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INDEX
� Pre Audit Work
� Preliminary for Audit
� Scope of AuditScope of Audit
� Day-Wise Schedule
� Various MOCs
� LFAR & MAIN REPORT
� TAX AUDIT REPORT
� GHOSH & JILANI COMMITTEE
PRE- AUDIT WORK
� Know-How of the Branch
� Deposit Oriented or Advance Oriented
� Composition of Advances� Composition of Advances
� Go in for a Pre-Audit Visit, if possible
� Going through LFAR
� Ghosh & Jilani Committee Recommendations
PRELIMINARY FOR AUDIT
� No. of Team Members
� Well Balanced Team
� Allocation of WorkAllocation of Work
� Time Bound Working
� Confirm from branch whether required set of documents that form part of report are available
SCOPE OF AUDIT
� Scrutiny of Balance Sheet
� Checking of NPA Accounts
� Checking of Large Borrowal Accounts
� FOREX (If Applicable)
LFAR� LFAR
� Ghosh & Jilani Committee
� Statutory Compliances
� Provisioning
� Reconciliation of Other Banks’ Account
� General Checking
� Classification of Advances
DAY-1
� Partner/Proprietor� Checking of Other Reports (Concurrent, Revenue, Internal
Inspection, Stock Audit Report, etc)
� Scrutiny of Balance Sheet
� Checking of Advances and Filling up of Relevant Documents
� Senior Auditor� Checking of NPA Accounts and Filling up of Relevant Documents
� Cash Verification (Vault + ATM)
� Articles
� Security Items Verification
� Checking of KYC & Inoperative Accounts
� Checking of Stock Statements
DAY-2/3� Partner/Proprietor� Checking of LC/BG & FOREX
� Asset Classification
� Senior Auditor � Checking of Depreciation & Provisions� Checking of Depreciation & Provisions
� Long Outstanding Entries
� Reconciliation of Other Bank’s Accounts
� Articles � Checking of Statutory Compliances & Filling up of Tax Audit
Report in Consultancy with Senior Auditor
� Checking for Revenue Leakage
DAY-3/4
� Deposit Trend checking for Window Dressing
� Further checking based on your Observations
� Filling up of Remaining Documents (LFAR & Ghosh & Jilani Committee Recommendations & Other Annexures)
� Reconciling all Reports
� Checking, Rechecking and nicely arranging the sets
VARIOUS MOCs
� Revenue Leakage� P&L Account :Credit
� Balance Sheet Effect : Advances Increase
� Change in Head (Expense)� Correct Account :Debit
� Wrong Account :Credit
� Balance Sheet Effect : NIL
CONTINUED…
� Depreciation under-charged� Depreciation Account :Debit
� Fixed Asset Account :Credit
� Interest Reversal� P&L Account : Debit
� Balance Sheet Effect: Advance Decrease
MOC - 1
� Processing Charges amounting to Rs. 0.75 Lacs
not charged in XYZ Account (Medium Enterprise).
Outstanding Balance is Rs. 234.00 Lacs
� Rectification :Charges to be recovered in respective
account.
Sr.
No.
No. of
P&L Item
Heading of P&L Item
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give BriefDetail)
Income
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Service 75000 -- Processing 1
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
Expenditure
Service
Charges Head75000 -- Processing
Fees Charged1
-- -- -- -- -- --
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give BriefDetail)
Liabilities
MOC Annexure IIYEARLY ABSTRACT
-- -- --------
Sr. No.
YSACode
Heading of Yearly
Extract
Additions(Debit)
(Rs.)
Deductions(Credit)
(Rs.)
Remarks(Give Brief Detail)
Assets
-- -- --------
1 --75000 Standard
Assets
Standard Assets
increase due to
charges recovered
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
IntReversal on A/C of movemen
t inAssets Classification
Security wise Provision
RestructuringProvision
Total Provision
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
XYZ Standard -- 93600 -- 936001 23400000XYZ
XYZ
Standard
Standard
Existing
Proposed
Standard
Standard
--
--
93600
93900 --
-- 93600
93900
1 23400000
23475000
Existing Provision : At 0.40% of 23400000
Proposed Provision : At 0.40% of 23475000
MOC - 2
� XYZ is a loan account (SME) amounting to Rs.
