthly
installment.
In some cases of cash credit/OD accounts NPA classification is not done as per
norms, even though there are deficiencies like, interest remain un-served, out of
order, non-submission of stock statements.
The Bank should evolve a mechanism to continuously monitor all loan accounts
where interest/installment dues are not paid by borrower.
Place: Kolhapur For Sankpal Kulkarni & Associates

Date: 08/08/2018 Chartered Accountants
(Deepak S Patil), Partner

MRN. 108541(FRN:121256W)

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1. Introduction
Sindhudurg District Central Cooperative Bank Ltd., Sindhudurg is District Central
Cooperative Bank Registered under The Maharashtra Cooperative Societies Act,
1960 vide registration Number SNDRG/BNK/1401/1983 dated 1st July 1983.
Bank is also holding License No. RPCD (MRO) 1260/18.1.038/2011-12 dated 20 th

December 2011 duly issued by Reserve Bank of India to carry on banking business
in Sindhudurg District in state of Maharashtra.
The head office of the Bank is situated at Plot No. 32, Navnagar Vikas Pradhikaran,
A/p Sindhudurg Nagari Tal Kudal District Sindhudurg.
The jurisdiction as per bye-laws adopted by the bank is Sindhudurg district.
As on 31st March 2018 bank has network of 98 Branches spread across the entire
district.
The main object as per clause No. 2 of the bye-laws, duly adopted by Bank is
providing bank finance to affiliated societies and carries on general Banking
activities. The Bank has other 33 clauses in object clause excluding the main
object.
2. Appointment of Auditors
In accordance provisions of Section 81 (1) (a) of the Maharashtra Co-operative
Societies Act 1960 Bank has appointed auditors for the year under consideration
from panel prepared and maintained by the Co-operative Department.
Accordingly, Bank has appointed us as a Statutory Auditors for the year 2017-18
vide Annual General Meeting Resolution No. 6 dated 18 st August 2017.
3. Scope and coverage of Statutory Audit

The audit is to be conducted as per section 81 (5-B) of the Maharashtra Cooperative
Societies Act, 1960 and rules framed there under. The NABARD has advised to
submit the report covering specified aspects in the form of “Long Form Audit
Report” as mentioned in circular No. NB.Mah/985/CRR 4 CA/2010-11 dated 22 nd
March 2011.

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The criteria for selection of the branches have been prescribed by the NABARD as
mentioned above and accordingly Bank has selected the Branches for Statutory
Audit as follows;
Taluka Total Branches with Branches Total branches

Branch-es Advances more selected on covered for
than 2 crores random Statutory
basis Audit
Devgad 17 14 01 15
Kankavali 11 11 - 11
Vaibhavwadi 9 8 01 9
Malvan 14 13 - 13
Kudal 19+1 (HO) 18 01 19+1 (HO)
Vengurla 9 9 - 9
Sawantwadi 15 14 - 14
Dodamarg 4 4 - 4
TOTAL 98+1 (HO) 91 03 94+1 (HO)
* Branches where fraud took place selected for Audit : Nil
The returns of remaining 4 branches are certified by Bank Authority were dealt by
us with appropriate manner for the purpose of our audit.
4. NABARD Inspection
During the year under consideration, NABARD has conducted statutory inspection
of the Bank under section 35 (6) of the Banking Regulation Act, 1949 (AACS). The
period covered for the inspection was 1 st April 2015 to 31st March 2017. Copy of
the report is available on record. The Bank has submitted compliance of the
Report on 19/06/2018.
5. DISCUSSION OF DRAFT AUDIT REPORT

The drafts LFAR in respect of Branches were submitted to the bank for rectification
and compliance. Accordingly, some branches have submitted the compliance. In
cases of where compliance is not made satisfactorily, observations are re-submitted
to the bank for proper and full compliance.
Major audit observations were discussed with the Chief Executive officer during the
course of audit.
The audit report is discussed with Board of Directors.

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6. EXECUTIVE SUMMARY
Details of Financial performance for the year 2017-18
(Rs.in Lacs)
Particulars 31.3.2017 31.3.2018 Change in %
Increase/(Decrease)
Own Funds 12234.62 14527.58 18.74
Share Capital 3647.59 3877.83 6.31
Reserve & Surplus 8587.03 10649.75 24.02
Deposits & other A/Cs 150107.59 167899.28 11.85
Advances 106229.88 130415.09 22.77
Secured 104690.88 128515.09 22.76
Unsecured 1539.00 1900.00 23.46
Priority Sector 44976.34 40117.40 -10.80
% to Advances 42.34% 30.76% -11.58
Working Capital 177577.09 208149.23 17.22

Investments 59926.40 65249.87 8.88
Borrowings 11149.83 21711.20 94.72
Total Income 16159.07 18285.65 13.16

Total Expenditure 15309.07 17285.65 12.91
Profit before Provisions 1971.82 3344.64 69.62
Net profit before Tax 1446.88 1679.04 16.05
Yield on Average 9.41% 9.49% 0.08
Working Capital
Cost of Deposit 6.50% 6.13% -0.37
Return on Average 11.48% 11.86% 0.38

Advances
Non-interest income to 5.34% 3.93% -1.41
Total Income
Cost to Income 94.74% 94.53% -0.21
Net Interest Margin 3.58% 3.97% 0.39
Capital adequacy CRAR 11.31% 10.30% -1.01

C D Ratio 70.77% 77.67% 6.90
Net NPA % 0.00% 0.00%
No of employees 628 616 -1.91

Per Employee Business 408.18 484.28 18.64
Number of regular members 1278 1298 1.56

Number of Branches 98+1 98+1 0.00
Audit Classification A A

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During the year under consideration, there is increasing trend in share capital,
deposits, Advances and income earned by the Bank.
7. COMPLIANCE OF PREVIOUS AUDIT REPORT

The Bank has submitted compliance of Statutory Audit Report is reviewed by the
Audit Committee in the meeting held on 19 th September 2017 (Resolution No.8).
Further, Board of Directors has approved the Audit Compliance in the meeting held
on 29th September 2017 vide resolution no. 05.
Place: Kolhapur For Sankpal Kulkarni & Associates

Date: 08/08/2018 Chartered Accountants
(CA Deepak S Patil), Partner

Membership No. 108541
Firm Registration No. 121256W

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LONG FORM AUDIT REPORT (LFAR)

For the year 2017-18
I. CAPITAL
Bank has total Authorised Share Capital of Rs. 50.00 Crore divided in to 5,00,000 No of
Shares valued Rs.1,000/- each as per clause No. 3 of bye-laws adopted by the Bank.
As on 31st March 2018 total issued share capital amounts to Rs.38,77,83,000/-. As per
registers maintained by the Bank, total members are 1298. Out of total members, 1045
members are society/sanstha members and balance 253 members are classified under
individual category. During the year under consideration total 28 new members were
adopted by the Bank and 8 members are resigned.
The detailed position of share holding is as under;
Rs.in lakhs
Particulars Individual Societies Total
No Capital No Capital No Capital
Rs. Rs. Rs.
As on 31-03-2017 250 5.42 1028 3642.17 1278 3647.59
New members during the 3 0.15 25 1.55 28
year 230.50
Additional capital subscribed - 52.06 - 176.74 -
by existing members
Resignation etc - - 8 0.26 8 0.26
As on 31-03-2018 253 57.63 1045 3820.20 1298 3877.83
1) Share capital from member societies, individuals and Govt. and share holding
During the year under consideration, Share Capital is increased by Rs.230.24 Lacs
(net). As compared to previous year share capital is increased by 6.31% (Prev Year
7.77%) during the year.
During the year under consideration, as per bye-laws clause No.5 (A) 13, Bank has
permitted ‘B’ Class membership to 94,530 numbers of persons as approved by the
Board of Directors.
2) System followed for share-linking to borrowings by member societies / borrowers

and arrears thereof.
As per the byelaws clause No. 6.16.B, shares have to be collected from Member Society
@10% or 5% of the loan disbursed during the year up to the ceiling prescribed by the
Authority.

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Deficit in share linking was observed in respect of 2 indebted societies of the Bank
amounting to Rs.0.66 Lacs (Prev. Year Rs. 56.30 lacs) as on 31 st March 2018. As
compare to previous year, deficit of share linking of Rs. 55.64 lacs has been decreased
during the year.
The major defaulting societies in respect of share linking as on 31 st March 2018 are as
under;
Sr Particulars Amount in Rs.

1 Vareri Talebajar Vikas Society 46000.00
2 Kupawade Vikas Society 20000.00
3) As per byelaws Clause No. 6.22, Bank has issued share certificates to the affiliated
societies.
4) As per byelaws Clause No. 3.3, value of each share is Rs.1000/- each. As on 31 st
March 2018, some members are holding old shares of Rs.50/- or Rs.100 each and not
converted into new shares of Rs.1000/-.
5) NABARD has issued circular Ref No NB.DoS.HO.POL.2069/J-1/2012-13 dated 24 th

August 2012 for Computation of net worth of SCBs/CCBs. The Bank computed Net
Worth as per revised guidelines. The net worth as compared to total assets as on 31 st
March 2018 is 4.65%, detailed as under;
(Rs. in lacs)
Sr Particulars Amount
1 Paid up share Capital 3877.83
2 Statutory Reserve 2051.43
3 Agriculture Credit Stabilization Reserve 364.19
4 Building Fund 857.61
5 Contingent Provision against Std Assets (Excess
over required) 21.96
6 Dividend Equalization Fund 40.00
7 Investment Fluctuation Reserve 798.67
8 Undistributed profit 1000.00
9 Excess provisions made by the Bank 658.14
Total 9669.83
10 Total Assets 208149.23
11 % of own capital to total assets (Net worth) 4.65%

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6) The level of CRAR as per RBI Circular reference NO. CO.R.F.BC. 40/07.38.03/2007-08
dated 4th December 2007 and revised circular RPCD.RCB.BC.73/07.51.012/2013-14
dated 7th January 2014 as is 10.30% as on 31st March 2018 as detailed under;
(in Lacs)
1 Capital Fund 12908.65
2 Total risk weighted assets 125284.23
3 Capital Fund to Risk weighted 10.30%
assets
As per RPCD.RCB.BC.73/07.51.012/2013-14 dated 7th January 2014 Banks were advised

to achieve a minimum CRAR of 9% on an ongoing basis with effect from March 31, 2018.
Bank is maintaining mandate CRAR on an ongoing basis.
II. ASSETS
A. ADVANCES
1) Credit Appraisal
a) Loan Policy
 The Bank had approved and documented loan policy. The Policy guidelines
contains terms and conditions of sanction, documentation, margin to be
maintained, securities acceptable to the bank, limit of loan amount, repayment
period etc for all types of loans and advances compiled in a booklet form titled as
“Bank loan policy”.
 Certain additions/ modifications/ changes in the policy since then have been
communicated to the branches by way of office circulars issued from time to
time as directed by the Board of Directors.
 The District Level Technical Committee (DLTC) was convened by Bank every year
and the scales of finance approved by the DLTC were communicated to the
branches/PACS by way of circulars.
 The bank had also prescribed specific loan applications for all types of loans
sanctioned to Farm Sector, Non-Farm Sector, Short Term Loans, Medium Term,
Long Term loans and Cash Credits.

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b) The Bank has prepared statement namely Normal Credit Limit (NCL) for the
disbursing the Loans to Agricultural Section. The NCL was sanctioned by the Board
of Directors on time to time as received from taluka inspection office.
The Details of NCL for the year 2017-18 is as under;

(Rs. in Lacs)
Period Loan Loan Loan
Demand Sanctioned Disbursed
Sindhu Kisan Credit Card –
Paddy
01/04/2017 to 30/09/2017 10476.00 9150.00 3948.00
01/10/2017 to 31/03/2018 154.69 113.76 19.42
Sindhu Kisan Credit Card –
Mango, Cashew etc.
1/04/2017 to 31/03/2018 10417.82 9950.20 4670.36
Total 21048.51 19213.96 8637.78
The bank has fixed the limit for Short term loan for agricultural purpose based on
the holding of land and number of trees etc. The detailed list of various limits
applicable for the year 2017-18 was circulated to Branches.
The bank has delegated powers and limits to various committees and persons as per
byelaws rule No.38 (15) and 41 read with Schedule I, for smooth working and
disbursement of Credit portfolio.
The Bank has system of appraisal of loan/credit proposals which commensurate

with the working of the bank. The bank has defined policy for obtaining adequate
security for loan as per loan policy.
c) During the course of audit, we have observed the following shortcoming in

appraisal of loan proposals.
 The Bank is not looking into the aspects of the activity being financed, income
generation capacity, credit worthiness of the borrower, risk factor and estimates
submitted by the borrower. As a prudent banking policy bank should trust more
on repayment of loan and not only security offered by the borrower.
 In some cases, loan appraisal note is not prepared properly considering the
usage of loan, income and background of the borrower and commercial and
economical viability of the project and financial projections submitted by the
borrower.
 The Bank is not considering the actual income of borrower, estimated income of
the borrower during the appraisal. We observed that actual income or estimated
income is not matching with the repayment schedule of the loan.

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 In some cases appraisal done by bank is not proper and not based on factual
position of the business of the borrower.
 The Bank should disburse the loan to borrower on its own merit. In many
cases, we observed that loan is disbursed at the maximum limit without
considering the borrower requirement, actual eligibility and need of borrower.
 Age limit of the borrower is to be fixed by the bank. In some cases loan is
disbursed to persons having age more than 75 years.
 In case of housing finance, loan has been disbursed to already constructed

house. This is in contravention of the bank loan policy. Also loans have been
fully disbursed without completion of full work.
 During the year gold loan inspection of various branches has not been carried
out by the inspection department of the bank.
 High value loans were approved and disbursed very fast, sometimes within two
days from the date of application. It created pendency of documents, wrong
appraisal, incorrect assessment of sources of income and installment etc.
 Interest was not provided by some branches in the books of accounts on loans
disbursed as on 31st March 2018.
2) Sanctioning/Disbursement
a) To provide fast and good service to the borrower the Bank has decentralized the
powers of sanction as per bank loan policy revised during the year vide circular No.
Loan/999/33/VIKAS-54/1009/15-16 dated 25th June 2015.
As per loan policy, loan application within the power of Branches has been received
and sanctioned at branch level. The Loan applications beyond the delegation power
of the Branch Managers were sent to Head office. These loan applications are
processed at Head office after receipt of report from Loan Inspector. Based on
report, scrutiny notes were prepared by loan department/CMA department at Head
office and same were put up to the Loan sub-committee/Executive Committee &
Board for necessary sanction.
b) The Bank has policy of taking review of sanction, disbursement and recovery at
Taluka level committee and at head office during the meeting of Board of Directors
or Executive Committee.
c) The Bank has policy to verify all the loan documents during the course of inspection
at Branch level.

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d) The Bank did not comply with the unit exposure norms under CMA.
As per NABARD guidelines following major exposure limits are applicable to the
Bank is as under:
 Unit-wise exposure –Institutional borrower Rs. 4020.83 Lakh

 Ceiling on financing of Individuals Rs. 60.00 lakh
Total exposure as on 31st March 2018 is as under;

(Rs. in Lakh)
Sr Name of Borrower Exposure Amount Amount O/s on
No. Limit Sanctioned 31/3/2018
INSTITUTIONAL BORROWER
1 Dr. D Y Patil SSK, 4020.83 24354.79 18073.96
Gaganbavada
2 Kumbhi Kasari 4020.83 4944.00 4944.00
3 Sindhudurg Shikshan 4020.83 5160.00 5141.45
Prasarak Mandal
INDIVIDUAL BORROWER
1 Dhuri Pramod Ravindra 60.00 59.00 60.51
2 Sawant Gitanjali 60.00 50.00 61.20
Shivram
3 Samant Devdatta 60.00 75.90 64.11
Janardan
4 Mane Pradeep Gajanan 60.00 64.50 63.64
The bank has submitted CMA returns I & II for the quarter ending March 2018
within due date.
e) In some cases, the branches had not adhered to terms and conditions of sanction
before disbursement of loans, resulting in deficit in share linking, deficit in
securities to be obtained and non-adherence to Loan policy and circulars.
1. Loans are sanctioned / disbursed without recommendation of Branch/DO.

2. Loans sanctioned on monthly EMI basis but as sanction letter, repayment
condition mentioned as annually.
3. Moratorium period to borrower (Agricultural Land) is granted arbitrarily without
considering actual project requirement and valid policy. Moratorium differs
borrower to borrower for the same type of advances.
4. As per documents submitted by borrower, borrower is not engaged in
Agricultural / farming activity. Instead of this advances sanctioned and
disbursed under Agricultural category.
5. Loan has been disbursed at Branch level, without sanction of HO/DO or
without following Loan policy.
6. Appraisal of Loan is done in without considering the documents and projections
submitted by borrower.

