REPORT ON CREDIT AUDIT

Name of the Branch

Name of the Officer conducting Credit Audit
Date of Credit Audit
Date of Report
No. of days taken
(Wherever amounts are furnished,
It should be in lakh)
PART A : PROFILE OF THE BORROWER

I a) Name and address of the

borrower
Group
b) Constitution
c) Private / Public / Joint Sector
d) Line of Activity
e) Name/s of Proprietor / Partners /
Directors and their Networth
As on
f) Names of Guarantors and their
Networth
As on
g) Details of last sanction / renewal
Sanctioning Authority
Date of Sanction
h) Classification of asset:
As on
i) Credit Rating Previous Year Current Year
As on 31-03-1 As on 31-0-3-1

II Financing Pattern
a) Sole Banking, Multiple Banking
or Consortium
b) If Under Consortium
1) Name of the Leader Bank
2) Our Bank’s share as % to total Amount - Rs.
exposure FB : %
NFB : - %

III a. Prudential Exposure Norms Individual Group

(Rs. in lakhs)

Fund Based
Non-Fund Based
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b. Actual Exposure Existing Proposed

Company Group Company Group
Fund Based
Non-Fund Based

Individual Group
Exposure Vs. Risk Weight:

Name of the Group

IV Position of the Account as on

(Rs. in lakh)

Sl. Facility Limit Drawing Balance Excess / Excess /

No. Limit overdue if Overdue
any since *
1
2
3
4
5
6

* Number of days remaining overdue be indicated.

Interest Income :Rs.

Non Interest Income :Rs.

Conduct of accounts : - Comments on Excess / adhoc permission clearance of the same /

overdues with age and comments thereon:

V A Effectiveness of Credit Descriptive comments

Appraisal and Monitoring :-
Points to be looked into for
appraisals.
i. -- Latest date of assets / liabilities
statements obtained from the
borrowers / guarantors / changes
in Networth
ii. -- Adequacy of the value of
liquid assets indicated in the
statement to take care of future
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capital requirement of the unit in

case of private limited company /
partnership concern
proprietorship concerns has been
looked into
iii. -- Whether IT / WT assessment
orders / returns filed are obtained
from the borrowers / guarantors
and looked into for any
significant variance and
incorporated in the appraisal note.
iv. -- Whether the name of the
partners / proprietor / directors
appearing in the defaulter list of
ECGC / RBI have been
commented and does it have any
impact on business
v. -- Status of compliance of
statutory requirements like
obtention of clearance from
Pollution Board, adhering to
Effluent Disposal Norms etc.
vi. -- Comments on whether
sanctions are made by the
delegated authority and excess /
adhoc if any permitted have
approval from the respective
authorities.
V
vii. Whether the Proprietors / Partners
/ Directors of borrower entity or
their relative is a director in our
bank / any other scheduled
banks / co-operative bank.
If so, whether sanctioned by the
Board
viii. Take over accounts (If
applicable)
a. Whether in compliance with the
bank policy i.e.
-- Bench mark stipulated for take
over vis-à-vis the actual

b. -- Availability of status report

from the transferor bank / report
on quality of the asset and the
conduct of the account with them
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V B Effectiveness of Credit
Appraisal and Monitoring : -
Performance Appraisal
i. Evaluation / Comments on
Management’s efficiency and
capability made by the branch
ii. Comments / evaluation on Last 2
years performance i.e.
a. -- Estimates vis-à-vis (Rs. in lakhs)
achievements
b. -- Gross Sales / Net Sales
c. -- Operating Profit
d. -- Other Income
e. -- Net Profit after Tax
f -- Cash Profit
g. -- Instalments falling due in the
next year

Actuals Variation Estimates Actuals Variation

Estimates
Gross Sales /
Net Sales
Operating Profit

Other Income
Net Profit after
Tax
Cash Profit
Instalments
falling due in the
next year
iii. If the achievements were below
90% of the estimates, reasons for
the same (like, market scenario,
unexpected changes – industry
specific and unit specific etc.)

