Auditing Deposit Portfolio – Bank Branch
The Most vital part of Inspection involves the 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) for Deposit Portfolio:
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 or ID Proof have since been obtained and verified with originals?
- Whether a copy of the PAN Card or Form 60 has been obtained and verified with the original and also in the Income Tax Department website about the genuineness (in the case of the PAN Card)
- In the case of non-resident Indians, whether a copy of the valid Passport has been obtained and verified with the original?
- Whether copies of the Constitution (in case of Proprietary/Partnership firms), Board Resolution along with name and signatures of the person(s) authorized to operate the account, etc. obtained and verified?
- In the case of Public Limited companies, whether the Branch has obtained the Certificate of Incorporation and verified it in the Corporate Affairs Ministry website and confirmed the genuineness?
- Whether copy of the Registration Certificate of the Partnership or Trust, as may be the case, is obtained and verified?
- Whether Memorandum of Association has been obtained (in the 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 authorized Branch official confirm the above verification along with the signature and date of verification?
- Whether independent inquiries have been made to confirm the genuineness of the applicant and have been recorded?
- Whether risk profile has been assigned to the Account holder?
- After account opening whether a 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 the Nomination form is duly filled in and entered in the system, and acknowledgment is given to the Account holder(s) with the Registration Number?
- Whether proper permission has been obtained for opening accounts of high-risk customers such as dealing with Antiques, etc.?
- There are no accounts opened with fictitious/bogus names?
- Whether the prospective account holder shown intent to get an Aan TM Card, Credit Card, Internet Banking facility, and other digital operations?
- The mandate for operation has been appropriately mentioned in the AOF and the account operations properly filled up in the Account Master?
- Whether Specimen signature Card along with the photograph of the account holder(s) scanning has been completed in the system?
- Whether the prospective account holder desire to have Cheque Book facility given his intention in writing?
- Cheque Books are issued to the account holders against proper acknowledgment?
- Whether the Branch has obtained a proper authorization letter from the account holder(s) for handing over the cheque books to a third party?
- Whether the Branch has obtained the proper letter along with the necessary proof for reverting the Status of the account from the 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 the 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 acknowledgment 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 the issuance of cheque books and extending ATM Card and Mobile Banking facilities?
- Whether high-value/suspicious transaction reports being generated by the Branch on a day-to-day basis and verified and reported to the Higher Office?
- 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, or 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? If any are found, the Branch should be advised to get them renewed as per the Policy guidelines of the Bank.
- Whether the Branch allowing Temporary Overdrafts in select customers’ accounts and the TODs are adjusted within the stipulated period? Long outstanding/un-adjusted TODs are to be brought out in the Audit Report.
- Whether unissued Cheques, ATM Cards, Internet Banking User ID kits, etc. properly recorded, and whether this tallies with the physical inventory?
- Are death Claim Settlements are made strictly as per the guidelines of the Central Manager at appropriate levels?
- Tax norms are strictly followed in the case of Term Deposit accounts and TDS deducted are properly remitted to the Income Tax Department as per the time norms?
- Are tax returns properly filed with the Income Tax Department website within the stipulated time period and are copies held on Branch records?
Further, could we jump into the realm of the process of opening accounts? It’s an important process that banks take very seriously to make sure everything is above board and functioning well.
Right off the bat, account opening forms (AOF). This small document holds the key to your banking relationship. So, for the bank, this step is critically important and they must store this form in their records! Why? Well, it all comes down to following the rules and being prepared for insane audits. It also keeps everything above board and responsible.
Go on, when you fill out that AOF, make sure you dot all i’s and cross t’s! A completed and signed form tells them that you’re serious about opening an account. It’s similar to saying, “Yes, I want to do this!” to the bank. If you leave bits blank or don’t sign it, it could cause headaches further down the line when the auditors come knocking.
Let’s talk about photos. You know the cliche about a picture being worth a thousand words? In banking, then, it’s worth even more! The reason is that having a recent photo on your AOF helps the bank confirm that it is really you. It’s like putting a face on the forms, humanizing it all. Plus, it’s a prominent feature of those “Know Your Customer” regulations that banks are subject to.
Now, the nitty-gritty of establishing who you are and where you live. The bank requires you to submit address and ID proofs, and will want to verify these against the originals. When you self-attest these documents, you’re basically saying, “Yup, this is me!” It’s a responsible way to say that it’s just a tool. This whole process serves to prevent some shenanigans and provides the accountability that, very often, needs to be maintained as to ensure that things are above board.
Note: PAN card And Form 60 This is really big for tax purposes. The bank must verify your PAN card or Form 60 to check whether it is the real McCoy. They will also verify PAN details on the tax department’s website. Why? Well, because it helps them narrow down your tax situation, plus all the tax forms need to track that it’s kosher.
For our non-resident Indians across the world, your passport is your golden ticket. The bank has to look at it and validate it. It’s how they make sure you are who you say you are, and help them comply with all those tricky foreign exchange rules.
Now, opening an account for an entity – a business – gets a little more complicated. Sole proprietorships or partnerships need to show your business paperwork to the bank. If it’s a company they will want to see who is authorized to run the account. It’s all about who is in control of the money.
They have specific requirements that apply to public limited companies. The bank will ask for your Certificate of Incorporation as well and will be able to verify it on the Corporate Affairs Ministry website. This is their method of ensuring that your company is the real deal and not a fly-by-night operation.
Partnerships and trusts have paperwork for that, as well. Your registration certificate needs to be seen by the bank so that they can confirm that you’re a legitimate business. It is about gaining trust and obeying the law.”
Well, private limited companies you are not off the hook either! It is likely the bank will want to see your Memorandum of Association. This document is a guideline for your company and it tells them what you are about and what they are permitted to do. (It allows the bank to determine whether your account aligns with your business objectives.)
If you are opening a current account, be prepared to share details about plain other loans or credit you have. This gives the bank a complete picture of your financial state. It’s like when you tell your doctor all the medications you take, it just helps avoid some really bad surprises.’
Finally, after all of this checking and verifying, a bank official will officially stamp their sign-off on everything. They’ll sign off saying they have done all the requisite checks. Sort of the last rubber stamp, indicating that everything was done in the proper way.
So there you have it! It may seem like a bunch of hoops to jump through just to open a bank account, but it is all to keep things safe and legal and running smoothly. It’s the bank’s way of saying, “Welcome aboard! Let’s do this right.”