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7. In case of Loan against Salary, borrower has taken loan twice on same salary
from two or more branches. We observed that around 70 borrower have taken
loan amounting to Rs.2.50 cr from different branches.
8. In some cases accounts become NPA, in the year of disbursement itself. This
shows that branch is not doing proper appraisal and monitoring of advances.
Monitoring from HO level is much needed to plug such deficiencies.
Please refer to Annexure I for gist of major observations pertaining to Branches.
f) Verification of utilization of funds before release of next installments was either not
recorded or recorded in a routine way.
g) The bank should maintain properly system of maintenance of drawing power

register (DP) in the branches, as the bank did not ensure to obtain the stock
position at periodical intervals.
h) Post disbursement visits are not done in cases of large advances to confirm proper
utilization of loan and future repayment of borrower.
3) Documentation
a) The Bank has prescribed loan documentation in the booklet ‘Bank Loan Policy’
more particular in Schedule No. 4 at Page No. 201. The Bank executes the loan
documents as per the terms of sanction. The Bank had prescribed specific loan
application format and other relevant documents for all types of loan activities.
b) At bank level, documents are kept in safe custody. All large loans, granted to
various borrowers are kept at head office in safe custody along with sanction letters
and other documents.
c) The Bank is maintaining ‘Loan Document Register’. The Bank is advised to

maintain proper register of documents giving details of valid documents, renewed
documents.
4) Review/ monitoring / supervision
a) During the course of audit we observed that, in some cases bank has not monitored
the loans outstanding properly. In case of Gold loans, bank has renewed the gold
loans without recovering interest due/overdue interest. Bank should tighten the
supervision in such cases.
b) The bank is renewing the Cash credit loans disbursed to cooperative society and
other individual borrower in a routine way without being considering actual
transaction in accounts. The following deficiencies were observed in respect with
renewal of documents.

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 Transaction done by borrower in the account in previous year is not being

considered while renewing/granting enhancement of the limit. Though the bank
had stipulated that total operations in a CC account should be at least 4 times of
limit sanctioned during last year, for renewal of the limit, the same is not being
adhered to in most of the cases.
 There is no system of working out drawings powers (DP). Either borrower was
not submitting stock statements periodically or the same, if submitted, were not
put up to any scrutiny.
c) As per the guideline issued by the RBI, advances to non-corporate entities with
limits beyond Rs.10 Lakh, compulsory audit is to be done by borrower and audit
report is to be kept on record by the bank. The Bank is not adhering to this
guideline in majority cases.
d) The Bank has policy of scrutiny of stock statement, but in majority cases same has
not been scrutinized by the bank officials and in some cases stock statements/
book debts has not been obtained by the bank regularly.
e) The bank does have system of periodic verification or inspections of stock,

equipments and machinery and other securities.
f) Insurance cover is obtained immediately by the bank at the time of disbursement.

The bank is prompt in renewing the insurance cover.
g) The Bank is preparing ‘Demand collection and Over dues Position’ on every June as
per guidelines of NABARD. The recovery performance as per DCB prepared for the
year ended on 31st March 2018 is as under;
Demand collection and Over dues Position as on 31st March 2018
(Rs. in Lacs)
Type of Loan Demand Recovery Over dues % of over
in Cash dues to
Demand
1) Agricultural Loan
a) STL 10948.99 8180.21 2768.78 25.29%
b) MTL 634.92 486.72 148.20 23.34%
c) LTL 24.98 5.30 19.68 78.78%
2) Non Agricultural 9314.79 8520.74 794.05 8.52%
Loans
3) Individual Loans 25267.09 23003.94 2263.15 8.96%
4)Un-renewed Cash 869.79
credit
Grand Total 46,190.77 40,196.91 6,863.65 14.86%
As per DCB percentage of cash recovery to Demand comes to 87.02%

18 | P a g e
5) Large Advances
Bank has violated unit exposure limit fixed by NABARD in case of following advances.
1. Finance to Padmashree Dr. D Y Patil SSK Ltd, Gaganbavada
i. Sugar Pledge Loan Rs. 12000.00 Lac

ii. MT Loan Rs. 8154.79 Lac
iii. ST Loan Rs. 4200.00 Lac
 As on 31st March 2018, total outstanding loan is Rs.18073.96 Lac ( Exposure

Rs. 24354.79 lac). All accounts are regular and there is no overdue amount.
2. Finance to Kumbhi Kasari SSK Ltd., Kuditre, Dist. Kolhapur
i. MT Loan Rs. 4944.00 Lac
 As on 31st March 2018, total outstanding loan is Rs. 4944.00 Lac. The account
is regular and there is no overdue amount.
3. Finance to Sindhudurg Shikshan Prasarak Mandal
i. MT Loan Rs. 5160.00
 As on 31st March 2018, total outstanding loan is Rs. 5141.45 Lac. There is no
overdue amount.
6) Foreign Exchange Bills
During the year under consideration, Bank has not negotiated any foreign bills under
letters of credits, pre and post shipment credits etc.
7) Coverage of crop loans under Crop Insurance
a) The Bank has implemented National Agricultural Insurance Scheme during the
year. As per policy adopted by the bank, the scheme is optional for all borrowers.
The main object of the insurance scheme is to financially help the farmers from
natural disaster, to implement new technology and to stable the farmers in case of
drought.
b) During period under consideration, Bank has taken insurance cover of 248 farmers
for Paddy.

19 | P a g e
c) The Bank is regular in paying the insurance premium to the controlling authority.
During the year amount of insurance premium is Rs.0.60 lacs pertaining to 248
farmers.
d) During the year no claims for paddy has been preferred by the Bank and settled by
the AICI.
e) The Bank is implementing ‘Weather Based Crop Insurance Scheme (WBCIS) for
Mango and cashew. Bank has taken insurance cover of 3179 farmers and the total
premium collected and paid was Rs.159.49 Lac.
Details of claims settled during the year 2017-18 are as under;

(Rs. In Lacs)
Name of Claim submitted Claim Settled
Crop
Members Amount Member Amount
Cashew 299 10.87 34 6.93
Mango 2058 103.52 2058 761.47
Paddy 248 0.60 00.00 00.00
Total 2605 114.99 2092 768.40
8) Imbalances
a) The imbalances between the borrowing outstanding of PACS from DCCB and the
loan outstanding at members level increased as may be seen from the following
table;
(Rs in lakh)
Year No of Amount due to Amount due to Imbalances
Societi Bank from PACS PACS from
es members
Principal Interest Principal Interest Principal Interest
31.03.2009 25 395.06 3.28 261.20 12.05 133.86 (8.77)

31.03.2010 22 492.94 10.55 362.84 2.55 130.10 8.00
31.03.2011 21 707.39 43.96 550.10 69.90 157.29 (25.94)
31.03.2012 16 716.35 11.65 576.41 49.24 139.94 (37.59)
31.03.2013 14 735.76 20.93 601.05 53.41 134.71 (32.48)
31.03.2014 11 492.99 25.04 394.36 28.91 98.63 (3.87)
31.03.2015 14 1145.03 27.25 1021.35 6.14 123.68 21.11
31.03.2016 15 1055.61 34.19 921.98 47.96 133.63 (13.77)
31.03.2017 11 778.51 31.99 671.56 30.94 106.95 1.05
31.03.2018 12 939.12 32.29 791.28 38.43 147.84 (6.14)

20 | P a g e
The bank should review the position and facilitate improvement in the recoveries at
the ground level and effecting reduction in the cost of management at PACS level in
order to address the problem.
b) The total percentage of imbalances to total loans of concerned PACS as on 31 st

March 2018 is 15.85%.
c) Main reason for imbalances is as under;
 Part of recoveries is utilized by PACS for their administrative expenses.

 Misappropriation / frauds and losses at PACS level.
9) Other
Bank was entered an agreement with Jay Jawan Suraksha Rakshak Sah. Sanstha.
Agreement has been expired on 31/03/2016. Bank has extended the contract on
05/12/2017 for the period 01/11/2017 to 31/01/2022. Total 53 security guards are
provided. Agreement does not contain amount of contract. Therefore the agreement is
not executable as it contains various defects. Agreement clauses are not complied by
the vendor and bank. I cards and KYC documents of guards are not on record.
B. Fixed Asset-
1. Bank does not have written documented purchase policy for fixed Assets.
2. Existence of physical assets as compared to books of accounts
3. Depreciation –
Depreciation of building at Zarap branch is charged @10% instead of 5%. Excess
depreciation of Rs.1,44,273/- is charged. ( Dep. @10% Rs.2,88,456/-). Further
depreciation on building at Malavan branch is not charged amounting to
Rs.2,000/-. Due to excess provision profit is decreased by Rs.1,42,273/-
4. Building
During the year under audit, Bank has prepared a policy for purchasing building
premises for branches based on performance of the branch sanction vide resolution
no.13, dated – 29/11/2017 of Board of Directors meeting.
a) Vengurla Branch Building Purchase

During the year bank has purchased building for Vengurla branch amounting to
Rs.177 lac excluding taxes vide agreement to sale dated -31/03/2018 from B.P.
Developer, Vengurla.
b) Head office building
 Original estimate of building construction was Rs.308.96 lac. As on

31/03/2018 cost of construction is incurred of Rs.984.42 lac including cost of
furniture.

21 | P a g e
C. INVESTMENTS
1) The comparative position of the composition of the investment portfolio is given

below;
(Rs in Lakh)
Sr Particulars As on 31st As on 31st
No. March 2017 March 2018
1 GoI Securities & Treasury Bills 37074.09 45620.50

2 Investment in shares of Co- 191.40 191.40
operative institutions
TOTAL 37265.49 45811.90
As compared to previous year, investments are increased by 22.93%.
2) The bank has laid down Investment policy in terms of guidelines issued by RBI and
monitored by the Investments Review Committee consist of 8 officers of the Bank
and headed by Chief Executive Officer. During the year under review, total 12
meetings have been held by the committee.
3) The Bank gets the information of cash and bank balance through CBS system.
Surplus funds are mainly invested in mutual funds / call money. The Bank has
delegated power to make investments in GoI Securities, Treasury Bills and Deposits
in MSC Bank and others.
4) The Bank has done following transactions during the year 2017-18;
(Rs in Lac)
Total Total Sale Income received from GSEC transactions
Purchases
Profit Interest Total income
received on recovered received
sale
75211.94 51291.91 206.12 2498.65 2686.97
5) The Bank is regular in depositing Reserve Fund. During year, Bank has earmarked
Government Securities of Rs.1000.00 lacs towards investment in Reserve Fund also
redeemed Government securities of Rs. 500.00 lacs on 02nd Jan 2018. MSC Bank
has confirmed the earmarked deposits vide letter dated 28 th October 2015 & 21st
September 2017 totaling earmarked Government Securities of Rs.2500.00 lacs.
6) The Bank is maintaining CSGL account for trading in Government Securities.
7) The Bank has appointed M/s Sushant Phadnis & Co, Chartered Accountants,
Kolhapur for investment audit. The Bank has obtained audit report of investment
portfolio on quarterly basis.

22 | P a g e
8) The Investment review committee and Board of Directors have taken review of
investment portfolio from time to time.
9) The Bank has sufficient control over the investment.
10) The Bank is regular in collecting interest on investments.
11) The Bank has defined procedure for valuation and provision. The Bank has
adopted procedure as per RBI/NABARD guidelines. The Bank has amortized the
premium over the period of maturity.
12) As per clause No.4.6 of the Byelaw, regarding Investments, Bank can invest/keep
deposits with nationalized banks and financially sound scheduled co-operative
bank.
Name of the bank Amount

Sr.
No. (Rs. in Lakh)
1 In private Banks – HDFC 89.97
Total 89.97
13) The Bank has made other investments i.e. (Shares in cooperative and other
institutions) amounting to Rs.191.40 Lac.
14) The Bank has maintained the required SLR throughout the year. As on 31 st March
2018, the Bank has made investment in SLR category of Rs.45620.50 Lac. The
Bank has maintained SLR above minimum prescribed by RBI.
15) As per RBI Master Circular regarding Investment Fluctuation Reserve (IFR), Bank
has to create IFR to the Extent of 5% of AFS Securities.
As on 31.3.2018 position of Investment fluctuation Reserve (IFR) is as under;
AFS investment as on 31st March 2018 Rs.3857439062.00
5% IFR provision as per circular (Required) Rs.192871953.00

Actual IFR Provision done by the Bank 31.3.18 Rs.79867286.00
Provision to be made Rs.113004667.00

23 | P a g e
D. OTHER ASSETS
1) As on 31st March 2018, total 40 items are consolidated under the head ‘other assets’
amount to Rs. 47,27,74,417.69. The Major items of other assets are as under :
 Income Tax Paid in Advance Rs. 8,36,37,667.00
Year wise Details of income tax paid are as under;
Paid for the year 2006-07 Rs. 45,52,832.00

Paid for the year 2009-10 Rs. 4,50,125.00
Paid for the year 2010-11 Rs. 1,11,34,710.00
Paid for the year 2017-18 Rs. 6,75,00,000.00
Bank should pass necessary entries as per Income Tax returns filed and orders
passed by the Income Tax Department for the concern years.
 Agriculture Loan Interest Receivables from Govt (STY) Rs. 58,86,941.00
 Agriculture Loan Interest Receivables from Govt (IND) Rs. 10,46,732.00
Bank has paid the amount to Vikas Societies towards interest subvention as per
scheme for the year, which is claimed as receivable from Government under
Panjabrao Deshmukh Interest Rebate Scheme.
 Interest subvention Receivable Rs.1,71,18,041.00
The Bank has claimed following amounts for interest subvention received from state
and Central Government. Details of receivables are as under;
1 Kharif Central 2016-17 1,33,66,216.00
2 Rabbi Central 2015-16 37,51,825.00

24 | P a g e
 Following assets have been considered as unrealizable and full provision is made
for the same.
Particulars Amount Considered Provision Short

outstanding as made by provision
as on unrealizable bank
31/3/2018 as on
31/3/2018
Sundry Debotrs 5940206.00 0.00 842502.03 0
Interest 151289.97 151289.97 151289.97 0
receivable from
MSC Bank
ARD Relief 492008.00 492008.00 492008.00 0
Fund
Overdraft in SB 50000.00 50000.00 50000.00 0
acct of Kudal Br
Total 66,33,503.97 693297.97 1535800 Nil
 GST (Input Tax Credit)

Tax Receivable as Payable as Net ITC used as
per books as per books as Receivable / per GSTR3B
on 31.03.18 on 31.03.18 (Payable) of Mar 18
IGST 60420.99 43.25 60377.74 56604.00
CGST 2711792.22 543732.13 2168060.09 673850.00
SGST 503132.11 543543.77 (40411.66) 622995.00
Bank should reconcile its GST liability & ITC with Books of accounts and GST
returns and should make necessary adjustments time to time.
E. NON FUNDED BUSINESS
1) The Bank is engaged in following types of non-funded business.
 Safe Deposit Lockers

 Issue of Bank Guarantee
 Insurance Commission
 LIC Premium collection center
 Collections of cheques (IBP)
 Collection of MSEDCL Bills
 RTGS/NEFT facility
2) The Bank has laid down procedure of transactions and collection of charges as per
circular No. circular No. 999/35/1326/17-18 dated 29 th July 2017 covering Lockers
Rent and other charges to be collected.

25 | P a g e
3) As per the Bank policy for issue of Bank guarantee, Bank is collecting commission
1% for Six Months and 2% for more than Six Months.
4) In case of Safe Deposit Lockers, bank has revised rental charges w.e.f 1 st July 2016
vide circular No. 999/34/08. The Bank is collecting locker rent in advance and
treats whole amount as current year’s income irrespective of period of locker rent.
During the course of audit, we observed that locker rent is not collected
promptly and pending since long time (Kankavali and Sawantwadi City
Branch). Out of total 2034 lockers 1373 lockers are allotted to customer.
Bank should take initiatives to rent out balance lockers of 661.
5) The Bank has revised outstation cheque collection charges with effect from 1 st Aug
2017 (circular No. 999/35/1326/17-18 dated 29 th July 2017) based on provisions
of Section 18 of Payment of Settlement Act, 2007 and circular No. RBI/2008-
09/207/DPSS.CO.NO.611/3.1.03 (P) dated 8/10/1008 issued by the Reserve Bank
of India.
6) The Bank is collecting various service charges, as per schedule of rates for various
purposes, for increasing its non-fund based business like charges for issue,
cancellation, revalidation of duplicate demand draft, duplicate pass book, bouncing
of cheques, stop payment instructions etc. The Bank is also collecting evaluation &
processing fee as mentioned in schedule 1 of Bank Loan Policy in respect of its
lending to non-agriculture sector.
F. APPLICATION OF PRUDENTIAL NORMS
1. The Bank has partially adhered to the prudential norms on income recognitions,
assets classification and provisioning –SCB’s /CCBs as issued by NABARD vide
reference No.NB.DOS.HO.POL.1577.P.57 -2002/03 dated 19th August 2002.
a) During the year under consideration, we have observed that bank has not treated
accounts as NPA amounting to Rs. 189.84 Lac of forty nine (49) loan accounts
as per prudential norms.
b) In case of Non-Agricultural loans, bank has not adhered to prudential norms. In

many cases, bank has wrongly allotted Yearly installment instead of Monthly
installment.
c) In case of cash credit/OD accounts NPA classification is not done as per norms,
even though there are deficiencies like, interest remain un-served, out of order, non-
submission of stock statements.
d) The Bank should evolve a mechanism to continuously monitor all loan accounts
where interest/installment dues are not paid by borrower.