15.00 Lacs. Interest not served since Nov, 2013
amounting to Rs. 0.45 Lacs. The same has not
been declared NPA by the Branch. Outstanding been declared NPA by the Branch. Outstanding
Balance as on 31.03.2013 is Rs. 13.45 Lacs
� Rectification : Account to be declared NPA
Sr.
No.
No. of
P&L Item
Heading of P&L Item
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
Income
1 -- 45000 Interest not served Interest
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
Expenditure
1 -- 45000 Interest not served
reversed
-- -------- --
Interest
Income
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
Liabilities
MOC Annexure IIYEARLY ABSTRACT
------------
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions
(Debit)(Rs.)
Deductions
(Credit)(Rs.)
Remarks
(Give Brief Detail)
Assets
1
2
3
Loan Account
NPA
Standard
Asset
--
1300000 --
--1300000
45000 Total Assets reduced
NPA increased
Standard Assets
decreased
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
IntReversal on A/C of movemen
t inAssets Classification
Security wise Provision
RestructuringProvision
Total Provision
XYZ1 1345000 -- --3363Existing
Proposed
XYZ
XYZ
1 1345000
1300000
Standard
NPA
Standard
NPA
-- --3363
195000
3363
45000 -- 195000
Existing Provision : At 0.25% of 1345000
Proposed Provision : At 15.00% of 1300000
MOC - 3
� Expenses amounting to Rs. 0.50 Lacs wrongly
debited to Sundry Expenses Account instead of
Postage Expenses.
� Rectification :Expenses to be debited to correct
head
Sr.
No.
No. of
P&L Item
Heading of P&L Item
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
Income
-- -------- --
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Sr. No.
No. of P&L
Item
Heading of P&L Item
Additions(Debit)
(Rs.)
Deductions(Credit)
(Rs.)
Remarks(Give Brief Detail)
Expenditure
--
--50000
50000Sundry
Expenses
Wrong head credited
Right head debitedPostage
Expense
1
2
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give BriefDetail)
-- -- -- -- -- --
Liabilities
MOC Annexure IIYEARLY ABSTRACT
-- -- -- -- -- --
Sr.
No.
YSA
Code
Heading of
Yearly
Extract
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
-- -- -- -- -- --
Assets
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
IntReversal on A/C of movemen
t inAssets Classification
Security wise Provision
RestructuringProvision
Total Provision
-- -- -- -- -- -- -- -- -- --
MOC - 4
� Mr. X has a CC Limit (SME)amounting to Rs. 10.00 Lacs
(Outstanding Balance – 9.45 Lacs) which is regular as on
31.03.2014. He also has a TL (SME) amounting to Rs.
20.00 Lacs (Outstanding Balance – 18.65 Lacs). The TL
was required to be classified as NPA as on 31.03.2014. was required to be classified as NPA as on 31.03.2014.
But the same was omitted to be declared NPA by the
Branch. Interest not served amounts to Rs. 0.55 Lacs
and Principal not repaid amounts to Rs. 1.00 Lacs.
Interest for March,2014 amounting to Rs. 0.10 Lacs has
not been served in CC Account.
� Rectification: Both the accounts are to be declared NPA
Sr.
No.
No. of
P&L Item
Heading of P&L Item
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
Income
1 Interest
Account (CC)-- 10000 Interest not served
reversed
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Sr. No.
No. of P&L
Item
Heading of P&L Item
Additions(Debit)
(Rs.)
Deductions(Credit)
(Rs.)
Remarks(Give Brief Detail)
-- -- -- -- -- --
Expenditure
Account (CC) reversed
Interest
Account (TL)-- 55000 Interest not served
reversed
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give BriefDetail)
-- -- -- -- -- --
Liabilities
MOC Annexure IIYEARLY ABSTRACT
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions
(Debit)(Rs.)
Deductions
(Credit)(Rs.)
