KNOW YOUR CUSTOMER (KYC)

 

KNOW YOUR CUSTOMER:

     

Know Your Customer - KYC

Banking in India has reached even to the outfit of Rural areas with wide campaigns by Banks and the Government.  With the expansion in the Bank network, which involves the accumulation and distribution of lakhs of crores of rupees by way of Deposits and Loans, it is very much essential that the genuineness of Customers is confirmed so that the Public money gets high protection.  It is possible for the banks only by knowing their customers in toto. 

INFORMATION SYSTEM AUDIT (IS AUDIT)

INFORMATION SYSTEM AUDIT IN BANKS:

Information System Audit

In the present day's context, Information System Audit is very much warranted, because the entire Banking Industry totally relies upon Information Technology, which is otherwise considered to be its backbone.  

On the one hand, it involved a huge expenditure on the Banks in the initial stages like building necessary software, and computer peripherals and providing training to their staff, etc., the Banks have increased their customer base and improved their business multifold,

It would be possible for the Banks to retain the Progressive Growth only by improving their Customer Service which would rather generate more leads to their business.  It goes without saying that Customer Service totally depends on the System functions of the Banks, which necessitates examining of the Information System at periodic intervals to keep good going.  It is also considered as a vital part of Risk Based Internal Audit (RBIA) in Banks.

In view of the above, the Information System Audit got momentum and has become absolutely essential in the Banking Industry.  To accomplish this task, the Inspecting Officer should remain updated with the knowledge of handling of Computers and their basic requirements.  Here I have given elaborately the procedure for conducting Information System Audit.

The Internal Auditing Official should verify the following:

Physical Security verification:

• whether the Branch maintaining Records of Invoices, Hardware Configuration Register, and Installation Report file is maintained and updated from time to time as and when computer peripherals are received at the Branch?

• whether the Computer Peripherals are available as per the Office Furniture and Fixtures (OFF) Register and the same are numbered serially?

• whether unusable computer peripherals are disposed of as per instructions of Higher Offices?

Uninterrupted Power Supply system and Network Equipment:

• whether UPS (Uninterrupted Power Supply) room and Network equipment (Hub, Modem, Router etc. room is in a secluded place and entry is restricted to unauthorized persons?

• whether the Network equipment are properly mounted as per guidelines?

• whether the UPS Room/Network equipment room is having an adequate ventilation facility and is air-conditioned to avoid malfunctioning of the UPS/Network equipment and also to elude any fire hazard?

• whether Branch staff are adequately trained to extinguish the fire in case of any accident in the Branch?

• whether Smoke Detectors are installed in the Branch at appropriate places and the same are in proper working condition?

• whether the above are covered under AMC and the representatives are visiting the Branch for attending to the AMC work as per Contracted terms.

• whether the Branch is maintaining records of such visits?  

• whether proper power connection is available and earthing done properly for the computer peripherals?

• whether no other electrical equipment than the computer peripherals are connected to UPS?

• whether Annual Maintenance Contract is available for the UPS/Network equipment?

• whether records of visits of the AMC representatives are properly held and he visits the Branch and carries out the maintenance work regularly as per the Contract and in case of any breakdown?

• whether Eatables and water are strictly not allowed in the UPS/Network equipment room?

• whether Data Cabling is satisfactory and free from all trouble like rat-biting and human damage?

• whether proper care has been taken while laying down the data cable and electrical cable to ensure that both of them are not crossing each other?

• whether labeling of the data cable is properly and prominently done so that identification becomes easy?

OBSERVANCE OF POLICY GUIDELINES:

• whether the staff is adequately trained in IT handling?

• whether the staff is aware of the IT Policy of the Bank?

• whether staff handling the computers lock their PCs when not in use or they move out of their workplaces?

• whether Power-on Passwords are set in nodes?

• whether Password Secrecy is absolutely followed in right spirit?

• whether the Branch has installed unauthorized Software in nodes and stand-alone PCs?

• whether the USB Ports are disabled in all PCs/Nodes except in one Node with due authorization of Higher Offices?

• whether remote access in all Nodes are denied/disabled?

• whether approved Anti-virus is installed and enabled in all PCs/Nodes?

•  whether Unauthorized Nodes are not connected to unapproved/external networks like Broadband, dial-up connections, wi-fi networks, etc.?

• whether the Nodes are not used by unauthorized persons?

• whether only one stand-alone PC is connected to an Internet connection?

• whether the Branch is taking immediate steps to rectify telephone line faults and is maintaining cordial relations with the service provider?

PASSWORD SECURITY:

• whether staff are provided User Ids and Passwords immediately upon their reporting for duty at the Branch?

• whether the staff are having adequate knowledge of Password secrecy and the same is being strictly followed?

• whether the staff is maintaining absolute secrecy of Passwords and the same is not being shared?

