AMIT BACCHAWAT TRAINING FORUM Bank AUDIT AMIT BACCHAWAT TRAINING FORUM

TYPES of audit Statutory audit Concurrent audit RBI audit

Match the followings Term loans Long term, Floating rate CC, OD and Demand loans Bills Discounted/ purchased Participation on risk sharing Interest bearing staff loans Long term, Floating rate Short term, generally fixed rate Bills receivable discounted with bank Transactions b/W bank-participation certificate Loans to staff

Advances NATURE FUND BASED NON FUND BASED NATURE Term loans CC, OD and Demand loans Bills Discounted/ purchased Participation on risk sharing Interest bearing staff loans Short term, generally fixed rate Transactions b/W bank-participation certificate Loans to staff Long term, Floating rate Bills receivable discounted with bank NON FUND BASED NATURE Letter of credit Bank guarantee Bills for collection Guarantee from one bank to another Guarantee from bank to third parties Bank collects your bill from buyer/ buyers bank

Difference b/w CC and OD Corporates Security- generally Current asset No separate fee Generally working cap requirements Separate account Generally individuals + corporates Anything- mostly fixed assets Fees on overdrawn amount Any purpose Same account

Classification of advances Sector wise Priority Non priority Security wise Secured Unsecured Prudential norms Standard NPAs Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the banks for providing a specified portion of the bank lending to few specific sectors like agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sections.. This is essentially meant for an all round development of the economy as opposed to focusing only on the financial sector. Most important for exams

ADVANCES PER PRUDENTIAL NORMS STANDARD LOAN 1.7.19 1.5.19 SMA1 1.6.19 SMA2 Loan given 1.1.19 SMA 0 3 months Repayment due- 1.4.19 NPA Doubtful 1-3 1.7.19- NPA Substandard Doubtful 1 1.7.21 1.7.23 1.7.20 40%/100% 15% 25%/100% 100%/100% Doubtful more than 3 1.7.24

DRAwing power Drawing Power generally addressed as “DP” is an important concept for Cash Credit (CC) facility availed from banks and financial institutions. Drawing power is the limit up to which a firm or company can withdraw from the working capital limit sanctioned. Updating drawing power for working capital by the bank is an important credit monitoring exercise.

Allocation of loan taken by Vijay Mallya

Mode of security creation MORTGAGE

Mode of security creation HYPOTHECATION

Audit of advances Areas to be covered What to do Advances are o/s- not fictitious Amount is receivable by bank Documentation is proper No unrecorded advances Valuation is proper, provisioning is as per norms Disclosure is correct Study internal controls Review loan documentation Reviewing operation of accounts Examining Existence, enforceability and valuation of security Checking Compliance with RBI Analytical procedures/ substantive testing

Internal controls Whether bank has satisfied itself as to the credit worthiness of the borrower Sanction from appropriate authorities of bank Necessary documentation before advance is made. Compliance with terms of sanction and end use of funds. Sufficient margin as specified in sanction letter to be ensured. If registration is required, it should be done in the name of bank. Dp register to be checked and updated every month. Irregular accounts to be brought to the notice of concerned authority.