Remarks
(Give Brief Detail)
Assets
1
2
3
Standard
Assets
Standard
Assets
NPA
--
--
2745000
2745000
65000Standard Assets
reduced
NPA increased
Standard Assets
decreased
--
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
Int Reversal on A/C of
movement in Assets Classification
Security wise Provision
RestructuringProvision
Total Provision
X 2810000 Standard Existing Standard -- 7025 -- 70251
2745000 NPA Proposed NPA 65000 411750 -- 411750
X 2810000 Standard Existing Standard -- 7025 -- 70251
Existing Provision : At 0.25% of 2810000
Proposed Provision : At 15.00% of 2745000
MOC - 5
� ABC has a CC Limit (SME) amounting to Rs. 15.00
Lacs has been declared NPA by the branch as on
31.03.2014. But interest not served amounting to
Rs. 0.58 Lacs not reversed. (Balance Outstanding
is Rs. 15.58 Lacs)is Rs. 15.58 Lacs)
� Rectification: Interest to be reversed
Sr.
No.
No. of
P&L
Item
Heading of P&L Item
Additions
(Credit)
(Rs.)
Deductions(Debit)
(Rs.)
Remarks(Give Brief Detail)
Income
-- 58000 Interest not served Loan Interest 1
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
-- -- -- -- -- --
Expenditure
-- 58000 Interest not served
reversed
Loan Interest
Account1
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
-- -- -- -- -- --
Liabilities
MOC Annexure IIYEARLY ABSTRACT
-- -- -- -- -- --
Sr.
No.
YSA
Code
Heading of
Yearly
Extract
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief Detail)
Assets
1 NPA -- 58000 NPA reduced
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
Int Reversal on A/C of
movement in Assets Classification
Security wise Provision
RestructuringProvision
Total Provision
1 ABC 1558000
NPA
NPA
1500000ABC Proposed
Existing
NPA
NPA
--
-- 233700
225000 --
--
225000
233700
NPA1500000ABC Proposed NPA -- 225000 -- 225000
MOC - 6
� Mr. A has a CC Limit amounting to Rs. 20.00 Lacs
(Outstanding Balance : 20.10 Lacs)which is regular as on
31.03.2014. He also has a TL amounting to Rs. 30.00 Lacs
(Outstanding Balance is Rs. 28.32 Lacs). The Account
classifies as NPA as on 31.03.2014. TL has been declared classifies as NPA as on 31.03.2014. TL has been declared
NPA & Interest reversed by the Branch but the CC Limit
was omitted to be declared the same by the Branch.
Interest for March,2014 amounting to Rs. 0.10 Lacs has
not been served in CC Account.
� Rectification : CC Limit is to be declared NPA
Sr.
No.
No. of
P&L
Item
Heading of P&L Item
Additions
(Credit)
(Rs.)
Deductions(Debit)
(Rs.)
Remarks(Give Brief Detail)
Income
Loan Interest -- 10000 Interest not served
MOC Annexure I(PROFIT & LOSS ACCOUNT)
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief Detail)
-- -- -- -- -- --
Expenditure
Loan Interest
Account-- 10000 Interest not served
reversed1
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give BriefDetail)
-- -- -- -- -- --
Liabilities
MOC Annexure IIYEARLY ABSTRACT
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions
(Debit)(Rs.)
Deductions
(Credit)(Rs.)
Remarks
(Give Brief Detail)
Assets
1
2
3 NPA
Standard
Assets
Standard
Assets
--
--
-- 2000000
2000000
10000 Interest reversed
Standard assets
reduced
NPA Accounts
increased
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
Int Reversal on A/C of
movement in Assets Classification
Security wise Provision
RestructuringProvision
Total Provision
Standard Existing Standard -- 5025 -- 50251 A 2010000
NPA Existing NPA 32000 -- 420000A 2800000 420000
A 4800000 NPA NPAProposed 42000 720000 720000--
Existing Provision : At 0.25% of 2010000
Existing Provision : At 15.00% of 2800000
Proposed Provision : At 15.00% of 4800000
MOC - 7
� PQR Loan account has an Outstanding Balance as
on 31.03.2014 of Rs. 8.46 Lacs has been classified
as Sub-Standard Asset. But the same should have
been classified as Doubtful Asset (D1).been classified as Doubtful Asset (D1).
� Rectification: Asset Classification is to be changed.
Sr.
No.