• whether the User Ids are disabled whenever the concerned staff proceeds on leave or training or for any other purpose and not available in the Branch for the entire day?

 TRAINING AND KNOWLEDGE:

Training Class Room

• whether all the staff of the Branch has been imparted the necessary training in handling the systems and Core Banking Solutions?

• whether all the staff of the Branch is able to attend to the system related to issues of the customers and provide necessary solutions?

• whether all the staff members of the Branch are having adequate knowledge about the User/ Operation Manuals for Core Banking Solution packages of the Bank in the local network of the Bank?

• whether the staff are aware that the IT/CBS circulars are available in the Intranet/local network system of the Bank?

AVAILABILITY OF RECORDS:

• whether necessary requests are made to Higher Offices for temporarily upgrading the powers from a lower level in the event of absence/leave of a staff member in the higher level?

• whether pre-migration records/data (data prior to CBS migration) are preserved and are traceable in case of any dispute by an account holder or a query from any Government agency?

• whether documents entered in the DMS (Document Maintenance System) are up-to-date?  (The Auditor may conduct a random check on this score.)

• whether Scanning of Specimen Signature cards are up-to-date, properly done (Right Specimen Signature Card to Right account no.) and there are no backlogs observed? (The Auditor may conduct a random check on this score.)

• whether Day-end reports are generated without fail, verified, duly authenticated by the concerned authorized Officials of the Branch, and the same are preserved?

ALTERNATIVE DELIVERY CHANNELS:

ATM Machine

• whether the Branch is replenishing Cash in ATMs attached to the Base Branch as and when required and the ATM users are not returning empty-handed for want of Cash in ATMs?

• whether the ambiance of the ATM is good and if any uplifting is required, the same may be incorporated in the Audit Report?

• whether proper cleanliness in the ATM Room is maintained?

• whether the Branch is taking the Journal Print log as per the instructions of Higher Offices and the same are maintained properly for verification?

• whether the Cash Balance in ATM is tallied during cash loading and difference if any, are reconciled immediately?

• whether the dual combination number locks of the ATM Cash Chest placed in a closed cover  and stored in the double lock for both Custodians separately?

• whether the dual combination number locks are changed at frequent intervals as per instructions of Higher Offices?

• whether Admin Functions are properly carried out after loading of Cash in ATM?

• whether the dispensing test is done every time while loading cash?

• whether the ATM is properly is covered under AMC and adequate Insurance?

• whether the AMC service provider visits the ATM for maintenance work and in case of troubleshooting and proper Visit Log reports are maintained and produced for verification?

• whether the AMC Service provider is accompanied by an authorized Official of the Branch during his visit and any changes in the Settings made by the Engineer is being monitored by the Branch Official?

• whether the CCTV camera is mounted at an appropriate place in the ATM room and the Branch is taking backup of footages and the same are preserved for future use, in case of need?

• whether adequate security measures in the ATM Lobby have been taken care of by the Branch?

• whether the Branch has deployed Security Guard for the ATM?

• whether the ATM lobby is free from any kind of unauthorized devices?

• whether the ATM lobby is having proper locking arrangements?

• whether power cables, LAN cables etc. are in concealed position?

DISASTER MANAGEMENT:

• whether Disaster Management Policy is strictly adhered to and all the required arrangements have been made?

• whether the Branch has formed a Business Continuity Team consisting of Branch staff and they know their role and responsibility?

• whether the Branch is maintaining proper and updated records of contact numbers and e-mail ids of the AMC providers, Local Police Station, Fire Station, and Ambulance Services on hand?

RECTIFICATION AND REPLY:

• whether the Branch has rectified all the irregularities observed in the previous Information System Audit Reports?

• whether the Branch has submitted their reply to the concerned Higher Office?

• whether the reply submitted by the Branch is convincing and the Report is closed?

AUDITING OTHER BANKING OPERATIONS - ADMINISTRATION OF THE BRANCH

BRANCH ADMINISTRATION AUDIT:

Auditing the Administrative aspects of the Branch is utmost important which ensures security and safety of the Staff, Customers and their interests.  Therefore, the following verification should be made by the Auditing Official during the Internal Audit procedure:

The Auditor should verify -

REGISTERS

• whether Stamps Register is maintained and physically available Stamps on Hand tallies with the balance in the Ledger account and the same is verified and balanced at periodic intervals?

• whether Petty Cash register is maintained and the same is tallied at periodic intervals?

• whether postage/courier register is maintained and proper recordings are made therein?

• whether the Branch maintains Security items register, enters the receipt/withdrawal of stocks  and the same is tallied at stipulated intervals?

• whether the Security Items Register denoting entries of securities like DD Blocks, FDR blocks, Cheque Books of various types etc. are tallying with system balance of each head of account?

• whether Cheque Book Issued Register is properly maintained and duly acknowledged by the Account holder or his/her authorized representative for receipt of the same?