26 | P a g e
2) Income Recognition
a) As per the IRAC norms, the Bank is recognizing the income earned on advances.
b) The Bank has system of providing unrealized interest on NPA account at the end
of the year. As per circular No. Acct/Stat/999/33/220/15-16 dated 5 th March
2016 Bank has implemented system of making provision for unrealized interest.
3) Asset Classification
a) The Bank has applied norms for assets classification in respect of all assets and
the provisioning norms, subject to newly identified NPA by us.
As on 31st March 2018 the status of NPA is as under;

(Rs in Lakh)
Particulars 31st March 2017 31st March 2018
NPA % NPA %
ST (SAO) 285.76 8.75 332.60 8.55
MTL (Farm Sector) 15.45 0.47 48.55 1.25
Direct Lending to 109.84 3.36 99.32 2.55
Agriculture (MTL)
Long term 81.36 2.49 56.82 1.46
Agriculture
Total Farm Sector 492.41 15.07 537.29 13.81
Short Term Lending 1280.41 39.19 1352.65 34.76
Medium Term Loan 1149.86 35.20 1362.51 35.02
Long Term Loan 344.49 10.54 638.44 16.41
Total 2774.76 84.93 3353.60 86.19
NON Farm Sector
Grand Total 3267.17 100.00 3890.89 100.00
b) As per the classification of assets and provisioning required against NPA and
standard asset as on 31st March 2018 bank has to made total provision of
Rs.2339.36 Lac on gross NPA. The Bank has made provision for ‘bad and
doubtful debts (NPA) of Rs. 4959.90 Lac as on 31 st March 2018 towards Non
Performing Assets and Standard Assets. Thus, bank has made excess provision
for bad and doubtful debts.

27 | P a g e
The position of classification and provisioning as on 31 st March 2018 is as

under;
(Rs in Lakh)
Classification of Assets Outstanding Provision Provision
Amount required to made by
be made the bank
a) Standard Assets 126524.20 478.04 500.00

b) Non Performing
Assets
i)Sub Standard assets 1555.54 155.55
ii) Doubtful assets 2205.21 2053.67 4459.90
iii) Loss Assets 130.14 130.14
Total (i+ii+iii) 3890.89 2339.36
Grand Total 130415.09 2817.40 4959.90
c) During the year under consideration, bank has indentified new NPA of
Rs.1367.66 lac and Rs.743.94 lac recoveries effected in NPA account. Bank
should take more efforts for recovery in NPA account. The movement of NPA can
be tabularized as follows;
Particulars Rs. in lac

Gross NPA’s as on 31st March 2017 3267.17
Add: New NPA’s during the year by Bank 1367.66
Less: Recoveries in NPA account 743.94
Gross NPA’s as on 31st March 2018 3890.89
Whether to add NPA identified by auditor ?
d) The NPA classification is done at bank level. The NPA statement is verified at
Head office level.
In our opinion, Bank should take necessary steps to early detection and
prevention of NPA. Bank should take regular efforts on quarterly basis so as to
take preventive step well in advance.
The bank has taken partially steps to recover the dues from NPA account. In
many cases, bank has not taken effective steps for recovery even though
mentioned in statutory audit.

28 | P a g e
e) The Bank has taken necessary legal aid to recover the overdue amount as
follows.
The Bank has initiated procedure under section 101 of the MSC Act (RRC) on 87
number of borrowers amounting to Rs.120.70 Lac during 2017-18. As on 31 st
March 2018, Bank has fully recovered Rs.309.78 Lac from 1283 numbers of
borrowers and partially recovered Rs.166.79 Lac from 435 borrowers.
The position of recovery through RRC as on 31st March 2018 is as under;
(Rs. in Lac)
31st March 2018
Particulars
No of cases O/s Amount
Pending cases as on 1st April 2017 2871 1335.66
Add : New cases during the year 87 120.70
Less : Fully Recovered cases 1283 309.78
Partially recovery 435 166.79
Pending cases as on 31st March 2018 1675 979.79
The Bank has taken action under Securitisations Act 2002 on 1 borrower
amounting to Rs.240.23 Lac.
The Bank has filed arbitration cases on borrower for recovery of outstanding
loan and status of the same is as under;
(Rs. in Lakh)
31st March 2018
Particulars
No of cases O/s Amount
Pending cases as on 1st April 2017 6 45.43
Add : New cases during the year 1 23.45
Interest debited during year
Less : Fully Recovered cases 0 0
Partially recovery 1 1.73
Pending cases as on 31st March 2018 6 67.15
During the year 2017-18, Bank has settled outstanding Loans & Advances
under scheme ‘One Time Settlement’ (OTS). The Details of OTS is as under;
(Rs. in Lac)
Sr No of Cases/ No of Outstanding Amount Amount
borrower Cases Loan collected waived
off
1 OTS granted to 16 34.25 29.79 4.46

eligible
borrower

29 | P a g e
4) NPA Management Strategy
The Bank is monitoring performance of large loan accounts at Head office and sub-
committee level. The Bank is reviewing movement in NPA accounts on yearly basis.
The bank has taken legal aid under Securitisations Act 2002, Section 101 of MSC
Act, Section 138 of Negotiable Act etc.
The bank should implement the prudential Norms accurately. In some cases, bank
has not identified the NPA on recovery basis and timely basis. During the course of
audit, we have identified the New NPA amounting to Rs.189.84 lac in forty
nine (49) loan accounts.
The Bank is not taking impartial action in NPA accounts, in which directors of the
Bank is guarantor. In our opinion, Bank should take strict action on such
borrower, as it is moral responsibility of the Directors of the Bank. (For
example – M/s Bhai Saheb Sawant Nagari Pat Sanstha, Sawantwadi and
Sawantwadi City (Loan O/s 474.70 lac)
As on 31st March 2018, total advances outstanding from directors and their relatives
was of Rs.631.48 Lacs. Out of these advances amounting to Rs. 19.43 was overdue.
Three Directors Advances are categorized as NPA as on 31 st March 2018 amounting
to Rs. 25.49 lacs.
In our opinion, Bank should monitor the NPA movement on quarterly basis. Bank
should adopt the system of early detection and recovery in potential accounts.
Bank should implement the NPA in true spirit to as to early detection and remedial
measures can be taken in time.
III. MANAGEMENT APPRAISAL

1) Board of Directors
The management of the Bank is vested in a Board of Directors consisting 19 members

elected for a period of 5 years from 22/05/2015 to 21/05/2020.
During the year 2015-16 election was conducted under the Superintendence,
directions and control of State Cooperative Election Authority, Maharashtra State, Pune
in accordance with provisions of Section 73CB of the Act. As per the order issued by
Divisional Jt. Director, Co-operative Society, Kokan Division has published name of
elected members vide Order No VSN/Kokan/V-1/73 B/Pub/5/2015 dated 11 th May
2015.
As per byelaws clause No.8, total number of elected directors should be 19. Other
directors as per byelaws clause No.8.30.1 is to be adopted as Technical Director,
functional Directors and Special Invitee District Dy. Registrar.

30 | P a g e
As on 31st March 2018, composition of Board of Directors is as under;
Sr. Particulars Required as Number of

No. per old bye Directors on
laws Board
1 Elected Directors from various 19 19
categories as per bye laws clause No.
8.30
2 Technical/Expert Directors as per bye 2 0
laws clause No. 8.30.1.D
3 Functional Directors as per bye laws 2 2
clause No. 8.30.1.E
4 Special Invitee as per bye laws clause
No. 8.30.1.F District Dy. Registrar Co- 1 1
op. Societies.
Total 24 22
On the compositions of the Board of Directors, we have following observations.
During the year under review chairman and Vice Chairman was as under;
Mr Satish J Sawant was acting as Chairman
Mr Suresh Y Dalvi was acting as vice chairman
The Board represents the dignitaries from social/political, agricultural and

socioeconomic field.
As per the bye laws of the Bank, meeting of the Board of Directors is to be conducted
once in a month. During the year under consideration, total 13 Numbers of meetings
held discussing the various issues as mentioned in byelaws clause No. 35.
As on 31st March 2018, total outstanding Loans & Advances from members of Board of
Directors and their relatives was Rs. 631.48 lac (Directors Rs. 338.94 Lac & Relatives
Rs.292.54 Lac) for various purposes. Out of total Loans and advances, amount of
Rs.19.43 Lac (Directors Rs. 15.49 lacs and relatives Rs. 3.94 lacs) was overdue as on
31st March 2018. In next period most of the loan accounts are regularized.

31 | P a g e
2) The Bank has formed following committees during the year under consideration to
assist the Board of Directors in discharging some of the functions.
Sr. Name of the Function of Committees Meeting of

No. Committee committee held on
2017-18
1 Executive committee To exercise all the powers voted 24
in the Board of Directors or those
powers, which are delegated to it
by the Board of Directors and as
per byelaws clause No. 9.42.
Total committee members are 10.
2 Industrial Loan and To sanction loan proposals --
Cottage Karagir Yaojna subject to the limits prescribed in
committee the Byelaws clause No. 10.43.
(Loan Committee) Total committee members are 5.
3 Audit Committee To review Internal Inspection 7
Department work and issue
instructions, to implement and
comply observations of NABARD
inspection and statutory Audit
etc as per byelaws clause No.
11.43.b. Total committee
members are 5.
4 Investment Review To take review of Investment Port 12
Committee Folio, to find new avenues for
gainful Investment subject to
RBI/NABARD Norms. Total
committee members are 8.
5 Information Technology To promote IT culture within the 5
Steering Committee organization through appropriate
commitment and with adequate
resource. Look after the I.T.
project planning product
selection and supervise the
implementation and major work
will be to see to it that the bank
business objectives/ strategic
business plans are adhered to by
the I.T. objective/I.T. plans of the
bank including Core Banking.
Total committee members are 5.
6 Building Construction To formulate purchases process, 3
Committee services and to recommend to the
Board of Directors regarding work
of new building construction or
repair of existing building
7 Asset-Liability Review of assets and liabilities, 4
Management Committee availability of internal and
(ALCO) external resources of funds & its
deployment, maintenance of

32 | P a g e
Sr. Name of the Function of Committees Meeting of

No. Committee committee held on
2017-18
CRR/SLR, review of investment
portfolio, position of loans issued
and outstanding and recovery of
loans etc.
We have verified the minute books of above committee maintained by the Bank. The
committee has done its work as per byelaws.
3) Chief Executive Officer and Management Personal
a) Day-to-day affairs of the Bank were looked after by the Chief Executive Officer Mr.
Anniruddha Yashwant Desai, extension given by Board of Directors in meeting hold
on 31st May 2016 as per “fit and proper criteria” circulated by RBI/NABARD. CEO
is possessing adequate experience in the field of banking and cooperation. Mr.
Desai, CEO of the bank was earlier worked as Class I, Special Auditor in
Department of Co-operative, Government of Maharashtra. Mr. Pramod S Sawant
was acting as Deputy CEO.
b) In second line management, Bank has appointed Six Managers and Eleven Dy.
Managers at Head Office. The mangers are reporting to the CEO in day-to-day
working.
c) The Bank has written policy of HRD including Staffing Pattern, Promotion &
Transfer policy, Computer policy, & Training Policy etc as per Mitra Committee
recommendations. The HRD policy is duly approved by NABARD vide there letter
No. NB.MRO.4530/CRR-6/11-12 dated 2nd January 2012.
As per HRD policy, bank’s staffing pattern of 675 employees is approved by

NABARD w.e.f 1st April 2012. As on 31st March 2018, 616 staff was working on roll
of the bank.
d) The Bank has system of giving training for its officers and other staff. During the
year under consideration, bank has arranged training at various centers covered in
23 training session.
e) Corporate Governance
In our opinion, Board of Directors of the Bank, are striving to function in a way, which
is supportive of good corporate governance.
Corporate governance especially in the co-operative banks has come into sharp focus
because more and more co-operative banks in India, both in urban and rural areas,
have experienced grave problems in recent times, which has in a way threatened the
profile and identity of the entire co-operative system. These problems include

33 | P a g e
mismanagement, Assessment of portfolio of Loan products, poor investment decisions

and the growing distance between members and their co-operative society.
IV. EARNING APPRAISAL

1) Analysis of variation in major items of income and expenditure compared to previous
year, with important ratios is as under;
(Rs. in Lakh)
Particulars 31.3.2017 31.3.2018 Difference Change in
%
A. Income Items
 Interest received on loan 12011.88 13428.20 1416.32 11.79
 Interest on Investments 3283.91 4138.61 854.70 26.03
 Other Receipts 863.28 718.84 -144.44 -16.73
Gross Income 16159.07 18285.65 2126.58 13.16
B. Expenditure Items
 Interest paid on 9477.77 10225.18 747.41 7.89
Deposits & borrowings
 Salary & Allowances 3494.97 3277.96 -217.01 -6.21
 Depreciation & Maint. 249.42 348.00 98.58 39.52
 Other Expenses 965.09 1089.87 124.78 12.93
 Provisions 1121.82 2344.64 1222.82 109.00
Total Expenditure 15309.07 17285.65 1976.58 12.91

C. Net Profit 850.00 1000.00 150.00 17.65
 From the above table, it can be seen that net profit for the year has been
increased by 17.65% with increasing trend in Interest on investment and
decrease in Salary and allowances during the year.
 The Bank’s income from interest received on loans increased by 11.79% during
the year. The main increase in interest income on loans is due to increase in
loans disbursement and increased rate of interest.
2) The important ratios observed during the year as under;

34 | P a g e
(Rs.in Lac)
Particulars’ 31.3.2017 31.3.2018 Change
in %
Net Profit to WC 0.48% 0.48% 0.00%
Net Profit to total income 5.26% 5.47% 0.21%
Interest income to total income 94.66% 96.07% 1.41%
Other income to total income 5.34% 3.93% -1.41%
Interest Recd on Loans to Average
Loans 11.48% 11.86% 0.38%
Interest paid on Deposits to Average
Deposits 6.50% 6.13% -0.37%
Staff cost to Average Deposits 2.52% 2.12% -0.40%
Interest paid on Deposit &
borrowing to Total Expenditure 61.91% 59.15% -2.76%
Cost of Management to WC 2.91% 2.55% -0.36%
Cost to Income 94.74% 94.53% -0.21%
Net interest Margin 3.58% 3.97% 0.39%
Productivity to No of employee 408.18 484.28 76.10
Productivity to No of branches 2589.27 3013.28 424.01
During the year, interest income to total income is increased by 1.41% and other
income to total income is decreased by 1.41%. The productivity to number of
employee is increased by 76.10 lac per employee and productivity to number of
branches is increased by 424.01 lac.
3) The Bank has earned profit of Rs.10,00,00,000/- as per the financial statements
prepared by the Bank.
4) We have taken test check of Interest applied during the year on deposits and loans.
5) The Bank has made adequate provision for impaired credits as mentioned below;
(Rs in lacs)
Particulars Amount % of Required Provision
eligible for Provision provision made by
provisioning Bank
i) Impaired Credits
a) Substandard assets 1555.54 10% 155.55
b) Doubtful –I 100.18 20% 20.03
c) Doubtful –II 101.98 30% 30.59
d) Doubtful –III 233.19 100% 233.19 4459.90
e) Unsecured Loans 1769.86 100% 1769.86
f) Loss Assets 130.14 100% 130.14
Total 3890.89 2339.36 4459.90
Excess provision made 569.01
The bank has made excess provision against the impaired credits.

35 | P a g e
6) Appropriation of Profit
The Bank has earned profit of Rs. 8,50,00,000.00 for the year ended on 31 st March
2017. The appropriation of net profit done by the Bank considering the provisions of
byelaws clause No. 21.63 is as follows;
1 Net profit as per Profit & Loss account for 8,50,00,000.00

year ended on 31.3.2017
2 Less :
a) Transfer to Statutory Reserve @30% of 2,55,00,000.0
Net Profit 0
b) Dividend payable @ 9.75%
c) Transfer to Dividend equalization fund 3,42,49,601.0
d) Transfer to Technology Development 0 8,50,00,000.00
Fund 1,66,329.00
e) Transfer to Bank publicity & 1,96,00,000
propaganda fund
f) Transfer to BDD Reserve of Rural 15,00,000.00
Advance
39,84,070.00
3 Balance of Profit Nil
7) The Bank has declared Dividend @9.75% for the year 2016-17 amounting to
Rs.3,42,49,601.00.
8) The Bank has earned operating profit of Rs.3344.64 Lac during the year ended on 31 st
March 2018. The operating profit earned by the Bank was as follows for the last two
years.
(Rs in lac)
Particulars 2016-17 2017-18
Total Income 16159.07 18285.65
Total expenses before provision for BDDR, 14187.25 14941.01
Standard Assets & Investment fluctuation and
Income tax
Operating profit 1971.82 3344.64
Provisions as per above 1121.82 2344.64
Net Profit 850.00 1000.00
9) The Bank does have system of ‘Online CBS Audit’ to find out the income leakages.

