credit investigation

7/31/2019 credit investigation

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Credit investigation report

a) Branches have to preparea credit investigation report,

in order to avoid

undesirable consequencesat a later stage and also

improve the quality of credit

dispensation.b) Credit investigation report

should be a part of credit

proposal. The proforma ofthe said credit investigation


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report is furnished in the

annexure.c) Branches have to conduct

a detail credit investigation

on the suggested guidelinesas per the format and

invariably submit the credit

investigation report dulycompleted in all respects

while forwarding the

proposal ,whether it is anew or renewal proposal.


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Branches must take note of

the following guidelines inthis regard.

Wherever a proposal isto be considered basedonly on the merits of flag-

ship concern of the group ,

than such report shouldalso be complied in respect

of the subject flag-ship

concern besides theapplicant company.


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In regard to theproposal falling beyond the

power of RO ,the branch

should ensure

participation/involvement

of RO in completion of this

report.

The credit investigationreport should accompany


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all the proposal with fund

based limit above Rs.25Lakhs or non fund based

limit of above Rs.50 lakhs.

The party may besuitably kept informed that

the completion of this

report is one of therequirements in the

connection the processing

for consideration of theproposal.


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c.The branch should obtaina copy of the latestsanction letter issued by

existing Bankers to the

party and the terms ofsanction should be

studied in detail .

Wherever necessary ,comments on theobservation lapses

occurred in following the


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term sanction should be

detailed. Further, any important

factors like founding of

interest ,re schedulementof installment are any

other terms and

conditions stipulatedshould be highlighted as

they would highlight

adverse feature of theparty.


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The branches shouldalso obtain a cop[y of thestatement of accounts for

the latest 6 months

period and study. The Branch should

provide remark on

availment of continuousexcess drawings , return

of cheques ,scarce

operation . non-paymentof interest or any other


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adverse features

observed etc. Personal enquiry should

be conducted by our

bank,s officials with theresponsible official of

party,s present/other

Banker and enquiriesmade with a view to elicit

information on the

conduct of the accountetc.


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Minimum threecustomer/creditorsshould be interviewed

and opinion complied.

Care should be taken inselection of customers

creditor who shall be

representative incharacter.

Discrete enquiriesshould be made regardingquality of the product,


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payment terms, period of

overdues if any,mentioned clearly in the

report. The enquiries

should be aimed toascertain specifically the

status of trading of the

applicant and to knowtheir capability to meet

their commitments in

time.


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The Branch shouldmake enquiries withconcerns engaged in the

similar line activity to

know the market trend.Further any inter

corporate loans availed by

the company. The position regarding

payment of taxes/duties

may be ascertained fromthe notes to the balance


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sheet of the firm

furnished by charteredaccountants of the firm.

This may also be found

out by verifying therelevant sources like Tax

return , Orders , excise

challan, invoices etc . andalso by personal enquiry

from market sources.


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In depth observation may be

made as to:Whether the unit is working

in full swing;

Number of shifts,number of

employees;

Any obsolete stocks finished

goods with the unit;

Machinery-imported or

indigenous or obsolete or

status of working(age and


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condition of the machinery

installed);Information on

power,water,pollution

control etc;

Information on industrial

relation;marketing strategy.

Credit files

Branches have to maintain

separate credit compulsorily

in the case of accounts with

limits of Rs.50 lakhs and


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above(fund based/non

based). For all otheraccounts also it is preferable

to maintain such files for

quick access of allinformation related to the

credit.

A Credit file provides animportant sources material

for Loan supervision .It is

also a critical source ofinformation for internal


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reviews, external audit and

examination by theregulatory authorities.

CONTENTS OF CREDIT FILE

The credit file should

provide all information

pertaining to a credit

decision and thereafter

regarding credit follow-up

and supervision. The credit

file has to be maintained

separately and should not


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be used filing day-to-day

correspondence.The recommended contents

a credit file are as follows:

Basic information report on

the borrower

Milestones of the borrowing

unit

Competitive analysis of the

borrower

Credit investigation report


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Credit approval

memorandumFinancial Statements

Copy of Sanction

Communication

Security Documentation List

Dossier of the sequence of

events in the account

Collateral valuation report

Summary of QIS reports


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Latest Ledger [age

supervision Report and limitsummary

Visit Reports

Half yearly Credit Rating of

the Borrower

Quarterly risk classification

Press clippings and industry

analysis appearing in News

paper/Journals


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Minutes of latest

consortium meetingCustomer profitability

Summary of

inspection/audit

observations

Remedial Strategy and

Action plan in case of

accounts classified as

A2,A3,B,C OR D thus credit

file provides all the relevant

information regarding the


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present status of the loan

account ,as well as the basisfor taking a credit decision in

the past, along with the

covenants and collateralsupporting the credit

decision. This file is useful

especially to:The credit officer ,authority

it is a valuable for

monitoring the account.


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The controlling authority it

provides conciseinformation regarding the

background and the current

status of the account.The regulatory authorities it

provides a summary for

performing an Audit.

Documents

credit investigation