• whether the Branch is maintaining records of request letters/slips duly signed by the concerned Account holder for issuance of Cheque Books and the same are attested for receiver's signature in case of issuance to a bearer of the letter/request slip?

• whether the Branch is maintaining proper record of Key Register? 

• whether necessary entries are being made in the Key Register whenever exchange of keys take place?

OBSERVANCE OF GUIDELINES BY THE BRANCH:

• whether the Branch is placing necessary indents for supply of security items in time and the indents are realistic as per the requirements?

• whether the security items are held in safe room and not at the counters/table drawers defeating the very purpose of safety?

• whether the Brach has deposited the duplicate keys of safe with another nearby Branch with proper acknowledgement and the same are being exchanged at stipulated periodicity?

• whether the collapsible gates and shutters are provided on all the entrances and main gate entrance and the same partially opened for entry?

• whether security arrangements are made when the Branch is opened for cleaning and the cleanliness is properly maintained?

• whether the Cash Cabins are properly kept locked always and outsiders are not allowed in the Cash cabins?

• whether Alarm System is properly working and adequate AMC is available?

• whether all the AMC Service providers are attending to the maintenance work as per the Contract Agreement?

• whether the Lease Agreement is in current status and whenever falls due for renew, whether the Branch has taken enough measures to renew the same in time?

• whether the Branch has been making payments towards electricity, water, telephone charges in time and no penalty is imposed?

• whether the Branch is strictly adhering  to Expenditure Budget allocated by the Higher Offce and excess in expenses are being reported for obtaining ratification?

• whether stationery purchase is done by the Branch only on the basis of actual consumption and no wastage is observed by the Auditors?

• whether expenditure vouchers are duly made with the approval of Branch Head or the authorised Officer of the Branch?

• whether OFF items are properly numbered, identified and tallying with the Register/System? 

• whether Old Records are maintained date-wise, month-wise and year-wise and the same are preserved  as per Policy of the Bank?

• whether proper records are maintained at the Branch for transfer/shifting of Old Records to Old Records Room/Department?

• whether the ambience of the Branch is adequate and if any uplifting is required?

• whether Staff files/records are maintained properly?

• whether Close Circuit TV is available at the Branch and the installation of Cameras are in appropriate places?

• whether the Branch is maintaining proper backup of footages of the CCTV and the same are preserved as per the guidelines of Higher Offices? 

FRAUD MONITORING:

• whether any fraud has been detected at the Branch and the same has reported to Higher Offices in time?

• whether Preventive Vigilance Committee meetings are held as per the guidelines of Higher Offices and necessary records are held for verification?

• whether the Branch has taken adequate steps to avoid recurrence of frauds?

• whether action against the concerned Staff (if involvement of Staff is established) is taken and present status be mentioned in the report. 

STATUTORY COMPLIANCE:

• whether the Branch is complying with the Government/Bank Management's guidelines in collection and remittance of various Taxes and the same are remitted to concerned Government Departments in time?

• whether necessary periodical Returns are filed within the stipulated time period and no penalty is imposed for non-observance of time norms?

• whether Tax Deducted at Source is properly accounted for?

• whether TDS certificates are issued to concerned Account holders in time?

• whether Form 15G/15H are submitted by Deposit account holders are properly maintained, entered into system to avoid any future complication?

• whether Service Tax is collected regularly and remitted to Government Account, wherever necessary and Returns are filed in time?

• whether Profession Tax is properly deducted and remitted to concerned authorities?

• whether Pension payments are made strictly as per Government/Bank Management's guidelines and necessary claims are made with concerned Departments in time?

• whether Life Certificates are obtained and held on record as per guidelines?

• whether implementation of Official Language is strictly observed?

• whether Provisions of Shop and Establishment Act are complied with strictly?

• whether the Branch is acting upon the notices/communications received from Statutory bodies in time and in no case any adverse remarks are made by such bodies?

• whether the Branch is strictly adhering to Management's guidelines on Lenders' Liability Act, Fair Banking Practice and Cash Transaction Tax etc. 

AUDITING OTHER BANKING OPERATIONS - CUSTOMER SERVICE

AUDITING OF CUSTOMER SERVICE IN A BANK BRANCH:

Customer Service Plays a major role in any Industry, whether it is manufacturing or trading or service provider.  The way in which a customer gets attention in a business reflects the health of the business of an establishment.  A customer is a brand ambassador for promotion of the Organization.  Therefore, providing the best Customer Service is utmost for any business profile, more importantly in Banking industry.  

Considering the above, all Banks have been insisting upon their Staff force to be courteous and polite while attending to an existing Customer or a prospective Customer.  

In the backdrop of the above, auditing Customer Service area becomes very much essential and the checklist for undergoing this task is enumerated herebelow:

The Inspecting Officer should verify -

• whether the counters are kept ready 15 minutes before the commencement business hours to attend Customer transactions?