36 | P a g e
10) The Bank has following transfer price mechanism (TPM) for assessing the
profitability of its branches.
Sr Particulars Rate of Rate of Rate of

interest for interest for interest paid
1st Six Month 2nd Six for
2017-18 Month 31/3/2018
2017-18 (Avg.)
1 Branches having turnover of 7.25 7.00 7.00
Rs. 40 Crore and Taluka
Branches
2 Branches having turnover 7.75 7.50 7.50
more than Rs.15 Crore and up
to Rs. 40 Crore
3 Branches having turnover 8.00 7.75 7.75
more than Rs.5 Crore and up
to Rs.15 Crore
4 Branches having turnover up 8.50 8.00 8.00
to Rs. 5 Crore
For the purpose of TPM, bank had categorized its branches into four types and
differential rate of interest was paid to the branches. The Bank has given excess rate of
interest to D class branches to reimburse the management expenses and reduce
burden of interest paid on deposits. Bank has fixed the rate of interest according to the
TPM policy sanctioned by BOD meeting dated 28/12/2017 vide resolution no. 10.
V. LIQUIDITY MANAGEMENT
1) Cash
a) The Bank has issued circular No. Acct/banking/999/35/155/2017-18 dated 13 th

April 2017 for monitoring the cash balances & ATM Balances at branch level. The
Bank has fixed cash retention limit based on deposit target given to the respective
branch. The Bank has placed system of reporting excess cash holding and giving
permission for violation in exceptional cases.
b) During the year under consideration, Bank hold average cash balance of Rs.
2471.90 lacs
c) Unreconciled ATM Difference as on 31/03/2018 Rs. 28800/-

37 | P a g e
d) The Bank has taken insurance cover, detailed as follows;
Policy Number: 17060446170400000001 – Banker Indemnity

Period of Insurance cover: 1st April 2017 to 31st March 2018.
Name of the Insurance Company: New India Assurance Company Limited
Sum Insured : Basic sum Insured Rs.20,00,000/-
Additional sum insured for money in premises Rs.38 Crore
Additional sum insured for money in transit Rs. 8 Crore
As per above insurance policy 32 ATM centers were covered however total ATM
centers as on 31/03/2018 were 38.
Also average cash holding per ATM was Rs. 12 lacs but sum insured per location
was Rs. 4 lacs. Therefore insurance cover should be enhanced to that extent.
e) Cash has been maintained in Joint custody except in some cases where only one
man holds the custody.
Our observations from the audit of the Branches reveal as under.
 In case of majority of branches, cash retention limit is observed strictly.

 In case of one-man branches, the system of dual control over the custody of cash
could not be followed. However, no specific counter measures were taken to
minimize the risk under such cases.
2) SLR and CRR Requirements and Compliance
a) The Bank has system of compiling and monitoring demand and time liability (DTL)
position in terms of RBI Act.
b) The Bank maintains record of CRR on daily basis to determine position of CRR. The
Bank maintains surplus position in CRR throughout the year. The Bank is regular
in reporting the position to controlling authority.
c) The Bank is reporting the SLR position through returns and online submission to
RBI Portal on regular basis to controlling authority.
d) The Board of Directors and CEO are taking regular review of position on CRR and
SLR. The Bank has system of ensuring compliance to the controlling authority.

38 | P a g e
e) As on 31st March 2018, position of SLR under section 24 and CRR under section 18
of the Banking Regulation Act,1949 is as under;
(Rs. in Thousands)
Particulars Amount Amount Surplus
required to be maintained by the
maintained Bank
Cash Reserve 626831 663341 36510
Liquid Assets 3055800 4598560 1542760
3) Repayment of Borrowings
a) As per byelaws clause No. 3.4 of the Bank, maximum borrowing limit is as decided
by the RBI/NABARD. As confirmed by Bank, RBI or NABARD has not
communicated borrowing limit.
b) During the year under consideration, bank has availed & repaid borrowed fund as
follows;
(Rs. in Lac)
Particulars Sanction Opening New loan Repaymen Outstanding
Amount Balance availed during t of loan Balance
1/4/17 2017-18 during 31/3/18
2017-18
ST Multipurpose 12000.00 0.00 5500.00 0.00 5500.00
Loan NABARD
UPNRM –NABARD
ST (SAO) MSC Bk 4200.00 4005.00 3250.00 4005.00 3250.00
Venture Capital 253.71 0.43 0.00 0.43 0.00
fund (interest free)
MSC Bank
MT Agri. Loan 3090.00 2719.80 3090.00 864.40 4945.40
MSC Bank
MT Non Argi. MSC 3410.00 2424.60 3410.00 818.80 5015.80
Bank
Long Term 0.00 2000.00 1000.00 0.00 3000.00
Subordinated
Deposits (LTD)
Society and
Individuals
Total 22953.71 11149.83 16250.00 5688.63 21711.20
As per schedule of borrowing, Bank had repaid all the installments without any
default.

39 | P a g e
4) Deposits
a) The Bank has laid down norms and guidelines for conduct and operation of
inoperative accounts vide circular No. Acct/Banking/75/29/F54/3067/ 2011-12
dated 30th November 2011.
The Bank has issued circular No. Acct/Bank/75/28/1809/2010-11 dated 10 th

August 2010 for maintenance of Matured RD & Small saving accounts.
b) In connection with Circular DBOD.No.DEAF cell.BC.101/30.01.002/2013-14 dated

21st March 2014 and subsequent circular issued by RBI DBOD.no.DEAF
cell.BC.114/30.01.0002/2013-14 dated May 27, 2014 the Bank has submitted
DEAF returns in Form I and II on regular basis. The Bank has filed all returns for
the March 2018 on 11th April 2018. The Bank has remitted all amounts to
concerned authority for the year 2017-18.
c) The RBI has issued Directions u/s 35A of B.R. Act, 1949 (AACS) vide circular No
DBR.AML.BC.NO.81/14.01.001/2015-16 dated 25th February 2016 to follow
customer identification procedure under PMLA 2002 & PML (MR) Rule 2005.
Further, RBI has issued master circular on KYC Norms and norms of opening of
Bank accounts vide circular NO. UBD.BPD.(PCB) MC.NO.16/12.05.001/2014-15
dated 1st July 2014. In accordance with directions bank is implementing KYC
procedures.
Out of total 520722 accounts (including no frill accounts) up to 31 st March 2018,

bank has made KYC compliance of 491080 accounts. As on 31 st March 2018 Bank
has done KYC compliance of 94.31%.
Further, to directions issued by RBI in Feb 2016, Bank has categorized customers
under Low, Medium and High Risk category. Bank has not allotted Unique
Customer Identification Code (UCIC) to its customer. We observe multiple customer
IDs’ of a single customer. Some examples of multiple customers ID are as follows –
Br.Code Account Number Borrower Name Customer No

22 19822/2499 AKERKAR NARAYAN GUNDU 33410
20 19808/1826 ANSURKAR VITHOBA LADU 649195
The Bank has updated KYC Policy in 2011. In our opinion, Bank should prepare
master (consolidated) KYC policy in accordance with the latest directions and
master circulars issued by RBI.

40 | P a g e
d) As on 31st March 2018, position of total deposits is as under;
(Rs. in Lakh)
S Particulars As on As on Change
r 31/3/2017 31/3/2018 in %
1 Fixed Deposit
a) Individual’s 68881.33 66278.51 -3.78
b) Other societies 16950.40 21597.89 27.42
2 Saving Deposits
a) Individual’s 49765.42 57601.65 15.75
b) Other societies 3379.47 3669.09 8.57
3 Current Deposits
c) Individual’s 10696.16 18292.98 71.02
d) Other societies 434.81 459.16 5.60
Total 150107.59 167899.28 11.85
During the year under consideration, deposits have been increased by11.85%.
There is no unusual large movement in aggregate deposits.
e) Bank is regular in depositing insurance premium under DICGCI. Details of

deposits assessed and premium paid is as under;
Sr. Deposit amount Amount of Date of

Period
no assessed premium payments
1 As on 30th September 2017 15583283042 9194138 27/11/17
2 As on 31st March 2018 16830208719 9929824 29/05/18
Total 19123962
f) Composition of Deposits and growth thereof as on 31st March 2018 are under;
(Rs. in Lac)
Sr Particulars As on As on Change in
31/3/2017 31/3/2018 %
1 Fixed Deposit 85831.73 87876.40 2.38
2 Saving Deposits 53144.89 61270.74 15.29
3 Current Deposits 11066.14 18686.59 68.86
4 Money at Call 64.83 65.55 1.11
Total 150107.59 167899.28 11.85

5 CASA Deposit 64275.86 80022.88 24.50
Out of total deposit held by the Bank, low interest bearing CASA deposits are
47.66% (Prev Year 42.82%). The proportion of fixed deposits in total deposits
52.34%. As per banking industry norms, Bank holds good amount of CASA
deposits.

41 | P a g e
g) During the year, bank has introduced following new deposit schemes.
1. Suvarna Thev Yojana
h) The Bank does not hold any FCNR and other non-resident accounts.
i) The Bank is regular in reporting information as per Anti-Money Laundering (AML)

guidelines. During the year, Bank has filed CTR/STR/CCR returns with the
regulatory authority. CTR return of April, September, December & February 2018
submitted late.
j) The Bank has furnished information regarding receipt, disposal & pending
grievances in respect of internal grievance redressal system of PSB’s and FIS as per
circular MRO.DoS/9622/C & G/2014-15 dated 25th February 2015.
VI. SYSTEMS AND CONTROLS

1) Guidelines for loans and advances
The Bank had framed elaborate rules and regulations on the terms and conditions of
sanction, documentation, margin to be maintained, securities acceptable to the bank
etc for all types of loans and advances, cash credits and bills purchased, discounted
etc., being granted by its HO and branches to PACS, other credit societies and to
individuals. This issue is already discussed in Clause II – Assets under heading
Advances.
2) Accounting Procedures adopted by the bank

The Bank has formal operational manual on CBS environment.
3) House Keeping
a) The Bank has placed system of monitoring the position of balancing of general
ledger and other books at regular intervals. The Bank has system of periodical
reconciliation of control and subsidiary records. The Bank has finalized the financial
statements well in time.
b) The Bank has maintained proper record of Demand Drafts payable, Demand Draft
paid without advice instrument wise. At regular intervals, the balance of
outstanding instruments is transferred to other ledger heads and to Head Office for
proper control.
c) The Bank has system of physical verification of security forms like cheque books,
FDR’s, Demand Draft, Money Transfer etc at regular interval and at the time of
inspection from the head office. In our opinion, method of verification and interval
should be fixed by the bank.

42 | P a g e
4) Inter-branch Adjustment/Reconciliation
a) The reconciliation of branch adjustments has been done at Head Office level. No
material delays and discrepancies were observed in preparation of bank
adjustments. Accounts department at Head Office prepares a monthly consolidated
summary for the Bank as a whole.
b) As on 31st March 2018 position of inter branch adjustment is under;

(Rs. in Lac)
Sr Period Debits Credits
No of Amount No of Amount
entries entries
1 Below 6 months -- -- 2 0.44
2 More than 6 months to 1 -- -- -- --
year
3 More than 1 years to up to 3 -- -- -- --
years
4 Above 3 years -- -- -- --
Total -- -- 2 0.44
Total Outstanding of inter branch Adjustment : (Cr) 0.44 Lac
5) Inter Bank Reconciliation
The bank has system for reconciliation of bank accounts on monthly basis. The bank
has prepared reconciliation statement and obtained confirmation letters from the
respective banks.
Branches have been permitted to operate the accounts with other Banks, mainly to
facilitate the clearing. There are no long outstanding entries of material amounts
pending in Reconciliation of Bank Accounts.
The details of balances held by the Bank in other bank accounts excluding Fixed
Deposits accounts are as under;
(Rs. in Lac)
Particulars Amount
Current deposit with RBI 645.57
Current deposit with MSC Bank 556.56
Balance with other banks 2577.76
Total…… 3779.89
6) Suspense Accounts’, Sundry Debtors etc
Under the head, ‘Sundry Debtors’ amount of Rs.59,40,206.00 is shown as receivable. The
bifurcation of the same is as under;
Particulars Amount
Sundry Debtors at Head Office 58,51,626.00
Sundry Debtors at Branch level 88580.00
Total 59,40,206.00

43 | P a g e
Amount includes in sundry debtors are of Adhar Commission Receivable, Advances

paid for ZEP Project etc.
7) As per our observation and checking, there are no long pending items in balance sheet,
which require special attention as on 31 st March 2018 except those mentioned
specifically in the report.
8) Bank inspection
a) During the year under consideration, Bank has implemented following types of
inspections;
 Continuous Concurrent & Revenue Audit
 Revenue audit – Online Inspection
 Internal & Revenue Audit
 Inspection of gold loan & security thereof
 Checking by Vigilance officer
b) The Bank is conducting various inspections and audit mostly on six monthly bases
except Continuous cum Concurrent audit which is done on quarterly basis.
c) The inspection cell consists of total 14 persons details of the same are follows;
 Manager - 1 No (from 01/10/2016)
 Dy. Manager - 1 No
 Asst Manager - 2 Nos
 Banking Officer - 3 Nos
 Jr. Banking Officer - 3 Nos
 Clerk - 3 Nos
 Peon - 1 Nos
d) The status of branch inspection, status of report and compliance made thereof as
on 31st March 2018 is as under;
Sr. Type of Inspection Branches Inspected Compliance

No eligible for Branches given by
Inspection Branches
1 Continuous Concurrent Audit 61 34 17
Revenue Audit 61 34 17
2 Internal & Revenue Audit (D 37 24 05
class) 37 24 05
3 Gold Loan Inspection 89 89 69
4 Visits by Vigilance Officer 98 58 58

appointed by Bank

44 | P a g e
The Bank has to modify and update its audit cell and other inspections according to
the need of the Bank. Branches has made due compliance of inspection report. The
Audit committee, constituted by the BOD, has taken regular review of compliance
offered by the branches and the committee has taken appropriate actions in time.
Internal Audit / Concurrent Audit of branches should be carried out by

independent chartered accountant firm.
e) During the year under consideration, M/s UVK Associates, Chartered

Accountants were appointed as Internal Auditor for Head office. The scope of work
is fixed by the Bank at the time of appointment. The letter of appointment of
internal auditor were issued having reference No.INT.AUDIT/999/35/15/2017-18
dated 17.04.2017.
 As per scope, clause no. 4, documents are not submitted.

 Pending compliance of previous audit report is not checked by auditor.
 Financial statements are not certified / checked by the auditor and not on
record.
In our opinion, following matter needs to be attended on priority at the time of

internal audit as per scope of appointment;
 Potential NPA accounts should be detected and necessary action should be

taken immediately by the branches to keep close watch and to reduce the
potential NPA. Certified Overdue statement for 30.9.2017 and 31.3.2018 is not
on record as per scope of appointment.
 Compliance report duly verified by Internal Auditor is not on record.
f) The Bank has system for supervision and monitoring the PACS. During the year
Bank has done inspection as follows;
Taluka Eligible Inspection Balance Inspection Compliance

for Completed PACS report Received
Audit issued to
PACS
Deogad 34 9 25 7 2
Vaibhawadi 25 10 15 9 1
Kankavali 38 4 34 3 1
Malvan 28 21 7 18 3
Kudal 36 11 25 8 3
Vengurla 23 6 17 4 2
Sawantwadi 34 14 20 10 4
Dodamarg 12 2 10 2 0
Total 230 77 153 61 16

45 | P a g e
The Bank has completed inspections 33.48% of PACS during the year. Last year it
was 85.22%. The coverage of inspection should be increased so that early detection
of incompletions / shortcomings could be made possible.
9) Management Information System (MIS)
a) The information flows from the branches to Head office at periodical intervals in the
form of returns and statements. A department at Head office gathers all the
information and processes it in tabularized forms. Such processed information is
placed before the higher authority for review and comments.
b) The bank is regular in submitting off-site surveillance system (OSS) returns and
other external returns.
10) Fraud prevention, monitoring and control
a) As informed by the management, there are no cases of frauds, misappropriations,

embezzlements etc discovered during year under consideration.
b) The Bank is reporting the frauds, misappropriations etc to the controlling authority.
c) The Bank has system of monitoring and reviewing the frauds, thefts etc.
d) The Bank has made 100% provision for frauds occurred in the bank.
e) The Bank has taken preventive measures to avoid recurrence of frauds by issuing
circulars No. Acct/B/75/28/80/2010-11 dated 10th April 2010 inviting attention of
all the branches to prevent frauds in gold loans.
11) Risk management systems
The existence and effectiveness of risk management mechanism is vital for designing a
compatible internal control system to achieve the goals within the desired risk spread.
The Bank has to set up effective system to evaluate risk and take effective mitigating
measures.
a) Liquidity Risk
The Bank is maintaining surplus Liquid Assets as required to be maintained under

section 24 of the Banking regulation Act, 1949. As on 31 st March 2018, bank was
maintaining Liquid Assets of Rs.45985.60 Lac.