No. of
P&L
Item
Heading of P&L Item
Additions
(Credit)
(Rs.)
Deductions(Debit)
(Rs.)
Remarks(Give Brief
Detail)
-- -- -- -- -- --
Income
MOC Annexure I(PROFIT & LOSS ACCOUNT)
-- -- -- -- -- --
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
-- -- -- -- -- --
Expenditure
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
-- -- -- -- -- --
Liabilities
MOC Annexure IIYEARLY ABSTRACT
-- -- -- -- -- --
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief Detail)
Assets
Sun Standard
Assets
Doubtful
Assets
--
--846000
846000 Sub-Standard Assets
reduced
Doubtful Assets
increased
1
2
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
Int Reversal on A/C of
movement in Assets Classification
Security wise Provision
RestructuringProvision
Total Provision
NPA Existing NPA -- 126900 -- 1269001 PQR 846000
NPA Proposed NPA -- 211500 -- 211500PQR 846000
MOC - 8
� Provision for Rent amounting to Rs. 0.65 Lacs has
not been made
� Rectification :Change in Provisioning� Rectification :Change in Provisioning
Sr.
No.
No. of
P&L
Item
Heading of P&L Item
Additions
(Credit)
(Rs.)
Deductions(Debit)
(Rs.)
Remarks(Give Brief
Detail)
-- -- -- -- -- --
Income
MOC Annexure I(PROFIT & LOSS ACCOUNT)
-- -- -- -- -- --
Sr.
No.
No. of
P&L
Item
Heading of
P&L Item
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief
Detail)
Expenditure
1Rent
Expense
65000 --
Sr.
No.
YSA
Code
Heading of
Yearly Extract
Additions(Credit)(Rs.)
Deductions(Debit)(Rs.)
Remarks(Give Brief Detail)
Liabilities
MOC Annexure IIYEARLY ABSTRACT
1Prov. For 65000 --
Sr.
No.
YSA
Code
Heading of
Yearly
Extract
Additions
(Debit)
(Rs.)
Deductions
(Credit)
(Rs.)
Remarks
(Give Brief Detail)
-- -- -- -- -- --
Assets
1Prov. For
Rent
65000 --
MOC Annexure IIICHANGES IN CLASSIFICATION OF OUTSTANDING PROVISION
Sr. No
.
Name of Borrower
Outstanding
Asset Classification
Security wiseClassification
Int Reversal on A/C of
movement in Assets Classification
Security wise Provision
RestructuringProvision
Total Provision
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
MOC ANNEXURE IVFIXED ASSET RETURN
Sr. No.
Original Cost
Cumulative Depreciation
Net Book Value
Remarks
A FURNITURE & FITTINGS
i Closing Balance as per
Br. Return as on 31.03.2013
ii Proposed Closing Balanceii Proposed Closing Balance
iii Net Entry to be passed at LHO
B ELECTRICAL FITTINGS
i Closing Balance as per
Br. Return as on 31.03.2013
ii Proposed Closing Balance
iii Net Entry to be passed at LHO
Sr. No.
Original Cost
Cumulative Depreciation
Net Book Value
Remarks
C OTHER PLANT MACHINERY
i Closing Balance as per
Br. Return as on 31.03.2013
CONTINUED…
31.03.2013
ii Proposed Closing Balance
iii Net Entry to be passed at LHO
D Computer Software
i Closing Balance as per
Br. Return as on 31.03.2013
ii Proposed Closing Balance
iii Net Entry to be passed at LHO
Sr. No.
Original Cost
Cumulative Depreciation
Net Book Value
Remarks
E CARS
i Closing Balance as per
Br. Return as on 31.03.2013
ii Proposed Closing Balance
CONTINUED…
ii Proposed Closing Balance
iii Net Entry to be passed at LHO
F COMPUTERS
i Closing Balance as per
Br. Return as on 31.03.2013
ii Proposed Closing Balance
iii Net Entry to be passed at LHO
Sr. No.