• whether all staff members are present in the Branch well in time?

• whether duties of staff members are being rotated at prescribed intervals and all staff are performing their duties?

• whether the customers are satisfied with the time norms stipulated by the Bank Management for delivery of goods and whether the time norms are strictly adhered to?

• whether the Branch is encouraging their customers in adopting to the alternative Delivery Channels for enabling ease of use?

• whether the requests of customers asking for issuance of ATM Cards, PINs for the ATM Cards, Cheque Books, Internet Banking facility User Ids, Passwords, Demand Drafts/Pay Orders, Deposit Receipts, etc. are attended without any delay?

• whether the Branch is attending to requests for change of name, address, addition or deletion of names in the accounts as per stipulated time schedule?

• whether Customer Service Meetings are conducted at periodical intervals and the Minutes are recorded and held for verification?

• whether complaints received from customers are entertained in its real spirit and the same redressed in time?

• whether Complaints Register is properly maintained and shown for verification by Inspecting Officers?

• whether Notice Board contains the updated Interest Rates on Deposits and other current happenings in the Bank?

• whether the Branch has displayed the numbers of Vigilance Officer's contact phone number and address as per Central Bank instructions?

• whether the Branch is provided with First-Aid Kit and the required first aid medicines are available at the time of verification?

• whether the Branch is provided with adequate number of fire extinguishers and the same are refilled at stipulated intervals?

• If the Branch is providing Safe Deposit Locker service, whether the Locker Holders/Operators are given absolute privacy and necessary provisions are made in the Locker Room?

• whether ATMs are replenished with adequate Cash as stipulated by the Bank Management and the customers are not put into any difficulty?

• whether May I Help You board is displayed and is manned by a trained Official of the Branch?

• whether mutilated Notes are accepted for exchange as per RBI guidelines?

• whether phone calls are attended promptly by the concerned Desk Official?

AUDITING NON-PERFORMING ASSETS

Auditing the Non-Performing Assets of a Bank/Branch is gaining serious attention in Banking Industry.  In view of the Lockdown in the Global scenario in general and in India in particular, most of the borrowers are not in a position to honour their commitment towards repayment schedule.  This has forced the Banks in accumulating huge amount of Non-Performing Assets.  Besides, quite a large number of accounts have started to show serious concern and are categorized as Stressed Assets.  Therefore, a thorough inspection of NPA portfolio of Bank Branches is warranted.  

Here are a few guidelines to conduct a thorough audit of the Non-Performing Assets Department of a Bank Branch:

Stressed Assets:

The Inspecting Officer should verify 

-    that the Branch has been closely monitoring the recovery of interest and installments in                         loans/advances accounts as per repayment schedule?

-    whether the Branch has been taking adequate measures to follow up with the concerned borrowers         for recovery of interest/installments, if they are overdue?

-   whether timely reminders are being sent to the borrowers seeking their attention to make timely             repayment of interest and installments?

-   whether continuous follow up is made in the accounts which are classified under "Early Alert                 System" and "Special Mention Accounts" to avoid these accounts slipping into NPA category.

-   whether the Branch is  scanning through the loans/advances accounts with signs of sickness, identify      them and make follow up for timely repayments?

In the NPA front:

The Audit Official should confirm that -

-   all accounts identified by the system as Non-Performing Assets have been reported to Higher                Offices?

-   whether the Branch has made necessary provision in their Balance Sheet for Non-Performing Assets     of the Branch?

-   whether system classification of accounts is in order?

-   whether the Upgradation of accounts from NPA category to Standard category is done as per the             guidelines of Higher Offices?

-   whether the Branch has been utilizing the services of the Collecting Agencies and their performance     is satisfactory and as per the agreed terms of contract?

 -  whether the Branch has adequate security (wherever applicable) to cover the exposure to the NPA         borrower and the same are in recoverable condition?

-   whether securities are adequately covered with unexpired Insurance Policies?

-   whether the Branch has taken the latest valuation of securities and the same are confirmed by the             Branch Officials through conducting independent verification?

-   whether the Branch has obtained proper documents in respect of the loan/advance and the same are         in current status enabling easy enforcement?

-   whether the Branch has been obtaining Debit Balance Confirmations at periodical intervals duly            signed by the borrower?

-   whether the Branch has created proper charges with the SRO (Sub-Registrar Office) and Registrar of     Companies (in case of Private Limited Companies) and maintain copies of Encumbrance Certificates     and Search Reports respectively.

-  whether SARFAESI Notices have been issued to the borrowers and guarantors of the loan?

-  whether Possession notices are issued under Securitization Act in respect of all eligible cases and            proper follow up action has been initiated for taking possession of the assets?

-  whether enforcement agents have been appointed?