V B Contd.
iv. Abnormal variations if any in
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estimated / projected performance

which have been made in the
appraisal memorandum
v. Evaluation on the financial
ratios for the last 2 years and
comments thereon offered by
the branch and the stipulated
improvement in the near future.
Comments / compliance with
reference to the Bench Mark on
a. -- TOL / TNW
b. -- Current Ratio
c. -- Interest Coverage Ratio
d. -- DSCR
e. -- Turnover Ratio

f. Cash Profit
i. -- Net Profit
ii. -- Depreciation
iii. -- Non cash expenses charged to
P&L.
vi. Interlocking of funds in sister /
allied concerns if any, have been
noticed / commented in the
appraisal by the branch and
further comments of the credit
auditor. Any diversion of short
term funds to long term uses
within the system also should be
commented.
vii. Comments on the qualifying
remarks of the auditors in the
balance sheet and its impact in the
ratios / Credit risk made by the
branch in the appraisal and
further comments of the Credit
Auditor

V B Contd.
viii. Company’s dues towards
statutory liabilities viz., IT / ST /
PF / ESI / Excise duty / Customs
Duty
ix. Method of Working Capital
Assessment (i.e. Turnover
Method / STBC Method / Cash
Budget Method / MBPF Method)
applied
x. Comments on adverse features .
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such as non routing the sale

proceeds through the account,
overdues, devolvement, frequent
excess etc., have been whether
brought out in the appraisal
memorandum by the branch and
comments of the credit auditor
thereon
xi. Peer group comparison / inter
firm comparison made in the
appraisal – Comments on the
areas compared and the quality of
comparison
xii. Are there proper justification for
increased sales (Volume / value)
and Profits

xiii. Is the profit / profitability

projected is in tune with past
actuals and reasoning for
enhanced profit if % of NP to sale
is increasing.
xiv. Any adverse features (like
defaults / overdues / diversion)
closure of business units / hiving
off etc.
xv. Availability of NWC to meet
margin requirement stipulated.
xvi. Comments on Type of facilities
recommended / sanctioned /
adequate chargeable current
assets available net of margin

V B Contd.
xvii Total Time Taken for sanction
.
a. Date of Branch Proposal
b. Date of Sanction
xvii Capital Market Perception
i
a. -- Company
b. -- Industry
xix. Obtaining Confidential reports on
the borrowers / co-obligants /
guarantors / associate concerns /
Drawees of bills from other
Banks etc. wherever required
VI Documentation obtained:
i. -- Whether the loan documents
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are kept in force

ii. -- Whether documentation is
completed as per terms of
sanction including Joint
documentation, First Charge /
second Charge creation, obtention
of latest search report, Obtention
of Valuation certificates for prime
and collateral securities
iii. -- If not, impact on the non
availability of the securities due
to non compliance of the terms of
sanction (i.e. secured terms
remaining as unsecured advance)
documentation – COMMENTS.

iv. -- Receipt of approval from the

competent authority for non
compliance / waiver permitted
wherever required
v. -- Adequacy of insurance cover
for prime and collateral securities

VII. Compliance of Sanction

Terms
i. -- List of Terms of sanction not
complied with and whether
brought to the notice of the
competent authorities.
ii. -- Reasons therefor
iii -- Obtention of approval of the
. competent authority with date of
approval
iv. -- Impact on the quality of
assets / security / mitigative
measures available to the Bank.
VIII. Compliance of Regulatory /
loan policies of the Bank
i. Exposure Norms / Individual
group
ii. Capital market exposure
iii Norms for lending / Loan
. Delivery System
iv. Bills Culture norms
v. Rate of Interest charged
IX Credit Risk Assessment
i. -- Model Applied
ii. -- Latest year for which rating is
done
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iii Comments on evaluation of

. Financial Risk

Industry Risk

Business risk

Factored for credit risk rating of

the borrower account as per the
prescription of the model
iv. -- Migration of the rating – ”
Whether looked into to take
appropriate action.

X A Detection of early Warning .

Signals (effectiveness of
monitoring by CMO)
i. -- Regular and timely submission
of periodical feed back statements
stipulated for review of
performance and capturing of
warning signals i.e. submission of
stock statements, MSOD / QIS /
Balance Sheet etc.
a. -- Whether DP is arrived
excluding trade creditors /
advances from suppliers
b. -- Whether quarterly operative
limits are fixed based on QIS II.
ii. Quality of review done by the
branch i.e.
a. -- Comparing the performance
with estimates
b. -- Evaluating the reasons for
shortfall in actual performance
with justification for continuation
of the limits at the existing level
in spite of shortfall in the actual
performance
iv. Identification of warning
signals such as
a. -- Liquidity constraints due to
accumulation of slow moving /
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non moving stocks / large

overdue receivables / doubtful of
recovery / failure of buyers to
make payments / diversion of
funds – within the system and
outside the system
b. -- Fall in the production / sales
c. -- Labour Problem