46 | P a g e
b) Credit Risk
Credit risk means the possibility of failure in repayment of loans by the borrower on the
due dates. Misjudgment of credit risk leads to non-recovery of loans. The deficiencies/
irregularities observed in the policies and procedures in relation to appraisal, sanction,
disbursement and monitoring of loans and advances portfolio, pertains the credit risk
faced by the bank. The deficiencies in loan scrutiny/appraisal, follow-up by the
branches, documentation, etc. amounted to non-compliance with prudent banking
practices. The bank was found to be sanctioning high value advances without
scientifically assessing viability of the project and examining the credit
worthiness/repaying capacity of the borrowing units, violating unit exposure norms
and improper moratorium period. The Bank should take concrete steps to bring down
the level of credit risk exposure by evolving strategies for further reduction in NPA.
Specific cases of deficiencies/irregularities observed in policy and procedure in relation

to appraisal, sanction, and disbursement and monitoring of loans and advances
portfolio are covered under clause II Advance. The Bank is advised to avoid such type
transactions which lead to increase in credit risk.
As on 31st March 2018, NPA position was under;
(Rs. in Lac)
Sr Particulars Ratio Amount
1 Total NPA 3890.89

2 % of NPA pertaining
 Agriculture Sector 13.81% 537.29
 Non Agricultural Sector 86.19% 3353.60
2 Ratio of NPA to total Loans & 2.98%
advances
3 Amount involved in NPA (top 1672.46
20 accounts each in STY
category and other category )
4 Ratio of top 20 NPA to total 42.98 5.99
NPA
5 Ratio of doubtful assets out of 56.68%
total NPA
6 Ratio of Loss assets out of 3.34%
total NPA

47 | P a g e
c) Exposure Risk
The Bank has violated the unit exposure norms for sanction of loans prescribed by
NABARD in respect of its finance to D Y Patil SSK, Gaganbavada, Kumbhi Kasari SSK
Ltd , Kuditre, Sindhudurg Shikshan Prasarak Mandal. Further, Bank has disbursed
loans to Commercial Real Estate violating RBI norms. The Bank is facing exposure risk
for which it should take appropriate steps to mitigate it.
As per OSC-7 return prepared by the bank. The details of capital fund, risk assets
/exposure and risk assets ratio as on 31st March 2018
(in Lac)
1 Capital Fund 12908.65
2 Total risk weighted assets 125284.23
3 Capital Fund to Risk weighted assets 10.30%
d) Interest Rate Risk
The yield on deployment of fund is increased from 9.41% to 9.49%. The details of net
interest income of the bank, is as under;
(Rs in lac)
Sr Particulars 31/3/2017 31/3/2018 Increase or
Decrease
1 Interest Income
 On Loans & Advances 12011.88 13428.20 1416.32
 On Investments 3283.91 4138.61 854.70
Total 15295.79 17566.81 2271.02
2 Interest Expenditure
 On deposits 9056.69 9516.08 459.39
 On borrowings 421.08 709.10 288.02
Total 9477.77 10225.18 747.41
3 Net Interest Income 5818.02 7341.63 1523.61
The net interest income is increased by 26.19% (Prev. Year increased by 6.44%) during
the year 2017-18.
e) Operational Risk
As per the BASEL committee norms, the operational risk in the Bank arises due to
failure of the people, systems and controls.

48 | P a g e
Though at present no major evil has occurred due to operational risk, considering the
future that would require facing fierce competition, complex technology, rigorous
statutory compliances and lesser protection; operational risk would shoot up. The
present systems and processes would no longer be helpful to control this risk. Hence, it
is suggested to comprehensively revamp the entire systems and processes to meet the
future challenges.
12) Asset Liability Management (ALM) System
As informed to us the bank is in process of preparing the maturity pattern of assets

and liabilities of the Bank at periodical interval. The Bank was identified by NABARD
for implementing the ALM system w.e.f 1 st September 2008. The main objective of ALM
is a comprehensive approach towards management of bank’s balance sheet and
arriving at business decisions, based on sound risk management systems with the
ultimate objective of protecting the interest of depositors and stakeholders. The Bank
has constituted the Asset Liability Committee (ALCO) and taking effort to chart out
proper mechanism.
13) Vigilance Arrangements
The Bank has not set up “Vigilance Cell’ as suggested by NABARD vide their circular
No. NB.DoS.HO.POL.3899/p-71/2005-06 dated 14th January 2006. The Bank has
nominated Dy. Manager as “Vigilance Officer” to carry out the working of vigilance cell.
The Board of Directors has approved scope of vigilance cell to align with NABARD
Circular during the board meeting Resolution no. 8 dated 27 th December 2013. During
the year under consideration, Vigilance Officer has visited 58 branches and carried out
checking and inspection of cash balance, security arrangement, sensitive stationery
and overall working of the bank.
VII. COMPLIANCE
1) Functioning of Audit Committee
 An independent audit committee comprising of people having general understanding

of banking processes can serve as an effective and objective mechanism to monitor
the Banks financial reporting process and internal control system and thus, help
the Board to fulfill one of its most crucial oversight responsibilities.
 As per the byelaws clause no. 11.43, Board of Directors has formed audit committee
consisting 5 members from Board. Vice Chairman of the Board is acting as
Chairman of the Committee. The Bank has inducted Mr. Ashok C Sarang,
Chartered Accountants w.e.f. 01/06/2017 as independent member on the
committee.

49 | P a g e
 During the year, committee has conducted 7 meeting, discussing the various issues
as specifically mentioned in byelaws clause no. 11.43.b. The audit committee has
taken good efforts to exercise control over inspection and compliance thereof. The
committee is efficient and active in reviewing the compliance on observations made
by NABARD and regulating authority.
 Recommendations given by the Audit Committee regarding various functional

departments of the Bank such as Administration, Purchases/Property, Accounts,
Inspection, EDP, Loans, Planning and Field Recovery for improvement of internal
controls. The Bank has to take positive steps to implement the recommendations.
2) Comments on non compliance/contravention of important provisions of BR Act,

1949, MSC Act and byelaws etc.
1. Provisions of Banking Regulation Act, 1949 (AACS)
1) Section 6
The form of business in which the bank may engage is specified in Section 6.
 The Bank had rented out its premises survey No. 792 at Sawantwadi to Janta
Vastu Bhandar Sawantwadi Consumer Cooperative Societies and Flat
No.520/E/1 in Sai Complex in violation of the provisions of Section 6 of the Act.
2) Section 9
The Bank is prohibited from holding any immovable property howsoever acquired
except such as is required for its own use for any period exceeding 7 years from the
acquisition thereof. The Bank did not comply with the provisions as under;
 The Bank possessed immovable property at Sawantwadi bearing survey number

106, H No 29 (A) & 29 (B)-43 not in use by the bank.
 The Bank possessed immovable property at Sawantwadi bearing survey number
792 not in use by the bank.
 In case of open plot No.2 at Oras, bank has obtained permission from RBI vide
letter dated 31/05/2010 for extension up to 31 st May 2012. Bank has informed
RBI regarding the use of plot vide letter no. 75/29/596/2011-12 dated
19/01/2012 & letter no. 999/36/59/2018-19 dated 21/05/2018.
3) Section 35A
As per section 35A RBI has issued guidelines vide Master Directions DBR.AML.BC.
No.81/14.01.001/2015-16 dated 25th February 2016 under ‘Master Directions –
Know Your Customer (KYC) Directors 2016’. The Bank has partially complied the
guidelines mentioned in the circular. As per clause No 12 –Risk Management of
directions, the Bank has categorized customers into low, medium and high risk
category. But Bank has not allotted Unique Customer Identification code (UCIC) as
per directions. As informed to us bank is in process of allotment of Unique
Customer ID.

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2. Provisions of Bye-laws adopted by the Bank
1) Bye-laws clause No. 1

As per bye-laws, working area of Bank is ‘Sindhudurg District’. Bank has
granted loans to the customers outside District.
2) Bye-laws clause No. 6.16.b

The Bank has to collect shares from member society @10% on disbursement of
Loans. The Bank has not collected the Shares as required to be collected from
member societies as on 31st March 2018 amounting to Rs. 66,000/- pertaining
to 2 members.
3) Bye-laws clause No. 13.46.A

As per bye laws, Bank has to conduct inspection of society attached to the bank
on yearly basis. As on 31st March 2018, out of 230 societies, bank has
completed inspection of 77 societies.
3. Provisions of Know Your Customer and Anti Money Laundering Act, 2002
(AML)
The bank has partially complied with KYC norms as issued by RBI/NABARD. Bank
is in process of allotment of Unique Customer ID.
4. Provisions of Credit Information Companies (Regulation) Act, 2005 (CICRA)
As per Circular No DNBR (PD).CC.No. 019/3.10.01/2014-15 dated 6 th February

Bank has to take membership of 4 Credit Information Company (CICs). The Bank
has taken membership of all 4 credit information Companies.
5. Contravention of Circulars/guidelines issued by NABARD
1. Circular No 68/Dos/0/2008-09 dated 12th May 2008

(Ref No NB.Dos.CMA.768.A.75/2008-09)
 Circular Clause No. I – Exposure Norms

As per circular clause xii, in case of certain circumstances requiring DCCBs
to extend financial assistance to certain units/sectors in excess of the
exposure norms, in such cases the bank has to seek specific relaxation from
NABARD.
As per Annexure I attached to circular, prior authorization is required for
financing to state government corporations for power/infrastructure project
irrespective of the amount.
 Circular Clause No. III – Review of large advances by Board

51 | P a g e
As per circular, the bank shall continue to review the quality of their lending
to non credit cooperative societies/units outside the cooperative fold and
individuals, on a quarterly basis and submit a Memorandum thereon to their
Board.
 Circular Clause No. IV – Prior authorization from NABARD

As per circular, in respect of loan sanctioned to societies/state level
cooperative federation etc, banks are required to obtain the prior
authorization from NABARD.
6. The Bank has complied with the provisions of Section 44AB (Tax Audit) of the
Income Tax Act, 1961.
VIII. AUDIT OF COMPUTERISED OPERATIONS

1. Implementation of CBS Project
The Bank has implemented Core Banking Solution (CBS). The Bank is using OMNI
software developed by M/s Infrasoft Tech India Ltd., Mumbai as a core banking
solution. As on 31st March 2018, all the 98 branches have been covered under CBS.
During the year under consideration the bank has carried out Application Audit, Data
Base Audit & Network Audit. But compliance of the same is in progress.
Also it is suggested that following should be included in scope of CBS audit,
Sr. No. Audit Area

1 IT Environmental Audit
2 Vulnerability Assessment and Penetration Testing (VAPT)
3 Server Hardening
4 Licensing of Software / Operating System etc.
5 BCP / DRP
6 DR Site (if any)
2. Application:-
Application audit of software installed is carried out by the bank from CISA
Auditor. Compliance of audit is under process. In our opinion bank should give
attention on points mentioned above to strengthen the CBS system.

52 | P a g e
3. Information Security Policy
The Bank has prepared written Information security policy. Information security
policy is most important document for a technology driven organisation. The Bank
should have installed proper system in place for quality and safety of data and reports.
4. Business Continuity Planning
The bank has formulated Business Continuity Plan (BCP). BCP is an important
area in order to offer uninterrupted services to customers and fulfilling regulatory
requirements of DR Site.
5. Disaster Recovery Planning
The bank has established Cloud Disaster Recovery site at Bangalore. Bank has
not taken Drill Test and not done audit of DR Site.
6. The Bank has opened 33(Thirty Three) ATMs up to 31st March 2017. During the year
under audit bank has opened 5(Five) ATMs. The Bank has not issued any technology
driven products and services like smart Cards, credit card etc during the period 2017-
18.
7. Bank has executed various AMC agreements for Data Centre, Administrator Nework,
Desktop & computer, Database management etc. We observed that SLA (Service Level
Agreement) is not provided for verification.
8. Customer ID :-
The Bank has not implemented customer ID Policy for all the accounts of a single
customer. Customer ID is the most necessary thing in the CBS environment to have
control over the customer accounts.
IX. Preparation / Implementation of DAP & MOU Executed and

Revival package
1) In order to sensitize the cooperative Banks to the concept of cost effectiveness, regular
recycling of funds, professionalization, accountability, NABARD has made applicable
the Development Action Plan for all CCB’s and RRB’s vide circular dated 27 th
September 2007.

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2) The Bank has formed committee namely “District Level Monitoring and Review
Committee” for monitoring the progress and execution taken under DAP/MOU. Total 6
members are included in the committee which includes representative of NABARD, RBI
and MSC Bank. The meetings of the committee are held during the year on quarterly
basis.
3) The performance of the bank as discussed in the meeting of the DLMR held on 24 th
April 2018 is as under;
(Rs. in Lac)
Sr Particulars As on 31st March 2018
Target Achievement % of
Achievement
1 Branches (Nos) 100 99 99.00%
2 Share Capital 3700.00 3731.41 100.85%
3 Deposits 156000.00 155355.16 99.59%
4 Loans & Advances 120000.00 127609.52 106.34%
5 Recovery of Loan (30th 85% 86.00% 101.17%
June)
6 Net NPA % 0.00 0.00 100%
7 C D Ratio 75.64% 72.89% 96.36%
4) Miscellaneous -
a) During the year under consideration, profitability of the Branches and head office is
as under;
(Rs. in lakhs)
Particulars No of Profit Loss
Branches
Profit making Branches 97 3272.98
Loss making branches 1 0.32
Loss at Head office 1 2272.66
Net profit of the Bank 1000.00

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X. Audit Classification
NABARD has issued circular No. NB.DoS.HO.POL.No2743/J-1/2012-13 dated 12 th
October 2012 (Circular No 248.DoS.34.2012) regarding Audit Classification of CCBs and
revised certain norms/scales.
As per the norms, the bank has scored 90.20 marks out of 100 marks. The details are as
under;
Sr. Parameters Maximum Marks obtained

Marks by the Bank
I Capital Adequacy 15 15.00
II Asset Quality 15 15.00
III Management 10 7.00
IV Earnings 08 8.00
V Liquidity 20 17.75
VI Systems & Controls 20 16.50
VII Compliance 12 10.95
Total 100 90.20
As per the marks obtained by the Bank according to the criteria and parameters
fixed, Audit class “A” is awarded for the year 2017-18. The detailed statement of
marks obtained by the Bank is attached as annexure.
XI. Conclusion
In our opinion, bank has done overall good achievements and improvements in systems
and workings. The Bank is making good efforts to overcome the defects and deficiencies in
progressive manner. The overall supervision and control of the Board of Directors found
effective. The working of the committee is also very energetic and taking keen interest in
the business of the Bank.
Place: Kolhapur for Sankpal Kulkarni & Associates

Date : 08/08/2018 Chartered Accountants
Firm Registration No. 121256W
(CA Deepak S Patil), Partner

Membership No. 108541
Annexure I - Gist of major observations pertaining to Branches.

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Major observations in Branch - Advances
Branch A/c No./Name Amt Remark

Name (in Lac)
HO 18203/3 2000.00 1. SSK has already taken finance from IDBI of

Kisanvir Khandala Rs.20 cr on same stock. Again Bank has
SSK made finance of Rs.20 cr.
2. Loan is totally unsecured and not
disbursed as per Loan policy.
3. Stock is not verified/inspected by the Bank
authority.
4. Insurance policy with bank charge is not
on record.
Co-genTL 5000.00 1. Hypothecation of Plant & Mach is not
DYP SSK executed as per condition no 5.
2. Mortgage deed of other property SR No
137 is not taken on record.
3. Permission for purchase of co-gen plant
permission from Commissioner of sugar is
not on record.
H& T 1500.00 1. Loan is disbursed violating the Loan
DYP SSK 2300. guidelines/policy.
00 2. Loan is fully unsecured .
3. Condition no 3 of sanction letter is not
followed.
As per condition no 5, whether funds are
utilized for the purpose of loan is not on
record.
Ambrad 19804/439 26.90 1 Branch manager has not recommended
Vehicle Loan the loan.
Kalpita Munj 2 Audited financial statements are not
on record.
3 Charge noted 7/12 extract is not on
record.
4 Machinery is under insured by
Rs.763000/-.
Aros Dandeli 17501/2 17.00 1. As per condition in sanction letter,
Cash Credit borrower should make business
Naik Tissue Factory transactions through the cash credit
account. But same was not done.
2. Borrowers business is not in existence, but
cash credit for same business is still
renewed.
3. Monthly stock statements are not on
record.
Banda 20501/134 50.00 1. GST registered tax invoices are not on
Land development record.