Original Cost
Cumulative Depreciation
Net Book Value
Remarks
G GRAND TOTAL
i Closing Balance as per
Br. Return as on 31.03.2013
CONTINUED…
31.03.2013
(Ai+Bi+Ci+Di+Ei+Fi)
Ii Proposed Closing Balance
(Aii+Bii+Cii+Dii+Eii+Fii)
iii Net Entry to be passed at LHO
(Aiii+Biii+Ciii+Diii+Eiii+Fiii)
MOC ANNEXURE VCAPITAL ADEQUACY DATA – CAR B I
Sr.No
Account
Customer Name
Bucket No.
Outstanding
Outstanding After
Basel
Basel Coll. After
Net Exposure
Risk Weig
Risk Weighted
a) Funded Exposures
1 Existing
Proposed
2 Existing2 Existing
Proposed
TOTAL
b) Non- Funded Exposures
1 Existing
Proposed
2 Existing
Proposed
TOTAL
MOC ANNEXURE VI CAPITAL ADEQUACY DATA – CAR B II
Sr.No
Account
Customer Name
Bucket No.
Outstanding
Outstanding After
Basel
Basel Coll. After
Net Exposure
Risk Weig
Risk Weighted
a) Funded Exposures
1 Existing
Proposed
2 Existing2 Existing
Proposed
TOTAL
b) Non- Funded Exposures
1 Existing
Proposed
2 Existing
Proposed
TOTAL
MOC ANNEXURE VII FOR OTHER THAN FOREIGN CURRENCY BRANCHES DISC-1
Sr.No.
Particulars Maturity Bucket
Outstanding
1 Existing
ProposedProposed
2 Existing
Proposed
TOTAL
MOC ANNEXURE VIII FOR FOREIGN CURRENCY BRANCHES DISC-3
Sr.No.
Particulars Maturity Bucket
Outstanding
1 Existing
ProposedProposed
2 Existing
Proposed
TOTAL
VARIOUS FINACLE COMMANDS TO BE USED
� NAME SEARCH
� INTTI
� AINTRPT
� GI� GI
� LIMIT HISTORY
� MSGOIRP
� REPORTS MENU
� CTRL E
LONG FORM AUDIT REPORT
� Does the branch generally carry cash balances, which vary sig-nificantly from the limits fixed by the controlling authorities of the bank? Whether excess balances have been reported to the controlling authorities of the bank?
� Does the branch hold adequate insurance cover for cash-on-hand and cash-in-transit?cash-in-transit?
� Is cash maintained in effective joint custody of two or more officials, as per the instructions of the controlling authorities of the bank?
� Has the Branch kept money-at-call and short notice during the year? If so, whether instructions/guidelines, if any, laid down by the controlling authorities of the bank have been complied with?
� Are there any investments held by branches on behalf of Head Office/other offices of the bank? If so, whether these have been made available for physical verification or evidences have been produced with regard to the same where these are not in possession of the branch?
LONG FORM AUDIT REPORT
� In the cases examined by you, have you come across instances of credit facilities having been sanctioned beyond the delegated authority or limit fixed for the branch? Are such cases promptly reported to higher authorities?
� List of major items of the contingent liabilities (other than constituents’ liabilities such as guarantees, letters of credit, acceptances, liabilities such as guarantees, letters of credit, acceptances, endorsements, etc.) not acknowledged by the Branch?
� In the cases examined by you, have you come across instances of credit facilities released by the branch without execution of all the necessary documents? If so, give details of such cases.
� Are credit card dues recovered promptly?
� Has the branch identified and classified advances into standard /substandard/doubtful/loss assets in line with the norms prescribed by the Reserve Bank of India (The auditor may refer to the relevant H.O. Instructions for identification of NPAs and Classification of Advances).
LONG FORM AUDIT REPORT
� Where the auditor disagrees with the branch classification of advances into standard/substandard/doubtful/loss assets, the details of such advances with reasons should be given. Also indicate whether suitable changes have been incorporated/suggested in the Memorandum of Changes.
Have you come across cases where the relevant Controlling Authority of � Have you come across cases where the relevant Controlling Authority of the bank has authorised legal action for recovery of advances or recalling of advances but no such action was taken by the branch? If so, give details of such cases.
� Have all non-performing advances been promptly reported to the relevant Controlling Authority of the bank? Also state whether any rehabilitation programme in respect of such advances has been undertaken, and if so, the status of such programme.