-  whether the Branch has taken necessary steps to publish about the Auction of properties in the local        news papers as per norms?

-  whether the Branch has made any attempt to recover the dues under One Time Settlement Scheme as     per norms of the Bank?

-  whether Suits are filed with DRT or appropriate Court after obtaining necessary permission from            Higher Office, if required?

-  whether the Branch is deputing its officials to attend the cases without fail on the prescribed dates            whenever hearing is intimated?

-  whether the Branch is following up with the concerned Panel Advocates for obtaining the latest            position of the cases in suit filed accounts?

-  whether the Branch has taken necessary steps to obtain the Decree copy in time?

-  whether the Branch has taken necessary steps to implement the contents of the Decree cop without        fail?

-  whether the Branch has made efforts to get back the mortgage papers / title deeds deposited in Court /  Debt Recovery Tribunal immediately after obtaining the Decree copy or decision is conveyed?

-  whether the Branch has made efforts to ensure filing of Execution Petition within the stipulated time      of obtaining the Decree copy?

-  whether the Recovery Certificates obtained from the Debt Recovery Tribunal are enforced in time          without fail?

-  whether the Branch has filed petition for obtaining the Final Decree within the stipulated time?

-  whether cases are filed by the Branch under State Revenue Recovery Acts wherever applicable?

-  whether the Branch is following up with the concerned officials in respect of cases filed under State        Revenue Recovery Acts?

-   whether the Branch is maintaining proper records of Written Off accounts?

 -  whether claims with ECGC or CGMSE are made in time for recovery of dues and necessary follow        ups are made in time at periodic intervals?

Restructured Accounts:

-    whether restructuring of accounts is being done by the Branch only in eligible accounts and Higher        Office guidelines/terms of approvals are strictly followed?

-    whether the Restructured accounts are monitored to assess the performance of the accounts during         the specified period?

-    whether the Branch is classifying the Restructured Accounts as Non-Performing Assets, wherever         applicable?

-    whether the Branch is resorting to repeated Restructuring of Accounts in ineligible cases?

-    whether Staff accountability is ascribed wherever applicable?

-    whether necessary action is taken against the erring staff for non-adherence of guidelines/policy              norms?

Quick Mortality Accounts:

A loan/advance Account is classified as Quick Mortality case if it slips into Non-Performing Assets category within One year from the date of sanction.  This attracts more attention to the Branch and a deep analysis should be made by the Branch as also by the Inspecting Officer to ascertain the reasons for its slippage.

In these cases, the Auditor should thoroughly scan the entire set of documents including the KYC, Due diligence, Pre-sanction inspection reports, Process Note, Sanction, documentation, Disbursement, confirmation of End Use, Post disbursement inspection, security creation, creation of charges with concerned authorities, availability of adequate securities to cover the advance etc.

In such cases of Quick Mortality, the Staff accountability has to be ascribed and necessary action should be initiated against the erring staff, if any.  The Inspecting Official should go through all the papers connected with this affair and include the observations in the Audit Report.

If fraud is suspected/deducted in such cases, the Inspecting Official should seek from the Branch about the developments and the same should be included in the Audit Report.

AUDITING DEPOSIT PORTFOLIO

 

The Most vital part of Inspection involves Auditing of Deposits, Advances (Credit) and Non-Performing Assets categories of a Bank/Branch.  In this Post, I shall give you a few guidelines to be followed for auditing of Deposit Portfolio of the Branch.

Know Your Customer (KYC):

 

Verify the following:

 

• Whether prescribed Account Opening Form (AOF)  obtained and held on record?

• Whether the AOF is duly filled in and signed by the Applicant showing intention to open a Deposit account?

• Whether recent Photograph(s) are obtained and affixed in the AOF?

• Whether self-attested address proof, ID Proof have since been obtained and verified with originals?

• Whether copy of PAN Card or Form 60 has been obtained and verified with original and also in the Income Tax Department website about the genuineness (in case of PAN Card)

• In case of non-resident Indian, whether copy of the valid Passport has been obtained and verified with original?

• Whether copies of Constitution (in case of Proprietary/Partnership firms), Board Resolution along with name and signatures of the person(s) authorized to operate the account etc. are obtained and verified?

• In the case of Public Limited companies, whether the Branch has obtained the Certificate of Incorporation and verified in the Corporate Affairs Ministry website and confirmed the genuineness?
  

• Whether copy of Registration Certificate of the Partnership or Trust, as may be the case, is obtained and verified?
  

• Whether Memorandum of Association has been obtained (in case of Private Limited Companies) and verified by the Branch officials?

• Whether the applicant (in case of opening a Current Account) has disclosed the details of credit facilities, if any with other Banks/financial institutions?
  

• Whether the authorised Branch official has confirmed the above verification along with signature and date of verification?

• Whether independent enquiries have been made to confirm genuineness of the applicant and have been recorded?
  