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Makarand V 2. Progress reports and completion

Toraskar certificate of Engineer are not on record.
3. All disbursements are transferred to the
saving account of Makarand V Toraskar.
4. Payments are not directly made to the
parties from whom purchase made or
service taken.
5. Total bills on record are Rs.4405100/- and
disbursement is made of Rs.4700000/-
which shows loan amount is not used for
the purpose of sanction. Own funds are
not used for the project.
19201/1937 15.30 1. In some cases disbursement is made after
19201/1938 1.80 completion of construction or repair of
Farm House farm house.
Contruction & E.G- Loan disbursed to Chandrakhant Shetye
Repairy Rs.1.30Lakh on 30/06/2017 and Rs.1.40
Insuli VKS Socty. Lakh on 14/07/2017.
Ltd. Completion certificate of G.P Insuli is on
27/06/2017.
This shows loan amount is not used for the
purpose of sanction.
2. Bills of expenditure are not on record.
17501/353 5.00 1. Stock statement for the month of
Cash Credit – December 2017 and January 2018 is not on
Readymade record. Penalty of Rs.300/- per statement
Garment is not recovered.
Sawant Collection 2. Drawing Power Register is not maintained.
3. Rs. 270000/- withdrawn by proprietor,
utilization of this amount could not be
ascertained.
4. Stock Insurance policy is not on record.
5. Branch Manager has not given his
recommendation to this proposal.
6. No signatures of proprietor on financial
statements.
7. Physical verification of stock is not carried
out by bank officials. Stock shown in the
stock statement of March 2018 is
Rs.1500000/-, but stock as per financial
statement as on 31/03/2018 is Rs.
760500/-.
8. Name of proprietor mentioned on stock
statement is Raja Sawant but loan facility
is sanctioned to Ghanshyam K. Sawant.
9. Bank of Maharashtra Cash Credit closed

certificate is not obtained. There is no

57 | P a g e
proof of closure of C/C of Bank of

Maharashtra.
20501/123 40.00 1. As per sanction letter condition no.5,
Rajesh Ashok Powar amount should be paid directly to seller
but the amount is paid to Shree Ashok
Rajesh Pawar i.e borrower.
2. Receipt from dealer /seller regarding
receipt of money is not on record for
purchase , labour payment and for
material brought on site.
3. Progress Report is given on the name of
Shridhar Pawar and is not in name of
Rajesh Ashok Powar.
Deogad 17304/211 15.00 1. DP register is not maintained up to date
for diesel purchase. DP is not calculated at
17704/212 7.00 the time of disbursement. Society has not
maintained proper stock considering the
CC for diesel margin of 40%.
purchase and sale & 2. Society has got storage capacity of 24000
fishing material liters and even after considering current
supply. rate of diesel of Rs. 70 per liter, the
Taramumbari Sah Society cannot maintain required level of
Macchi Vyavsayik stock as per the margin stipulated by the
sanstha Ltd. Devgad Bank. In our opinion, Bank should consider
reducing the sanctioned limit as per actual
stock position of the borrower society.
3. Periodical stock inspection reports are not
on record.
4. Diesel & Fishing Material Stock is not
insured adequately.
17304/213 30.00 1. DP register is maintained but DP not
CC for diesel calculated as per actual stock available
purchase with the borrower Society. As per stock
Devgad Fishermen’s statement of March 2018 stock value is Rs.
Cooperative society 37,855.60 and balance outstanding is
Ltd. Rs.9,46,174/-
2. Society has got storage capacity of 30000
liters and even after considering current
rate of diesel of Rs. 70 per liter, the
Society cannot maintain required level of
stock as per the margin stipulated by the
Bank. In our opinion, Bank should consider
reducing the sanctioned limit as per actual
stock position of the borrower society.
3. Periodical stock inspection report from
bank official is not on record.
4. Stock is underinsured. Insurance policy is

of Rs.10 Lakh only. As per condition No.2,

58 | P a g e
required amount of stock insurance is Rs.

50 Lakh.
19313/1949 18.00 1. Revised quotation of bare vehicle & RTO,
Insurance is of Rs.15,77,842/- and
MT Vehicle Loan for quotation of body building is of Rs.
purchase of Diesel 5,30,000/-. Considering the loan policy of
Tanker financing 80% of total quotation value,
Devgad Fishermen’s allowable finance comes to Rs.
Cooperative society 16,86,274/- but bank has sanctioned &
Ltd. disbursed Rs. 18,00,000/- resulting into
excess finance of Rs.1,13,726/-
2. Bank has granted annual principal
repayment for this loan. But as per loan
policy, EMI should have been given for this
loan.
3. Vehicle RC book with Bank’s
hypothecation noted on the same not
available for verification.
4. Society has not submitted letter from
Bharat Petroleum Company for hiring of
tanker.
Vijaydurg 20612/50 40.00 1. Loan is sanctioned for interior work of
LT for Hotel Durg Beach Resort and for take-over of a
Business NPA account from Bank of India in the
Ravikiran S. Jadhav name of Durg Beach Resort situated at
& Pradeep P Vijaydurg. But detailed estimate for
Salaskar interior work not on record.
2. Disbursement of Rs. 25,32,000/- is made
to Bank of India for take-over of loan and
the same is evidenced by loan account
statements from Bank of India. End use of
balance loan amount disbursement is not
ensured as it is not supported by bills /
receipts / architect’s work completion/
valuation report of photographs of actual
work done.
3. Valuation of property taken as mortgage
not on record.
4. As per letter from Manager (Loans) bearing
No. Loans/999/35/695/2017-18 dated
13/06/2017 following points are raised but
no compliance for the same is not done
a. Resort is constructed in CRZ area near
Vijaydurg fort & construction
permission for the resort not on
record.
b. CA certified detailed project report

not on record.

59 | P a g e
5. Loan is sanctioned on the basis of

mortgaged property owned by one of the
guarantor Mr. Maruti P. Pilankar. On these
land documents, name of Durg Beach
Resort is recorded as occupier of the
property (49/2/1 & 49/2/2). Charge noted
7/12 extracts are on the record but fresh
assessment record (Form 8) with name of
borrower Mr. Jadhav & Mr. Salaskar not on
record. There is no official relation
between erstwhile Durg Beach Resort and
current borrowers and in our opinion name
of the Durg Beach Resort should not
appear on the Form 8 of the mortgaged
property.
6. The land taken as security is already made
subject matter of a notarized lease
agreement dated 05/01/12 which is valid
from 01/01/2012 to 31/12/2051 between
Maruti P Pilankar and Durg Beach Resort
represented by 6 other parties. Bank has
not considered this agreement while
appraising the legal aspect of the loan. In
our opinion, Bank should obtain separate
legal opinion to ascertain the complete &
effective enforcement potential of the
mortgaged security.
7. FD Receipt No. 462845 for Rs. 1,00,000/-
taken as security to loan is not discharged
by the depositor Mr. R S Jadhav.
8. Insurance policy for the furniture work
done from the loan taken, not on record.
9. Project Registration with MTDC is not in
the name of borrowers.
10. Business permission / license in favour of
borrowers for the running the resort not
on record.
11. In our opinion, current valuation report of
the mortgaged property should be
obtained from an external professional
valuator.
Dodamarg 17501/145 15.00 1. Branch has not recommended for proposal.
Cash Credit Even then loan is sanctioned by HO.
Sai Ganesh Krupa 2. As per financial statement of year 2016-
Traders 17, borrower has closing stock of
Rs.186580/- and shown turnover of
Rs.1965850/-. But branch has disbursed
full amount of loan.
3. Borrower is not doing business and

60 | P a g e
transactions are not satisfactory.

4. Insurance policy of stock of goods is not on
record.
5. Penalty charges for non submission of
monthly stock statement of Rs.800/- per
statement are not recovered.
6. As per condition no.10, CA certified
financial statements are not submitted by
borrower. Penalty charges for same are
not recovered.
7. Sufficient transactions are not done trough
cash credit account.
Ghotage 17501/59 10.00 1. Latest financial statements are not on
Cash Credit record.
Kishor S Mhapsekar 2. Monthly stock statements are not on
record. Penalty of Rs.550 per statement is
not recovered.
3. Insurance policy is not on record.
4. Charge of Rs.10 lac is not noted on 7/12
extract.
5. Loan documents are not completely filled.
There is Poor documentation.
6. Physical verification of stock is not carried
out by bank officials.
7. NOC of other financial institutions is not
obtained.
8. Kerosene dealership license is in the name
of Jayshree S Mhapasekar. Agreement with
Jayshree Mhapasekar is not made. License
has expired on 31-12-2017; renewed
license is not on record.
9. Permission from explosive department is
not on record.
HO Counter 19826/2663 1200.00 1. Statutory audit report of FY 31.03.2017
Samruddha Resources not on record.
Ltd. 2. Project report not on record.
3. Loan is disbursed violating Loan policy. As
per loan policy, borrower is not eligible for
Loan.
4. Search report of acquiring land &
mortgaged property not obtained.
5. Penal interest @ 2% for overdue
installment amounting to Rs. 730970/- not
collected.
6. Unconditional acceptance on sanction
letter with Company Seal not obtained.
7. Agreement to sale (SatheKarar) made on
04/02/2016 with Premanand Parshuram
Parab of property 57/1 at post Kalane, for

61 | P a g e
which advance paid Rs. 20 lacs. In this

agreement specifically mentioned that if
balance amount not paid till 04/08/2016
then advance amount will be forfeited.
Sale deed of the above said property not
provided for Verification.
8. On Demand promissory note seal of the
Company not obtained.
9. Loan repayment period mentioned as 84
months (7 years). Also EMI repayment
concession of 6 month given. Therefore
total loan period should be 90 months (7
years & 6 months). However on all loan
documents, mortgage deeds &
agreements, loan period mentioned as 7
years.
10. On all loan agreement, guarantee
agreement, corporate guarantee
agreement & documents seal of Company
as well as seal of guarantor company Terre
Holding Ltd not obtained.
11. As per affidavit obtained from Company
regarding non acceptance of resignation of
director or non removal of director, Name
of director not mentioned.
12. As per Ministry of Corporate Affairs
website, Samruddha Resources Ltd. is
having existing charge of Rs. 123.26 Cr.
For which confidential status report from
respective financiers not obtained.
13. As per Memorandum of Association of
Samruddha Resources Ltd., Main business
of the company was to deal with mining
activity which was contradictory with
acquiring of agricultural land for rubber
plantation.
14. Post sanctions visit report not on record.
15. Rubber plantation verification report in
acquired land not on record.
16. Credit rating from external agencies not
obtained.
17. CIBIL reports of Company, all directors and
guarantor not on record.
18. As per statutory audit report of

31/03/2016, statutory dues payable for
more than 6 months are as under,
Income Tax - 496.00 lacs
Wealth Tax - 3.27 lacs

62 | P a g e
TDS - 52.25 lacs

Sales Tax - 20.68 lacs
Statutory audit report of 31.03.2017 not
provided for verification.
19. As on date of audit loan repayment was
irregular.
20610/695 15.00 1. Loan is given for construction of house but
Housing permission of grampanchyat is taken for
construction repairs.
Sushant Kurle 2. Income of borrower is Rs7777/- & EMI is Rs
12547/-; hence borrower income is
insufficient to pay the installment amount.
3. Disbursement of Rs1015000/- is given as on
26/02/2018 by cheque no 247750 for
clearing loan of Sindhu Bank Staff Co-
operative credit society ltd for Cash Credit
account. Hence utilization of loan is used
against bank policy.
17501/12 55.00 1. Charge noted 7/12 extract of property
CC for civil offered as security not on record.
contractor business 2. Borrower is a sub-contractor for N B
Sai Associates Tawade who has got work order for
-Mayura Patil construction of Kankawali Panchayat
Samitee building for Rs. 2,49,86,181/- &
dead line for this work is 13/10/2018.
There are no other current work orders in
hand. Considering the CC limits of Rs.65
Lakh & Rs. 8 Lakh already sanctioned by
Bank of India, Sukalwad Branch, enough
drawing power is not available to justify
additional CC limit of Rs. 55 Lakh
sanctioned by SDCC.
3. After going through the loan statements
from Bank of India, it is clear that the
limits are not being utilized properly and
penal interest is also charged by Bank of
India from time to time. More serious issue
is that, the BOI Term Loan (A/C No.
14797020000001) is being served for
installment by debiting the amount to CC
limit (A/C No. 147930110000062) & the
limit is overdue as on 07/02/18. It clearly
shows that, there is no genuine repayment
of term loan.
4. Borrower has got registration as
Unemployed Engineer with PWD Kudal for
value of Rs. 75 lac only & up to 15/11/19.
Considering this, it is clear that, borrower
will not be getting much work from

63 | P a g e
government to effect repayment of the

huge financial commitments with Bank of
India, SDCC, Saraswat Bank and personal
borrowings as per last audited balance
sheet available as on 31/03/17. (Total
Bank Loan Rs. 161.36 Lakh + Rs. 55 Lakh
sanctioned by SDCC and unsecured loans
of Rs. 6.73 Lakh.
5. In our opinion, proper credit appraisal is
not carried out for this CC limit and this
account should be monitored very closely
to avoid any future defaults.
Hodawada 16103/532 10.00 1. Rs. 1644475/- are paid to parties from
Paddy loan whom fertilizers and pesticides are
Matond V. K. S. soc. purchased but as per distribution
Ltd certificate amount is Rs. 1681653/- .
Difference of Rs. 37178/- to whom paid
could not be identified.
17501/163 10.00 1. Borrower is already enjoying cash credit
C.C Building facility of Rs. 200000/- with vengurla
material supply branch. This is not considered while
Vilas V. Dalavi sanctioning this loan.
2. Penalty of Rs. 550/- per statement is not
recovered.
3. Insurance policy is not on record. (Short
Policy)
2. C. A. certified financial statements are
not on record.
Kalse 17501/3 6.00 1. Cash credit sanctioned without following
Cash Loan loan policy & without HO sanction made.
Rajan M Ambekar 2. Branch Manager has not taken financial
statements from borrower and disbursed
loan without following guidelines of loan
policy.
3. Branch Manager has disbursed loan without
taking security and without guarantor i.e.
fully unsecured loan.
4. Loan sanction letter is not on record.
20501/487 5.00 1. Documents of borrower for security of loan
Agri-development is not taken.
Satyawan S Parab 2. Loan sanction letter is not on record.
3. Loan disbursed without following loan

policy i.e. without HO sanction.
4. Loan is fully unsecured.
Kankavali 17501/350 38.00 1. This CC limit was first granted in FY 16-17
Clean CC for for Rs. 40 Lakh (17501/331) with the

64 | P a g e
Main commercial condition that, it will be reduced by 10

complex project Lakh every year & was expected to get
Sanjay S. Sandav closed completely after 4 years. But in
current year the CC is renewed without
following original sanctioned term at Rs.
38 Lakh.
2. The limit is not being operated properly
since renewal. Only interest is served at
the end on the year.
3. Latest CA certified financial statements
for FY 2016-17 with ITR not on record.
4. Borrower has not submitted monthly Stock
& Book debt statements from December
2017 to March 2018.
20612/202 50.00 1. Borrower does not have proof of residence
LT loan for civil or business in the approved operational
construction area of the Bank.
Manish K. Joshi 2. CA certified project report not on record.
3. 7/12 extract of mortgaged property with
Bank’s charge noted on the same is not on
record.
4. Branch has disbursed Rs. 25 Lakh on
04/08/17 & balance Rs. 25 Lakh on
11/08/17 without complying with the
stipulated condition and instead of making
the payment to suppliers / contractors of
the Borrower, disbursement is made to
HDFC account of borrower at Mumbai. End
use of the loan cannot be ascertained
completely.
5. Legal Title Search & Valuation Report of
mortgaged property not on record.
Kankavali 19826 / 822 55.00 1. Term loan disbursed for gold hallmarking
City Prathamesh business, but borrower does not have
Talgaonkar enough experience of business.
2. Business place is rented for short period of
5 years.
3. Term Loan period is of 7 years and
business place is available only for 5 years.
It does not look appropriate.
4. Branch has not recommended proposal
being short security, weak guarantors and
other requirements.
5. Project has peculiar nature and having
inherent deficiencies itself.
6. In our opinion project is financially and
economically weak.
7. Government license, approvals are not on
record.