LONG FORM AUDIT REPORT
� In the cases examined by you has the branch complied with the Recovery Policy prescribed by the controlling authorities of the bank with respect to compromise/ settlement and write-off cases? Details of the cases of compromise/ settlement and write-off cases involving write-offs/ waivers in excess of 50.00 lakh may be given.
Are there any overdue /matured term deposits at the end of the year? If � Are there any overdue /matured term deposits at the end of the year? If so, amounts thereof should be indicated.
� Details of the outstanding amounts of letters of credit and co-acceptances funded by the Branch at the end of the
� Details of outstanding amounts of guarantees invoked and funded by the Branch at the end of the year
(a) Guarantees invoked, paid but not adjusted:
(b) Guarantees invoked but not paid
LONG FORM AUDIT REPORT
� Has the branch complied with the Income Recognition norms prescribed by R.B.I
� Does the bank have a system of estimating and providing interest accrued on overdue/matured term deposits?
� Are there any outstanding debits in the Head Office Account in respect Are there any outstanding debits in the Head Office Account in respect of inter-branch transactions?
� Have you come across items of double responses in the Head Office Account? If so, give details.
� Does the branch forward on a daily basis to a designated cell/Head Office, a statement of debit/credit transactions in relation to other branches?
� Smaller / medium sized branch to rectify irregularities pointed out during inspection / audit within 4 months.
� In order to bring about uniformity of software used by various branches/offices, there should be formal method of incorporating change in standard software and it should be approved by senior management. Such changes to be inspected and monitored
GHOSH & JILANI COMMITTEE RECOMMENDATIONS
management. Such changes to be inspected and monitored continuously.
� Every bank should have a manual of instructions for its inspectors/ auditors And periodically update the same.
� System of exclusive scrutiny of credit portfolio with focus on Larger advances and group exposures.
� Special scrutiny of high value accounts shifted to the bank Along with executives and accounts transferred from other Branches along with officials The observations of RBI inspections Should be promptly/ and affectively followed up by banks.
� Rotation of staff / duties and transfer covering all categories of staff Including dealing room / securities department, staff etc.
� Financial and administrative powers of officials should be laid down
� Precautions in handling cash and valuables- restriction of entry to cash cabin, dual custody of cash / valuables, surprise Verification at regular intervals etc.
GHOSH & JILANI COMMITTEE RECOMMENDATIONS
intervals etc.
� Precautions against shortage in cash reported by cashier.
� Introduction of surprise checking at frequent intervals
� Precautions against misappropriation of cash by member of staff in the guise of customer service. Only authorized personnel should accept cash / issue counterfoils in cash dept.
� Cashiers should not be allowed to make entries in Passbook.
� Proper system should be evolved in respect of cash balances insurance and prompt reporting of inter branch and inter bank remittances of cash.
� Precaution against misusing banking channels for tax evasion POs /TC in excess of Rs.50000 /- should be by way of debit to constituents account and not by cash. Doubtful Cases should be reported to higher authorities.
� Exercise of caution at the time of opening of New Deposit Account of all types.
GHOSH & JILANI COMMITTEE RECOMMENDATIONS
types.
� Customers to be educated about implication of introducing an account without knowing the party.
� Close watch on the operations in the new accounts should Be kept
� Issue of fresh cheques book should be only against requisition slip from previous check book and other precautions to be taken in respect of cheques books.
� Precaution in payment of cheques – verification of signature custody of specimen signatures, custody of bank Cheques books etc.
� Bank guarantees / LCs to be issued in security forms serially Numbered under two signatures above certain cut off point in Triplicate , binding on beneficiary to seek conformation of controlling office (incorporation of suitable condition in the document) etc.
� Safe custody of / access to vouchers through written orders of manager – records to be maintained of those who have accessed such records.
GHOSH & JILANI COMMITTEE RECOMMENDATIONS
– records to be maintained of those who have accessed such records.
� Fraud cases up to Rs.25,000/- having involvement of an Insider should not be reported to police where recovery is not Doubtful.
� Bills discounting facility under L/C, Co-acceptance should be Extended only to customers having regular sanctioned Limits.