• Whether risk profile has been assigned to the Account holder?

• After account opening whether Letter of Thanks has been sent to the Account Holder(s) and Introducer, if any, by Post/Courier to the address available on Bank's records?
  

• Whether correct Rate of Interest is entered in the Account Master of the System?

• Whether Nomination form is duly filled in, entered in the system and acknowledgement given to the Account holder(s) with Registration Number?

• Whether proper permission has been obtained for opening accounts of high risk customers such as dealing with Antiques, etc.?

• Whether there are no accounts opened in fictitious / bogus names?

• Whether the prospective account holder has shown intents to get ATM Card, Credit Card, Internet Banking facility and for other digital operations?

• Whether Mandate for operation has been appropriately mentioned in the AOF and the account operations are properly filled up in the Account Master?

• Whether Specimen signature Card along with photograph of the account holder(s) scanning  has been completed in the system?
  

• Whether the prospective account holder desires to have Cheque Book facility and given his intention in writing?

• Whether Cheque Books are issued to the account holders against proper acknowledgement?

• Whether the Branch has obtained proper authorisation letter fromthe account holder(s) for handing over the cheque books to a third party?

 
 

• Whether the Branch has obtained proper letter along with necessary proof for reverting the Status of the account from Inoperative/Dormant category to Active and verified with originals, duly affixing the signature of the authorized Official?

• Whether proper cooling period norms are observed in case of newly opened Deposit accounts?
  

• Whether withdrawals are allowed within the stipulated threshold limit as per Central Management guidelines and Loose Cheques are issued against proper request and acknowledgement of the Account Holder(s)?  

• Whether the Branch has been following the stipulated guidelines for issuing Loose Cheques?

• Whether the Branch is recovering the Service Charges for issuance of cheque books and extending ATM Card, Mobile Banking facilities?

• Whether high value/suspicious transaction reports are being generated by the Branch on day-to-day basis and verified and reported to Higher Office?

• Whether there are no debits made to Inoperative/Dormant accounts without the approval of the Branch Head or Authorized Officer of the Branch?

• Whether requests for change of address, addition/deletion of names in the accounts are entertained only  after obtaining necessary letters/proof from the existing account holder(s) and with the consent of the authorized Officer of the Branch?

• Whether there are no overdue Term Deposits in the Branch? and if any found, the Branch should be advised to get them renewed as per the Policy guidelines of the Bank.

• Whether the Branch is allowing Temporary Overdrafts in select customers' accounts and the TODs are adjusted within the stipulated period?  Long outstanding/un-adjusted TODs to be brought out in the Audit Report.

• Whether unissued Cheques, ATM Cards, Internet Banking User id kits, etc. are properly recorded and whether this tallies with the physical inventory?

• Whether Death Claim Settlements are made strictly as per the guidelines of Central Manager at appropriate levels?
  

• Whether Tax norms are strictly followed in case of Term Deposit accounts and TDS deducted are properly remitted to Income Tax Department as per the time norms?

• Whether Tax returns are properly filed with the Income Tax Department website within the stipulated time period and copies are held on Branch records?

AUDITING CREDIT PORTFOLIO - PART 3

 

Credit Monitoring:

 

Monitoring of Credit plays a major role in the Bank industry.  If there is a lapse in the monitoring of credit, it will ultimately lead to derailment of the Bank.  Therefore, it is considered to be a vital aspect of a Branch or Higher Office.  In the event of improper monitoring, it will be very difficult to recover from the losses.

The Inspecting Officer should see whether the Branch is submitting Monitoring Reports in all cases in time to this Controlling Office and whether the Controlling Office has made any adverse comments.  If so, the action taken by the Branch and submission of reply to Higher Office should be analyzed.

The Branch, after confirming the end use of funds, should ascertain that the Project is completed as per schedule or Project Report submitted, and the borrower has commenced Commercial Production.  This can be achieved by conducting inspections to the Unit of the borrower.  Depending on the operations in the account, the Inspecting Official can make an Unit visit.

 

The Branch is supposed to conduct Unit visits and submit reports to the Controlling Office at periodical intervals as stipulated by the Central Management.  The Auditor should peruse the Unit inspection reports submitted by the Branch to see whether any adverse remarks are made therein about the availability of stocks and other securities.  

 

If the advance is sanctioned under Consortium arrangement, the Inspecting Officer should see  whether joint inspections are being carried out and reports are held on record.  In case of any adverse points made therein, the Auditor can seek clarifications from the Branch and incorporate the same in his report.

 

The Branch should conduct valuation of Primary/Collateral securities at stipulated periodicity recordings should be made.  The Auditing Official should peruse the reports and get himself satisfied that there are no adverse remarks nor there is any depletion in the value.  If there is any deviation, the same should be brought out in his Audit Report.