65 | P a g e
8. Insurance policy with bank charge is not

on record.
9. Verification report, inspection report of
bank officials are not on record.
10. Utilization report is not on record.
20501 / 67 20.00 Loan sanction for land purchase.
Jaywant Tawade 1. As per actual purchase of land on record,
amount paid is Rs.6.84 lakh towards 3
lands. (for 2467 Rs.1.66 lakh, for 2465
Rs.4.33 lakhs and for 2466 Rs.0.91 lakhs)
2. Bank has disbursed full amount without
having borrower’s contribution. i.e. total
cost of land paid Rs.6.84 lakh and bank
financed Rs.7.50 lakhs for land purchase.
Thus branch has excess disbursed
Rs.237000/-( Permissible finance of 75% of
Rs.513000/-)
3. Branch should recover excess amount
disbursed amount of Rs.237000/-.
4. Bank charge on property is not noted.
5. Amount of land purchase is not directly
paid to owner as per condition no.9 of
sanction latter. Amount is transferred to
saving bank account of borrower.
6. Loan is not disbursed as per loan policy.
Kasal 18204 / 81 100.00 1. Branch is having gold items of pledge loan
Balasaheb Sawant of Dr. Balasaheb Sawant Nagari Sah. Path
Pat Sanstha ( P K Sanstha holding gold items net weight of
Sawant) 4942.300 grams as on 31/03/2018; of
which verification of weight & purity of
gold items were not done up to date of our
audit.
Katta 19826/1303 6.00 1. Loan sanction for project finance and cash
Shreeji Cashew 14.00 credit.
2. As per sanction letter, loan is to be
disbursed for purchase of new machinery,
furniture & other material.
3. Unit has not purchased new machinery or
furniture.
4. Branch has financed to old unit instead of
purchase of new machinery. This is very
serious.
5. Actual Shreeji Cashew is a partnership

firm but loan is sanction to partner as
proprietor of Shreeji Cashew. Thus all
documents executed become invalid and
null.
6. Undertaking from firm, partnership deed

66 | P a g e
etc. documents of firm are not considered

while granting loan.
7. Loan is disbursed in contravention of loan
policy of the Bank.
8. Loan assessment itself gone wrong and
misleading.
9. Loan is not utilized for the purpose for
which loan is sanctioned.
10. Borrower Mr. Pandurang Harchande is 70
year old. How he will run the business
without having any experience in this field
is doubtful.
11. Insurance policy kept on record is
misleading and not executable. Borrower
do not have Building, Machinery, furniture
in hand but insured amount shown/ valued
at higher/ inflated amount.
12. Branch recommendation is not on record
for verification.
13. In our opinion, loan appraisal itself has
gone wrong and repayment of loan is
doubtful.
14. Branch manager or Development Officer
inspection, verification report is not on
record. Not visited or inspected by
Branch.
15. As per Cash Credit statement business is
not in running condition.
Kolzar 17501/46 58.00 1. Real estate finance in contravention of
CC-Renewal Loan policy.
Pravin B. Parab 2. Borrower has not done business from CC
withdrawal but diverted the funds, As per
financial statements of borrower, sale
receipts are not sufficient as per CC
norms.
3. No Dues Certificate is not available for
verification.
4. Audited financial statement for the year
2016-17 is not on record.
5. As per condition no 2, for all work done &
payment received for the same should be
deposited into bank and for such thing,
agreement should be made on Rs200/-
bond paper, such agreement is not on
record.
6. Insurance policy of stock is not on record.
7. Inspection report is not on record.
8. Utilizations Certificate is not on record.
9. As per Work Carried certificate, 2 projects

67 | P a g e
are in progress but work order, progress

report, estimates, project plan is not on
record.
10. Some Documents & agreements like
Application form, Guarantors agreement,
Registered Mortgage or continuation
certificate, Hypothecation agreement of
stock & machinery etc kept blank, only
signatures are taken.
11. Stock Statements for the month of May 17,
June 17 & September 17 are not received
in bank formats and 40 % margin is not
taken into consideration for fixing the
drawing limit.
12. Stock Statements for the months of July
17, Aug 17, Oct 17 to Mar 18 is not
received by the branch & branch has not
charged penalty of Rs 2950/- per
statements for non-submission of stock
statements. Amount of Rs 23600/-
(2950*8) should be recovered.
13. As per IT returns for AY 17-18, the closing
stock is Rs 133909/- & debtors is Rs
4992630/-, branch has not taken 40 %
margin into consideration for renewal of
this loan.
14. Work order is given by Tahasil for survey
no 184, Hissa no 3/8 but project plan and
estimate for such work is not on record.
15. At the end of the year i.e. March 2018,
total amount of Rs 3700000/- has been
transfer to borrower saving account
(account no.1726) & on 16/04/2018
Amount of Rs 3400000/- lac has been
reversed to CC account from borrower
saving account.
17317/53 50.00 1. Given for Cashew Business.
CC-Renewal 2. As per condition no 1 & 2 the agreement
Sahyadri kaju of continuation security should be taken
prakriya va madarak but for survey no 28, Hissa no 1 is not
nirmati sahakari taken.
karkhana
3. 7/12 extracts is not available for survey

no/Hissa no (13/0, 24/1, 11/0, 22/0,
28/1).
4. Recommendation of Inspector for renewal
of such loan is not on record.

68 | P a g e
6. Utilization Certificate is not on record.

7. Insurance of Stock is not on record.
8. Audited financial statements for the year
2016-17 are not on record.
9. In previous sanction, stock of Rs 1 crore is
destroyed by fire & claim of Rs 4745106/-
from Insurance company is received and
balance of claim is still not received even
though this account is renewed for Rs 1
crore (ie Rs 50 lakhs for Cash Credit & Rs
50 lakhs for pledge loan) which is totally
unsecured. Credit Appraisal & repayment
capacity is not taken into consideration for
renewal of this loan. This account is
renewed against the bank policy.
18202/52 50.00 1. Given for Cashew Business.
Pledged Loan 2. As per condition no 1 & 2 the Agreement
Sahyadri kaju of continuation security should be taken
prakriya va madarak but for survey no 28, Hissa no 1 such is not
nirmati sahakari taken.
karkhana 3. Recommendation of Inspector for renewal
of such loan is not on record.
5. Utilization Certificate is not on record.
7. Stock Statement for the month of March
18 is not on record and branch has not
charged penalty for non-submission of
stock statement.
8. As per condition no 6, one key of godown
should be kept with bank & one key should
be kept with borrower but the bank has
not kept one key of godown.
9. No Guarantors has been taken for such
loan.
10. Audited financial statement for the year
2016-17 is not on record.
11. In previous sanction, stock of Rs 1 crore is
destroyed by fire & claim of Rs 4745106/-
from Insurance company is received and
balance of claim is still not received even
though this account is renew for Rs 1 crore
(ie Rs 50 lakhs for Cash Credit & Rs 50
lakhs for pledge loan) which is totally
unsecured. Credit Appraisal & repayment
capacity is not taken into consideration for
renewal of this loan. This account is
renewed against the bank policy.
Kudal City 1750/47 55.00 1. Stock Statement of May 2017, December

69 | P a g e
(Cash Credit –Nokia 2017, Feb 2018 and March 2018 are not on
Dealership) record. Penalty of Rs.2800 \- per
Swami enterprises statement is not recovered.
3. Latest audited Financial Statements are
not on record.
4. As per Balance Sheet as on 31-03-
2016,there was loan of Union Bank of India
of Rs.22,00,982/46,NOC of Bank is not
obtained.
5. As per Email by Dekate Sachin from
tnsmobile dated 12-07-2017 , the
dealership is granted only for Ratnagiri
district. As informed to us by bank
officials, all stock is at Ratnagiri. Also as
per inspection report of bank inspector,
dated 08-11-2017 there was no stock on
given address. Additional place of business
is also not registered with GST
department. No control of bank on
hypothecated Stock.
6. Charge noted on 7/12 Extract is not on
record.
7. Poor credit appraisal.
8. Details of Stock are not mentioned in
hypothecation deed.
9. Transactions in account are made with the
signature of Shailesh Tirodkar, but consent
of other partner is not on record.
19824/539 400.00 1. PAN & GST number of company is not
Agro Tourism M. T. obtained.
Loan 2. Project land is on individual name of Ilyas
Dreamland Lawns A. Shaikh and Mariambi I Shaikh. Land is
(P) Ltd. not transferred in the name of Company or
leased to Company. Charge is not noted
with ROC.
3. Old loan of Ilyas Shaikh is closed by
Sanctioning loan to Company. Total loan of
Rs.4 Crore is sanctioned against
hypothecation of land of Ilyas Shaikh &
Mariambi I Shaikh. But loan of Mariambi
Shaikh is not closed. Both loans are
disbursed against same project. This shows
credit appraisal is not done properly. Loan
of Mariambi Shaikh should be closed, as
Project is run by the Company in which
Mariambi Shaikh is also a Director. This
shows double finance for same project.
4. Approved Plan is not on record.

70 | P a g e
5. Utilization Certificate for disbursement is

not on record.
6. Audited Financial statements of company
are not on record.
7. Charge noted 7/12 extract (for Rs.4 cr.) is
not on record.
8. Amount of insurance policy is less than
project cost i.e. policy amount is Rs.3.75
crores & project cost Rs.6.54 crores.
9. Guarantors are Mariambi Shaikh & Shoab
Shaikh, they don’t have any income
source. Third party guarantors should have
to be taken
10. Deposit of Rs 6 Lac is made from loan
disbursement. According to sanction
condition No. 7 dated19-08-2017 deposit
should have to be made before
disbursement of loan.
11. Resolution given by company are not
numbered and dated. Incomplete
Resolutions.
12. Completion Certificate issued by Anil
Mestry is not proper. Stage wise
Construction completion is not mentioned.
Approximate Certificate is issued.
13. Additional loan of Rs.1 Crore is issued due
to financial crises of project. Bank
inspector’s approval is for Rs. 50 Lac, but
bank sanctioned Rs. 1Crore. Reasons for
sanctioning additional finance are not
mentioned. Proper assessment is not
made.
14. Vouchers of expenditure are on record.
But summary report of expenditure is not
prepared.
Kudal Main 17501/680 58.00 1. Rs.40,00,000/-cash credit limit was
CC to Individual sanctioned on 29/03/2017. Since the date
Manjiri R Desai of disbursement account was out of order
till 28/03/2018 borrower has deposited
Rs.6,00,000/- on 31/03/2018 and
regularized the account.
2. Additional limit of Rs.18,00,000/-
sanctioned on 28/03/2018. But the
documents on the basis on which
additional limit was sanctioned are not
3. Financial statements and Audit Report for
FY 2016-17 was not available for
verification.

71 | P a g e
4. Stock is not insured.

5. Borrower has not submitted stock
statements during the year.
6. Details of stock hypothecation are not
mentioned in deed.
7. Adequate stamp duty is not paid for loan
agreement.
8. Details are not filled in application form.
9. Post disbursement Inspection report not
17501/645 58.00 1. Individual exposure limit of Rs.60 Lakh is
CC for civil contract exceeded for this borrower considering the
business housing loan & gold loan given to this
Pradip Mane borrower. Total exposure has gone up to
Rs. 62.61 Lakh.
2. There are no orders in hand & stock of WIP
to justify the enhancement of Rs. 31 Lakh
to this borrower.
3. No dues certificate from other banks /
financial institutions not on record.
20613/02 48.00 1. Borrower has got CC limit with Bank of
Loan against Rental Maharashtra, Kudal Branch which was NPA
income till the loan is sanctioned.
Kapil Shirsat 2. Loan is disbursed to clear earlier loan
which is NPA. Thus bank has violated the
Loan policy.
3. Terms & Conditions of sanction letter are
not followed fully.
4. As per Loan policy Loan is to be sanctioned
against the Rent Agreement executed by
borrower with Bank, Post etc institution
only. In this case no agreements are
executed by borrower.
5. Loans is disbursed violating norms of Loan
policy.
20501/697 190.00 1. Loan sanctioned is not as per the approved
Agri Land purchase loan policy for Sindhu Krushi Bhumi”
Nirmiti Builders scheme. Borrower is a partnership firm
engaged in the business of real estate and
not an agriculturist.
2. Land cost is Rs. 240.50 Lakh & Loan
sanction is 79% of this cost. But maximum
permissible finance is 70% of project cost
or 80% of agreement to sale.
3. Certificate of being farmer not on record
for both the partners of the firm. This may
jeopardize the entire land purchase
agreement as agriculture land can be
purchased by a farmer only as per the

72 | P a g e
existing law.
4. Legal search report is obtained as if the
seller of the land will be taking the loan.
But Bank should provide detailed
information to the panel advocates in a
standard form to avoid any miss-
communication and to get a clear cut legal
opinion considering all the aspects of the
loan proposal.
5. Scrutiny & Recommendation Report of the
Development Officer or Branch Manager
not on record.
20501/699 30.00 1. Detailed quotation for land development
Agri Land purchase expenditure not obtained.
& development 2. Loan is appraised on the basis of detailed
Umesh Gavade project report submitted by borrower for
doing nursery business. According to it,
the business is shown profitable from the
1st year itself. And there was no need for
moratorium period but still HO has
sanctioned the loan with moratorium
period.
3. Borrower has submitted quotation for
purchase of saplings etc. from his own
firm M/S Vaishnavai Nursery.
4. Payments for expenditure on land
development were not made directly to
the various suppliers as stipulated in the
sanction letter after taking bills/receipts
from them.
5. Charge noted 7/12 extract of the
mortgaged land not on record.
6. As per policy, maximum permissible bank
finance is 70% of project cost. Borrower
has submitted project for Rs. 40 Lakh &
Bank should have sanctioned Rs.28 Lakh as
loan. But excess sanction is done to the
extent of Rs. 2 Lakh.
Malvan City 17501/7 45.00 1. Audited financial statements are not on
Cash Credit record.
Sanskruti 2. RERA compliance documents are not on
Infrastructure record.
3. As per sanction letter condition no.13
margin calculation statements are not
submitted by borrower hence drawing
power could not be calculated.
4. Since year 2015 the project is not
completed till date. Construction activity
is very slow. As informed to us there is no

73 | P a g e
booking till date. If the booking is not

done then recovery could not be made
monthly.
Mangaon 17501/286 60.00 1. Cash credit limit sanction for wood
Cash Credit trading. Borrower just started new
Prasad P. Morve business. Business license, registration,
GST registration are not on record.
2. Earlier borrower is using cash credit and
transport & contract business. As per ITR
of borrower, borrower is in transport &
contract business.
3. Branch has not recommended the
proposal, but H.O. sanction the huge loan.
4. As per sanction letter, Bank charge on
property no.26/8, 27A/5, 28/14A, are not
recorded.
5. Continuing security not taken on record as
per sanction letter.
6. As per condition no.8, guarantors’
assurance declaration are not taken on
record (no signed by guarantor).
7. As per condition no.11, insurance with
Bank charge of stock is not taken on
record.
8. Loan is disbursed without complying terms
and conditions of sanction latter.
9. Penalty charges are not recovered as per
terms and condition.
Mhapan 17501/67 50.00 1. No turnover in account.
C.C Construvction 2. Recommendation of bank inspector is not
business on record.
Anand M. Gavade 3. Monthly stock statements are not on
record. Penalty is not recovered.
4. Insurance is not on record.
5. Audited financial statements are not on
record. Penalty is not recovered.
6. Deposit of Rs. 1.25 Lac is not taken.
7. Bank officials not visited to project under
construction
17501/68 50.00 1. Monthly stock statements are not on
C. C. Manufacturing record, penalty is not recovered.
of fiber vessals 2. Stock verification is not carried out by
Shyam C. Sarang bank officials.
3. Proper investigation and analysis of
borrowers business is not made by bank
officials.
4. Turnover in the account is not

74 | P a g e
satisfactory.
5. As on 31/03/2017 Stock was of Rs.10.52
lac and as per stock statement of
December 2017 stock was Rs. 74.69 lac.
Which was drastically increased by Rs.
64.17 lac? Analysis of this increase was not
made while making scrutiny of the
proposal.
7. Rs. 1.47 crores are receivable from sister
concern Sai Sea Foods, as per balance
sheet as on 31/03/2017.
Oros 17501/45 20.00 1. Operations in the account are not
CC for jeweler satisfactory. Original limit of Rs.
business 14,00,000/- was constantly overdrawn in
FY 2016-17. and as on 31/03/2017 account
was NPA.
19826 / 941 20.00 2. Account was made regular in April 2017 by
MT Loan granting 3 gold loans (Account No. 16601 /
Pandurang B. 2608, 2616 & 2623) and renewed with
Malvankar enhancement of Rs. 6,00,000/- on
02/05/2017 as per HO approval.
3. These Gold Loans also were closed by
using proceeds from enhanced CC limit
only.
4. Later on CC limit is converted into Medium
Term Loan (19826/941) on 29/03/2018
5. CC to MT loan is converted without
considering the borrower’s previous track
record and present repayment capacity. As
per latest available ITR & P& L Account of
FY 2015-16, turnover of the business is Rs.
12.25 Lakh and Net Profit is Rs.3.70 Lakh
only and EMI for the TM is Rs. 37,480/-.
Considering the current position of
business of the borrower, repayment of TL
seems to be very difficult.
6. CA certified Financial Statements not on
record for FY 2016-17.
7. Insurance cover for shop, stock of gold and
silver is not adequate.
8. One of the guarantors, Mr. R S Desai, has
not signed MT loan documents.
Osargaon 17501 / 4 100.00 1) Existing charge noting of Rs.100 Lacs with
Kokan Mahila Vikas MCA is not on record.
2) Additional charge noting of Rs.10 lacs is
not done.
3) Net loss of Rs.164.68 lacs as per audited
financial statement of 31.03.2017.