� Guarantees above a certain limit be signed by two officials
CERTIFICATES TO BE OBTAINED
� Certificates in respect of H.O. Investments
� Certificates regarding Guarantees Invoked
� Certificates regarding Interest Subventions that are not applicable
LIST OF CIRCULARS
� Master Circular – Know Your Customer (KYC) norms / Anti-Money
Laundering (AML) standards/Combating of Financing of Terrorism
(CFT)/Obligation of banks under PMLA, 2002
� Master Circular - Prudential norms on Income Recognition, Asset
Classification and Provisioning pertaining to Advances Classification and Provisioning pertaining to Advances
� RBI/2012-13/500
DCM (NPD) No.5133/ 09.39.000/2012-13
RESTRUCTURING
� The guidelines issued by the Reserve Bank of India on Restructuring of Advances are divided into 4 Categories :
• Guidelines on restructuring of advances extended to industrial units.
• Guidelines on restructuring of advances extended to industrial units under the Corporate Debt Restructuring (CDR) Mechanism
• Guidelines on restructuring of advances extended to Small and Medium Enterprises (SME)
• Guidelines on restructuring of all other advances.
� Banks may Restructure the Accounts classified under ‘Standard', ‘Sub-Standard' and ‘Doubtful' Categories.
� While a Restructuring Proposal is under consideration, the usual Asset Classification Norms would continue to apply.
� Normally, in restructuring alteration in the Original Loan Agreement are made with the formal consent / application of the debtor.
Eligibility Criteria for Restructuring of Advances
made with the formal consent / application of the debtor.
� Financial Viability is to be established and there is a reasonable certainty of repayment from the Borrower
� Banks may review the reasons for classification of the Borrowers as Wilful Defaulters, and satisfy itself that the Borrower is in a position to rectify the Wilful Default. The restructuring of such cases may be done with Board's Approval. Others require approval of the Core Group only.
� BIFR cases are not eligible for restructuring without their express approval
� The accounts classified as 'standard assets' should be immediately re-classified as 'sub-standard assets' upon restructuring
� The non-performing assets would continue to have the same asset classification as prior to restructuring and slip into further lower asset classification categories as per extant asset classification norms
Asset Classification Norms
� Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank should be upgraded only when all the outstanding loan/facilities in the account perform satisfactorily during the ‘specified period’ (Annex - 5), i.e. principal and interest on all facilities in the account are serviced as per terms of payment during that period.
� If satisfactory performance after the specified period is not evidenced, the asset classification of the restructured account would be governed by restructuring payment schedule.
� Where the pre-restructuring facilities were classified as 'sub-standard' and 'doubtful', interest income on the additional finance should be
Asset Classification Norms
and 'doubtful', interest income on the additional finance should be recognised only on cash basis.
� If the restructured asset does not qualify for upgradation at the end of the above specified period, the additional finance shall be placed in the same asset classification category as the restructured debt.
Asset classification norms
� FITL / debt or equity instrument created by conversion of unpaid interest will be
classified in the same asset classification category in which the restructured
advance has been classified.
� Further movement in the asset classification of FITL / debt or equity instruments
would also be determined based on the subsequent asset classification of the
Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term Loan' (FITL), Debt or Equity Instruments
would also be determined based on the subsequent asset classification of the
restructured advance.
Income recognition norms
� The income, if any, generated by these instruments may be recognised on
accrual basis, if these instruments are classified as 'standard', and on cash
basis in the cases where these have been classified as a non-performing asset.
� The unrealised income represented by FITL / Debt or equity instrument should
have a corresponding credit in an account styled as "Sundry Liabilities Account
(Interest Capitalization)".
Income recognition norms
� In the case of conversion of unrealised interest income into equity, which is quoted, interest income can be recognized after the account is upgraded to standard category at market value of equity, on the date of such upgradation, not exceeding the amount of interest converted into equity.
Prudential Norms for Conversion of Unpaid Interest into 'Funded Interest Term Loan' (FITL), Debt or Equity Instruments
equity.
� Only on repayment in case of FITL or sale / redemption proceeds of the debt / equity instruments, the amount received will be recognized in the P&L Account, while simultaneously reducing the balance in the "Sundry Liabilities Account (Interest Capitalisation)".