Insurance Policy for the Primary/Collateral securities, wherever application, should be in Current status and the Sum assured should be adequate to cover the exposure to the borrower.

As per policies in vogue, the acceptable age of Book Debts/Sundry Debtors is 90 days old.  The Inspecting Official should go through the statements at random and confirm the guidelines and adequate Drawing Power is available for the exposure to the borrower.

In some Banks, the Debtors' statements are required to be duly certified by a Chartered Accountant at a stipulated period to ensure that the declaration made by the borrower is in order.  This should be seen by the Inspecting Officer.

The borrower is required to submit the financial statements in time to the Bank every year and the same should be certified by a Chartered Accountant.  If the audit is taking place prior to the completion of the deadline, at least a Provisional Balance Sheet certified by a Chartered Accountant should be in place.  The Inspecting Official should ensure that this point is complied with.

On going through the operations in the account, the Inspecting Officer should ensure that the borrower is routing all business transactions and the Credit Summation for the annual year is at least 4 or 5 times of the credit limit sanctioned. If any other transactions are noticed or there is inadequacy in the credits or irrelevant debits are made, the same should be brought out in the Audit Report.  This would go a long way to ensure that the interest of the Bank is safeguarded.

On going through the Balance Sheets vis-a-vis operations in the account, the Inspecting Officer may be in a position to ascertain whether the credit operations are in line with the Projections.  If not, the same should be brought on record by the Auditor.

The account should be subject to Internal/External Crediting, wherever application.  Auditing Official should ensure that the same has been done or not.  If there is a depletion in the rating, the Inspecting Officer should recommend for charging of appropriate Rate of Interest in the account.

In case of Consortium advances, the Auditor should ensure that Consortium Meetings are conducted and Minutes are recorded.  If any adverse comments are made in the Minutes, the same should be got clarified with the Branch and the same should be brought in the Audit Report.

It should be ensured by the Auditing Official that adequate follow ups are being made by the Branch in the case of overdues in the accounts and the same are recovered in time to avoid the accounts slipping into NPA Category.  

The Branch is supposed to obtain Debit Balance Confirmation from the borrower at periodical intervals as stipulated by the Central Management.  The Inspecting Officer should check whether such DBCs are held on record or not.  

Renewal of Credit facilities:

 

 

 

All loan/advances accounts are to be subject to review/renewal at periodical intervals.  This exercise should be completed in time.  If the borrower has not submitted the required papers for this exercise, the Branch may conduct a Short Renewal (mostly valid for only Three months) of the account based on the operations in the account, by preparing Short Renewal Note explaining in detail all the factors.  It should be noted that operations in expired limits are either not allowed or allowed with some penalty depending upon the conduct of the account or the credit worthiness of the borrower.  In the latter case, the Inspecting Officer should ensure that necessary penalty is being charged and recovered from the borrower.

If the borrower is enjoying Bank Guarantee facility sanctioned by the competent authority, the Inspecting Officer should ensure that the Guarantees are issued strictly as peer the Sanction terms and necessary Guarantee Commission is recovered from the borrower.  It should also ascertained by the Inspecting Officer that the Guarantees so issued by the Branch do not contain any Onerous Clauses, which may be detrimental to the Bank.  The Guarantees should be issued only with Limitation Clause.  

If the guarantees are invoked, the Inspecting Officer should ensure that the Branch has made payments promptly and the same has been reported to Higher Offices.

The Branch should call back the Original Guarantee if it has expired and the same should be cancelled.  The Inspecting Officer should take a list of expired guarantees and advise the Branch to conduct this exercise during the course of audit itself.

AUDITING CREDIT PORTFOLIO-PART 2

 

 

In this Post, I am going to give the Checklist to be taken into account by the Inspecting Officer while conducting audit of Credit portfolio. 

MANAGEMENT AUDIT IN BANKS

Management Audit in Banks is conducted annually to arrive at the health of the Circle, Region, or Zone, as per the terminology adopted by the concerned Bank in India.  

EXPLORING VERTICAL PANEL OF Blogger.com

 

Now that you are set to go for blogging.  The various items appearing in the left side panel of the Blogger.com are explained as under:

 

BLOGGING WITH Blogger.com

 

BLOG WITH blogger.com:

 

HOW TO START A BLOGGING CARREER?

HOW TO START A BLOGGING CAREER?

 

1. What is a Blog ?

 

Everyone in the globe wants to earn money.  Money comes in when you put up some efforts.  It is certain that you will get rewarded for your hard work.  There are many ways to earn money legally.  A few ways of earning money are – Writing a Blog Post, Creating a YouTube video, working as a Freelancer, doing Affiliate Marketing, Setting up an Online Store, etc.  These are the ways which would make you to shine in your life.  In this session, I am going to describe as to how to write a Blog Post. A Blog Post is nothing but honestly sharing your knowledge, expressing your views and ideas to the public forum.