75 | P a g e
4) Insurance cover as per insurance policy for

stock & stock in process was of 70 lacs.
However stock of insurance as per audited
financial stock Rs.105.63 lacs.
5) Receivables statement (Debtors) upto 30
days is not submitted.
6) Stock statement is not submitted in bank
specified format.
7) It is suggested that stock & receivables
audits should be conducted once in a year.
8) Turnover of the account was not
satisfactory.
9) Unit visit report is not on record.
Pinguli 20601/424 25.00 1. As per lease deed of MIDC, only factory
Prashant S Rane building is to be constructed on plot no. X
– 74, MIDC, Kudal. Approval of MIDC land is
to be used only for Industrial purpose and
not for Residential purpose.
2. Approval for construction of residential
house is not on record.
3. Bank has disbursed Loan for Industrial
factory but scheme is wrongly given as
Residential House. Interest Rate should be
higher as commercial loan.
4. Loan sanctioned and disbursed against
loan policy of the Bank.
5. As per condition no. 9, 30% of sanctioned
amount is disbursed as a first installment
i.e. Rs. 750000/- but bank disbursed
Rs.800000/-.
6. Search report of the property is not on
record.
7. Visit report/ inspection report of branch
manager is not on record.
8. Utilization certificate for first installment
is not on record.
20501/414 290.00 1. Loan disbursed for Agrl Land Purchase to
Agrl Land Purchase Partnership Firm.
Sankalp Siddhi 2. As per Circular No.25 of Bank Sindhu Jamin
Developers Kharadi, Loan is to be disbursed to
Individual or Co-operative Society only.
There is no provision of fiancé to
Partnership firm or company.
3. As per Circular, 30% amount is to be
invested by borrower. Borrower has not
invested own contribution for purchase of
Land.
4. The Bank has disbursed excess loan of
Rs.111.50 lacs without actual

76 | P a g e
utilization /purchase of Land by the

Borrower.
(Actual Land cost Rs. 255.00 Lacs-Own
Fund 30% Rs.76.50 Lacs= 178.50 bank
Finance.)
5. Bank authority has not visited the location
of land and not submitted visit
report/inspection report on record.
6. Appraisal note for loan sanction is not on
record for verification.
7. Loan is not sanctioned, approved and
disbursed as per Loan policy adopted by
the Bank.
20501/381 95.00 1. Loan is disbursed for purchase of Agrl
Agrl Land pur Land.
2. Loan is disbursed in excess of exposure
Vishal Desai limit of the Bank.
3. As per sale deed executed and kept on
Outstanding on record Total amount paid for Land
31/3/18 purchased is Rs.49.50 Lacs only which is
Rs.95.15 Lacs paid by borrower separately.
4. Loan is not utilized for purpose of
purchase of Land but it is reimbursement
of borrower in contravention of Loan
policy.
5. Bank has disbursed full loan to borrower
without confirming actual cost of Land.
(Actual cost of Land 49.50 lacs - 30% Own
contribution 14.85 lacs = Eligible Bank
finance Rs.34.65 Lacs.
Thus Bank has disbursed excess Loan of
Rs.60.35 Lacs.
6. Bank charge on property/Land with 7/12
extract are not on record.
7. Loan is disbursed against the Loan policy
of the Bank.
8. Borrower has not invested own
contribution in the Land.
9. Borrower Financial statements,
documents, KYC are not on record.
10. Guarantor Financial statements,
documents, KYC are not on record.
11. Loan application form is not taken on
record.
12. Utilisation report, Inspection report is not
on record as per condition no. 4.
13. Deposit @2% of loan amount is not taken
by the branch as per condition no. 10.
14. Loan is not disbursed as per condition no.

77 | P a g e
2.
20501/414 700.00 1. Loan disbursed for Agrl Land Purchase to
Agrl Land Long Partnership Firm.
Term 2. As per Circular No.25 of Bank Sindhu Jamin
Sankalp Siddhi Kharadi, Loan is to be disbursed to
Developers Individual or Co-operative Society only.
There is no provision of finance to
Outstanding Loan Partnership firm or company. Thus loan is
31/3/18 disbursed against the Loan Policy.
Rs.733.03 Lacs 3. As per Circular, 30% amount is to be
invested by borrower. Borrower has not
invested own contribution for purchase of
Land.
4. Search Report of property has not been
taken on record before disbursement of
Loan.
5. As per Loan proposal, 300 acre land is to
be purchased by borrower.
6. As per agreement kept on record for Land
purchase by borrower only 152 acre land is
purchased amounting to Rs.263.35 lacs.
7. The Bank has disbursed excess loan of
Rs.515.65 lacs without actual
utilization /purchase of Land by the
Borrower.
8. Bank has disbursed full amount to
borrower without being purchase of Land.
As per condition no 1 of sanction letter,
amount is to be disbursed as per purchase
of land. Bank has violated the
condition/terms of sanction letter.
9. Borrower has not mortgaged full land
purchased out of Loan. Thus Loan
becomes unsecured. Borrower has given
mortgage of partial land. As per condition
no 3 borrower has to mortgage land
amounting to Rs.900.00 lacs.
10. As per condition no 4, borrower has to
submit sale deed and mortgage deed
before disbursement of loan. Bank has
disbursed full amount without confirming
the condition.
11. Bank authority has not visited the location
of land and not submitted visit
report/inspection report on record.
12. As per condition no 11, borrower has not
submitted the full purchase deeds of land
to the Bank.
13. As per condition no 12, 2% deposit of Rs.14

78 | P a g e
lacs is not deposited with the Bank.

14. Loan application form is not signed by the
Borrower, gurantor and branch officials.
This is very serious.
15. Branch recommendations are not on
record for loan proposal.
16. Partner sheep deed, Resolution of Firm,
Registration certificates of the borrower
are not on record. Loan is granted without
confirmation of partnership firm.
17. KYC Documentation of Partnership Firm
Current account are not on record with
updated partners, deed, PAN etc. One of
the partner mentioned in Sanction letter
are Mrs Meera are not partner of the Firm.
18. Land is purchased in individual name and
not in the name of the Partnership Firm.
19. Loan disbursed to the borrower is null and
void as loan is disbursed to partners and
land is purchased in the name of partner
and in the name of firm. Loan documents
executed are defective and not legally
tenable.
20. One of the Guarantor, Expat Projects &
Developments Pvt Ltd is located at
Banglore. Why company is given
guarantee for loan is not on record.
21. Latest financial statement of Guarantor
Company is not on record.
22. Guarantor company’s ROC details, status,
CS Compliance report and other details
are not on record.
23. Original Board resolution for given
guaranty to other person is not on record.
Documents kept of record seem to be
doubtful and not valid as it is written on
letterhead by Dy Manger. Directors of the
company has not given any guarantee on
behalf of the company.
24. Latest financial statements of the Firm are
not on record. Loan is wrongly appraised
without considering the latest financial
statement of the borrower.
25. Appraisal note for loan sanction is not on
record for verification.
26. Bank charge on Property/Land 7/12
extracts, details are not on record for
verification.
27. Borrower has diverted the Loan amount

79 | P a g e
for other purpose i.e other than loan

purpose.
18/11/17 Loan inter paid Rs 14.80 lacs
22/11/17 Lokmanya Rs 12.50 lacs
16/12/17 MVR Automobi Rs. 14.00 lacs
19/12/17 Expat project Rs. 80.00 lacs
20/12/17 MVR Automobi Rs. 5.00 lacs
26/2/17 Lokmanya Rs.7.48 lacs
Further, borrower has not utilized the loan

disbursed for the purpose of loan.
Loan disbursed Rs.700.00 lacs
Actual Land Purchased Rs. 184.35 lacs
(Bank 70% loan)
(Land cost+stamp duty =263.35,Less 30% own
finance 79.00 lacs.
Excess finance/not utilized Rs.515.65 lacs
28. In our opinion, documents executed by the

Bank are not legally valid and not
executable.
29. Loan is not sanctioned, approved and
disbursed as per Loan policy adopted by
the Bank.
Sawantwadi 20501/89 272.00 1. Loan is disbursed in violation of Bank Loan
City Agri land policy.
development 2. As per sale deed amount paid against Land
Atul Laxman is Rs.159.00 Lacs. Thus Bank has disbursed
Nakhare full amount without considering the Land
cost. Amount is to be disbursed step by
step as per sanction letter.
3. Loan installment is Annually but loan is to
be recovered quarterly as per sanction
letter.
4. Loan Utilization report is not on record.
5. Appraisal of loan is defective and not done
proper. As per appraisal note total
income is to be received during 10 year is
around 31 lacs. How the customer is going
to repay TL from income received from
Land.
6. Land is purchased for commercial purpose,
but interest rate is charged @14% instead
of 16%. Bank has lost 2% interest on Loan
amt.
7. AS per financial statements and
information on record borrower is civil
contractor and developers. Object of

80 | P a g e
borrower is not Agrl farming but

commercial purpose.
8. As per agreement entered by borrower
with seller of Bhairavadi land, Land is to
be utilized for commercial purpose and
not for agrl purpose. Thus bank has
financed to commercial real estate in
contravention of guidelines of RBI.
9. Total turnover of borrower is Rs.18.42 lacs
for 2017 which is very low. Why Huge loan
is sanctioned by the Bank is not kept on
record. As compared to turnover of
borrower loan disbursed is very huge and
risky.
10. Loan is not utilized for the purpose of loan
for which it is sanctioned. Amount of
Rs.80.40 lacs are diverted for other
purpose.
11. Terms and conditions of the sanction
letter is not followed while disbursement
of loan.
12. 7/12 extract of all security with Bank
charge is not on record.
19701/1604 47.60 1. Out of total sanction Rs. 2600000/- are
Dairy farming transferred to S/B a/c number 40000/6601
Kamakshi R Nair and out of this Rs. 1936000/- transferred
to S/B a/c number 40000/6025 of Ravi K
Nayar which is not used for construction of
cattle shed. Utilization of loan amount is
not made for the purpose for which loan
was sanctioned.
2. Agreement with contractor and progress
report of construction is not on record.
record.
5. Physical verification is not carried out by
bank officials.
6. As per sanction condition no.13, buffaloes
are not purchased within three months of
sanction.
Sawantwadi 17501/528 40.00 1. As per unsigned financial statements for
Main CC for building FY 2016-17, Net Profit is shown at
material business Rs.32.45 Lakh but Income Tax Return to
Vikas Sawant confirm the profit not on record.
2. Borrower is not regular in submission of
monthly stock statements. Applicable
penal charges should be recovered.
3. Borrower has given guarantee for CC

81 | P a g e
Account No. 17501/455 and also has got an

Agri Loan with the Branch. For all these
accounts, common property is offered as
security. Total sanctioned exposure to
both of them comes to Rs. 88.46 Lakh and
value of charge noted on property
documents is Rs. 85 Lakh only. Branch
should increase the charge to cover all the
loans sufficiently.
4. CA certified financial statements for FY
2016-17 not on record.
20612/173 12.00 1. Original sanction was for land purchase for
LT for non-agri land construction of marriage hall & the rate of
purchase interest charged was 16%.
Shruti Dalvi This fact is duly highlighted in the
Scrutiny & Recommendation Report of DO.
But the sanction was modified based on
just a letter from the borrower to make it
a loan for purchase of land for
construction of house & rate of interest
was lowered to 15%. The borrower has
already obtained NA permission on
27/03/17.
2. In this situation, it was not proper to
change the original sanctioned terms
without actually verifying the purpose of
buying the land, which resulted into
reduction of rate of interest by 1%.
17501/523 34.00 1. CC limit was not appraised properly.
CC for Construction Borrower did not have experience in
business construction business. Proof of business
Shrikant M. not on record.
Arabekar 2. Borrower did not have resources to
undertake the huge construction project
for which the Bank has granted CC.
3. CA certified detailed project report not
obtained for the purpose of appraisal of
loan.
4. Borrower did not submit monthly stock &
book debt statement.
5. Latest visit / inspection report of the
borrower activity not on record.
6. DO have recommended for Rs.26 Lkah only
still limit of Rs. 34 Lakh was sanctioned by
HO.
7. No dues certificates from other banks /
financial institutions not obtained.
Talawade 17501/24 30.00 1. Permission of forest department is not
Cash Credit obtained. Such found illegal business

82 | P a g e
18401/23 20.00 activity.

Pledge Loan 2. As per pledge stock register there was no
Ravindra S Parab stock from 04/01/2018 to 19/03/2018. But
disbursement of pledge loan amount was
made without having stock in godown.
3. From 20/03/2018 to 31/03/2018 stock of
finished goods was Rs.2550000/-. After
considering margin, disbursement @75% of
stock comes to Rs. 1912500/-. But
disbursement was made of Rs.1978232/-.
Excess disbursement made of Rs.65732/-
4. Amount to be disbursed is not calculated
in pledge register. This shows there is no
proper control over stock and
disbursement of pledge loan.
5. Monthly stock statements are not on
record. Penalty of Rs. 1550/- per
statement is not recovered.
6. As per financial statements as on
31/03/2017, there was cash credit loan
taken from Bank of India which has
outstanding balance of Rs.25.87 lac. Total
of cash credit and pledge loans comes to
Rs. 75.87 lac.
7. Original sanction was of Rs.50 lac as
pledge loan (No. 18401/15 dtd.
25/03/2017). On 04/01/2018 the loan was
bifurcated as cash credit Rs. 30 lac and
pledge Rs. 20 lac. But balance of CC no.
18401/15 Rs.3502373/- was not shown in
the balance sheet of Ravindranath Parab.
This mean proper utilization of loan was
not made.
record.
9. Drawing power register is not maintained.
10. Insurance policy is of Rs. 52.66 lac which is
not adequate.
11. Physical verification is not carried out by
branch officials.
Zarap 17501/1 60.00 1. As per Inspection report dated
Renewal 30/10/17 the value of diesel & petrol
CC-Individual is Rs 2158471/-. As per
Zarap Petroleum recommendation of Inspector such
value does not have sufficient margin
for renewal of loan.
2. Insurance of stock is Rs 50 lac. Hence
it is underinsured by Rs 10 lac.
3. Primary security is Land & Building but

83 | P a g e
valuation report of Land & Building is

not on record.
4. Value of building as per bank
documents is Rs 80 lac but insurance of
building is Rs 4 lac. It is underinsured.
5. As per conditioned no 7 of sanctioned
letter, penalty for Non-submission of
stock statements is Rs 3050/- per stock
statement. Stock statement for the
month of Jan 2018 & Feb 2018 is not
received and branch has not recovered
penal charges of Rs 6100/- (3050*2) for
non-submission of stock statements.
6. A proper stock statement in bank
format is not on records. As per given
stock statements the closing value of
stock is not given properly & such
stock statements are not authorized by
authorized person.
7. Evaporation Report is not available for
verification.
8. Drawing power register is not
maintained by the branch. Drawing
power is not calculated.

84 | P a g e

Main Audit Report - SDCC 2018 SSN

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Main Audit Report - SDCC 2018 SSN

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SDCC 2018 –Statutory Audit Report

1 Statutory Audit Report 2 to 4

2 Audit Memorandum to the Statutory 5

4 Long Form Audit Report 10 to 55

Annexure Attached Annexure No. I

5 Audited Balance Sheet & Profit & Loss 1

7 Audit Classification statement 3

Sankpal Kulkarni & Associates, Chartered Accountants

Independent Auditors’ Report

Report on Financial Statements

1. We have audited the accompanying Financial Statements of Sindhudurg District

Management’s Responsibility for the Financial Statements

2. Management is responsible for the preparation of these Financial Statements in

3. Our responsibility is to express an opinion on these financial statements based on our

Sankpal Kulkarni & Associates, Chartered Accountants

Basis for Qualified Opinion

6. Attention is invited to non implementation of Accounting Standard AS-20 Earnings

Sankpal Kulkarni & Associates, Chartered Accountants

Report on Other Legal and Regulatory Requirements

b) In our opinion, proper books of account as required by the Maharashtra Co-

CA. Deepak S Patil, Partner

Sankpal Kulkarni & Associates, Chartered Accountants

Audit Memorandum to the Statutory Audit Report

1. Disbursement of Loan in contravention of Exposure Limit fixed by NABARD.

Name of Borrower Sector Total Exposure (in lacs)

The Bank is sanctioning limits in violation of the guidelines of NABARD.

Bank is not following proper procedures for apprising, sanctioning and

Sankpal Kulkarni & Associates, Chartered Accountants

In case of Non-Agricultural loans, bank has not adhered to prudential norms. In

Place: Kolhapur For Sankpal Kulkarni & Associates

(Deepak S Patil), Partner

Sankpal Kulkarni & Associates, Chartered Accountants

Bank is also holding License No. RPCD (MRO) 1260/18.1.038/2011-12 dated 20 th

The jurisdiction as per bye-laws adopted by the bank is Sindhudurg district.

3. Scope and coverage of Statutory Audit

Sankpal Kulkarni & Associates, Chartered Accountants

Taluka Total Branches with Branches Total branches

* Branches where fraud took place selected for Audit : Nil

5. DISCUSSION OF DRAFT AUDIT REPORT

The audit report is discussed with Board of Directors.

Sankpal Kulkarni & Associates, Chartered Accountants

Working Capital 177577.09 208149.23 17.22

Total Income 16159.07 18285.65 13.16

Return on Average 11.48% 11.86% 0.38

Capital adequacy CRAR 11.31% 10.30% -1.01

No of employees 628 616 -1.91

Number of regular members 1278 1298 1.56

Sankpal Kulkarni & Associates, Chartered Accountants

7. COMPLIANCE OF PREVIOUS AUDIT REPORT

Place: Kolhapur For Sankpal Kulkarni & Associates

(CA Deepak S Patil), Partner

Sankpal Kulkarni & Associates, Chartered Accountants

LONG FORM AUDIT REPORT (LFAR)

The detailed position of share holding is as under;

2) System followed for share-linking to borrowings by member societies / borrowers

Sankpal Kulkarni & Associates, Chartered Accountants

Sr Particulars Amount in Rs.

5) NABARD has issued circular Ref No NB.DoS.HO.POL.2069/J-1/2012-13 dated 24 th

Sankpal Kulkarni & Associates, Chartered Accountants

As per RPCD.RCB.BC.73/07.51.012/2013-14 dated 7th January 2014 Banks were advised

Sankpal Kulkarni & Associates, Chartered Accountants

The Details of NCL for the year 2017-18 is as under;

The Bank has system of appraisal of loan/credit proposals which commensurate