X A Contd.
d. -- Large sundry creditors
disproportionate to production
level / estimated
e. -- Other market borrowings
raised at high cost without the
permission of the Bank
f. -- Overdues with other Banks / F
Is if any
g. -- Frequent excess permitted
h. -- Frequent cheque returns
inward and outward

v. -- Whether Identification as SMA

is made on timely basis and
reported to HO : Credit
Department and Credit Risk
Management Department
vi. Effectiveness of action taken on
timely basis for maintaining the
quality of the account and inter-
action with the promoter /
partner / proprietor
vii. Comments on the effectiveness
of scrutiny of the Book debts /
bills discounted and further
follow up. For eg.
a. -- Items referred in the bill are
relating to the end products which
the borrower is manufacturing /
dealing for which we have
financed
b. -- Price Quoted – If below the
present market rate, whether the
profitability will be affected has
been discussed with borrower
c. -- Ageing analysis of Bills / Book
Debts
d. -- Effectiveness of scrutiny of the
bills to ensure about the
genuineness of transaction
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e. Follow up with the collecting

banker / drawee for realisation
without delay.
X B Comments on FX Business
handled (if applicable), Overdue
PCs, Overdue Post shipment bills,
devolved LCs etc. Whether these
irregularities are occurring very
frequently or as a stray incident.
Evaluation done by the branches
for the above and action taken.
Availability of ECGC cover /
Policy / ECGC approval wherever
needed.
X C Stock Audit (If applicable):
Comments on
i. -- Compliance with the
frequency stipulated and actual
periodicity

ii. -- Quality of stock auditor report

– Conforming to the proforma
suggested by Head Office –
Covering all aspects
iii. -- Critical observations of Stock
audit inspection regarding
working of the unit
iv. -- Action of the branch with
regard to Any adverse remarks
which would deteriorate the DP
and the accounting procedure etc.
v. -- Closure of the Audit Report –
Whether done within the
stipulated period.

X D Comments on Consortium
working
i. -- Frequency of consortium
meeting held vis-à-vis sanction
terms / receipt of minutes and
action taken report on the
suggestion / decision taken
ii. -- Inspection / Checking of
securities is being followed or not
– Give latest date
iii. -- Regular submission of DP on
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periodically done by the leader –

Indicate latest date.
If not received, how the branch is
monitoring the actual drawings
vis-à-vis the DP to be furnished.
iv. -- Exchange of information
among the members – whether
done regularly
v. Comments on compliance /
observations of RBI / Statutory /
Concurrent Auditors / Internal
Inspection
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X E Signals of Potential Credit Risk

Perceived from day to day
banking operations
i. -- Devolvement of LCs / Details Previous Year Current Year (Rs.
Invocation of BGs (Rs. in lakhs) in lakhs)
LC BG LC BG
No. of
LCs /
BGs
establi
shed /
issued

Amt.

No. of
LCs /
BGs
devol-
ved /
Invo-
ked

Amt.
Comments
ii. Inland Bills / Export Bills Details Previous Year Current Year
(Rs. in lakhs) (Rs. in lakhs)
IB FB IB FB
No. of
Bills
dis-
coun-
ted

Amt.

No. of
Bills re-
turned
unpaid

Amt.
Comments
iii. Irregularities in the account
iv. Reporting of irregularities and
devolvement of LC bills and
obtention of confirmation
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X E Contd.
v. Overdues to F Is, Banks & Others
and statutory dues
vi. Routing of transactions and forex Details Previous Year Current Year
business through the account (Rs. in lakhs) (Rs. in lakhs)
Gross Sales

Credit
Summation

Forex
Business as
per B/S

Forex
business as
per branch
books
Comments
vii. Diversion of short-term funds for
long-term uses, if any, noticed in
the funds flow statement
XI Qualitative comments on credit
skills i.e. any major changes in
global scenario / Policy of
Government affecting the unit.
i. -- Capability to identify the
critical risk factor and to suggest
mitigative factors on timely basis
ii. -- Knowledge of branch officials
on credit appraisal process and
conversant with the various
policy guidelines of the Bank /
RBI
iii. -- Analytical ability of the branch
officials as seen in the appraisal
iv. -- Training given / to be given on
credit and Credit Risk
Management area.
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XII. Final Views of the Officer

conducting credit audit
The potential problem of the unit
may run into in the next 1 year /
Business opportunity available to
bank / borrower

Signature

Name :

Designation :

Place : Chennai

Date :