 

2. Pre-requisites for Blogging:

 

• Mindset to do various researches
• Internet facility
• Creative thinking
• Determination
• A little bit knowledge of modern technology
• Reading Magazines of your choice to gain adequate knowledge

 

3. Steps involved:

 

3.1. Step 1:

 

First of all, have a clear knowledge about choosing the topic.  While choosing the topic or Niche, it may be kept in mind that it meets with the requirements of the audience.   The Blogger should be clear in his thoughts, so that the audience is interested to hear what is said in the post.

 

It is possible that the Blogger may have knowledge in different fields.  It does not matter much if the Blogger chooses multiple topics of his interest and knowledge.  However, the way in which the blog is written should convince the readers.  The blogger should also be in a position to bring out analyzed efforts on the topic on which the blog is written.  The Blogger is expected to give a honest opinion about the facts experessed in the Blog.

 

Above all, the expressions made in the Blog Post should be decisive and absolutely put the audience in a comfortable position while reading.

 

The topic chosen by the Blogger should match with the topics searched by the people.  For completing this task there are many tools available on the Internet.  Wherever possible go for a Pro or paid version of such tools which may contain added features for enabling ease of use.

 

Once the topic is chosen, scribble your ideas in a draft Blog.  Go through the same many times and modify it before finalizing. 

 

3.2. Step 2:

 

Once the topic is finalized and a draft of the Blog is ready, next comes finding a Domain Name for your blog post and a Hosting Company for publishing your writings on the Internet.  Nowadays, there are quite a number of Hosting companies available in the market, who are offering free Domain Name, at least for a limited period of say Six months or a year.

 

If your vallet does not permit to spend on this, you may go for the free services made available by Google.  In Google, there is a free space available in the name of Blogger.com, which enables you to chose Domain Name of your choice and the Webhosting is available for free.  You need not pay even a single pie for Domain Name and Webhosting.  However, there are only limited services available in Blogger.com. 

 

A few Webhosting Companies available in the Indian market are Hostinger.in, Bluehost.in, Godaddy.com, Hostgator.com, A2 Hosting.in, Siteground.com, etc.  They provide solid Uptime, which is also one of the requirements to get your domain ranked in the Google.

 

The Blogger, being in the infant stage, just a beginner, should ensure that the Domain Name is small, i.e. the characters are less, does not contain any special characters (as this may come in the way while being searched by the people on the internet).

 

3.3.  Step 3:

 

The vital part of blogging is searching for a Keyword, which should have relevance with the topic or Niche chosen for the blog.  There are many free Keyword search tools available in the internet.  Use them to do a complete Keyword research.  The Blogger should ensure that these keywords are incorporated in his Blog Post at appropriate places.

 

3.4.  Step 4: Technical (i):

 

Now that you have selected your Topic or Niche, prepared a Draft of the Content for your Blog, named your Doman, and found a Hosting Company,  the next step is to install WordPress on your website (if your choice is other than Blogger.com), with which you can do wonders. 

 

Wordpress is a fantastic platform that enables the blogger to become a Developer of his own and do miracles.  Once Wordpress is installed and logged in, open the Wordpress Dashboard and complete the following tasks:

 

• Open the Plugins, which is available on the left side panel. 
• Deactivate and delete all the Plugins, which were built in with Wordpress.
• Open the Settings Tab.
• Enter your Site Title
• Enter the Tagline as per your choice of Blog
• Enter the YOUR Domain Name in Wordpress Address URL
• Make it as https:// instead of http://
• In both WP address and Site Address URL

 

3.5. Step 5: Technical (ii):

 

1.         Open Settings in the WP Dashboard

2.         Select Permalink

3.         Select “PostName” if not selected by default

4,         Save Changes

5.         Open  Appearance Tab

6.         Cick on Themes

7.         Install “GeneratePress” theme and activate it.

8.         Prepare / Add New pages.

 

The Blogger should ensure that his Website contains all the Mandatory Pages like Privacy Policy, Terms of Usage, Disclaimer, About Us, and Contact

 

9.         For placing your posts under proper Category, :

 

            a)         Click on Posts :

            b)         Click on Categories

            c)         Edit the Category name and modify the Slug – and Click on Add category

 

10.       Customising your Menu Bar :

 

            A)        Go to Word Press Dashboard

            b)         Double click on Appearance

            c)         Click on Menu

            d)         Create Menu and give Name as Header Menu or Menu 1

            f)         Click on Categories

            g)         Select all under Categories

            h)         Click on Add to Menu

            i)         Select Primary Menu

            j)         Click on Save Menu

 

11.       For adding Widgets of your choice :

 

·       Click on Widgets

·       Go to Pages

·       Select Right Sidebar 

·       Click on Add Widget

 

Once you complete the above basic requirements of blogging, you are all set to go for commencing your Blogging career.