LFAR & RESTRUCTURING OF ADVANCES - nirc-icai.org LFAR 18032016.pdf · vis a vis main report to be prepared by bank branch auditor or by branch management exhaustive coverage lfar

RAJESH SETHI

(18.03.2016)

LFAR &

RESTRUCTURING OF

ADVANCES

VIS A VIS MAIN REPORT

TO BE PREPARED BY BANK BRANCH

AUDITOR OR BY BRANCH

MANAGEMENT

EXHAUSTIVE COVERAGE

LFAR

LFAR

QUESTIONNAIRE FORMULATED BY

RBI

SPLIT INTO 4 PARTS

• ASSETS

• LIABILITIES

• PROFIT AND LOSS ACCOUNT

• GENERAL

LFAR - ASSETS

CASH

• CASH BALANCE BEING WITHIN

PRESCRIBED LIMIT

• CUSTODY OF CASH

• PERIODICAL CHECKING

• ADEQUACY OF INSURANCE

LFAR - ASSETS

BALANCES WITH RBI, SBI AND/OR OTHER BANKS

• BALANCE CONFIRMATIONS

• BRS

• CASH TRANSACTIONS

• REVENUE ITEMS

• OLD ITEMS REMAINING UNEXPLAINED/UNADJUSTED

MONEY AT CALL AND SHORT NOTICE

INVESTMENTS

• HELD BY BRANCH ON BEHALF OF HO

• PHYSICAL VERIFICATION THEREOF

• RECEIPT OF INCOME THEREON

• MATURED OR OVERDUE

INVESTMENTS

LFAR - ASSETS

LFAR - ASSETS (ADVANCES)

LARGE ADVANCES

CREDIT APPRAISAL

• MAIN OBJECTIVE TO ENSURE THAT

ASSUMPTIONS BASIS WHICH LOAN

WAS SANCTIONED CONTINUE TO

HOLD GOOD

• ANY LAPSES IN OBTAINING LOAN

APPLICATION FORMS

• CREDITWORTHINESS

LFAR - ASSETS

SANCTIONING/ DISBURSEMENT -

DOA

• STRICT ADHERENCE THERETO TO

ENSURE NO SANCTION BEYOND

DELEGATED POWERS

• NO DISBURSAL WITHOUT

COMPLIANCE OF TERMS AND

CONDITIONS

LFAR - ASSETS (ASSETS)

DOCUMENTATION

• EXECUTION OF ALL DOCUMENTS AS

PER SANCTION TERMS

• NO DEFICIENCIES IN DOCUMENTS

LFAR - ASSETS (ADVANCES)

• HO INSTRUCTIONS FOR PREPARATION/RENEWAL OF PROPOSALS TO BE SCRUPULOUSLY FOLLOWED

• LOAN BEING USED FOR THE PURPOSE SANCTIONED

• NO UNEXPLAINED OVERRUNS IN COST OF PROJECT

• RENEWAL OF LOAN DOCUMENTS

LFAR - ASSETS (ADVANCES)

REVIEW/ MONITORING/ SUPERVISION

(RMS)

• PERIODIC BALANCE CONFIRMATIONS

• ACCOUNTS OVERDUE FOR

REVIEW/RENEWAL

• OBTENTION OF STOCK, BOOK DEBT

AND FINANCIAL STATEMENTS

REGULARLY

LFAR - ASSETS (RMS)

• OBTENTION OF STOCK AUDIT

REPORTS IN MAJOR ADVANCES

• NON-CORPORATE ENTITIES ENJOYING

LIMITS BEYOND Rs 10 LAKH

• PERIODIC PHYSICAL VERIFICATION

• DEFICIENCIES IN SECURITY VALUE

• UNAUTHORISED OVERDRAWINGS

BEYOND SANCTIONED LIMITS

LFAR - ASSETS (RMS)

• INADEQUATE INSURANCE

COVERAGE

• COMPLIANCE OF HO INSTRUCTION

FOR LEASE FINANCE ACTIVITIES

• PROMPT RECOVERY OF CREDIT

CARD DUES

• ADVANCES CLASSIFICATION PER

RBI NORMS

LFAR - ASSETS (RMS)

• DISAGREEMENT WITH BRANCH

CLASSIFICATION - MOC

• PENDING LEGAL ACTION FOR

RECOVERY/ RECALL OF ADVANCE

• PROMPT REPORTING OF NPA TO HO

• STATUS OF REHABILITATION

PROGRAMME

LFAR - ASSETS (RMS)

• STATUS OF PENDING ECGC/ DICGC CLAIMS

• OBTENTION OF VALUATION REPORTS ONCE IN 3 YEARS FOR FIXED ASSETS CHARGED IN RESPECT OF NPAs

• COMPLIANCE OF HO RECOVERY POLICY IN COMPROMISE/ SETTLEMENT/ WRITE-OFF/ WAIVER CASES OVER 50 LAKH

LFAR - ASSETS (RMS)

INVOKED GUARANTEES

DEVOLVED LCs

LFAR - OTHER ASSETS

STATIONERY AND STAMPS

EXISTENCE OF ADEQUATE CONTROL OVER

• TDRs

• DRAFTS

• PAY ORDERS

• CHEQUE BOOKS

• TCs

• GCs

LFAR - OTHER ASSETS

SUSPENSEACCOUNTS/ SUNDRY

ASSETS

• EXPEDITIOUS CLEARANCE OF

ITEMS

• OLD ITEMS REQUIRING PROVISION/

WRITE-OFF

• ANY UNUSUAL ITEM - NATURE AND

AMOUNT

LFAR - LIABILITIES

DEPOSITS

• COMPLIANCE OF HO GUIDELINES

FOR INOPERATIVE ACCOUNTS

• UNUSUAL LARGE MOVEMENTS

POST BS DATE IN DEPOSITS

REMAINING UNEXPLAINED

• QUANTIFICATION OF

OVERDUE/MATURED DEPOSITS

LFAR - LIABILITIES

OTHER LIABILITIES

• IDENTIFICATION OF 3 YEARS OR

MORE OLD ITEMS

• ANY UNUSUAL ITEM - NATURE AND

AMOUNT

LFAR - LIABILITIES

CONTINGENT LIABILITIES

• CLAIMS NOT ACKNOWLEDGED AS

DEBTS OTHER THAN

CONSTITUENTS’ LIABILITIES

LFAR - P & L

COMPLIANCE OF IRAC NORMS

EXISTENCE OF SYSTEM AS TO

COMPUTATION OF DISCREPENCIS IN

APPLICATION OF INTEREST ON

ADVANCES AND DEPOSITS

DETAILS OF EXCESS/ SHORT CREDIT

OF INTEREST ON ADVANCES

DETAILS OF EXCESS/ SHORT CREDIT

OF INTEREST ON DEPOSITS

LFAR - P & L

DIVERGENT TRENDS IN MAJOR

ITEMS OF INCOME AND

EXPENDITURE NOT

SATISFACTORILY EXPLAINED

LFAR - GENERAL

BOOKS AND RECORDS

• APPROPRIATE MAINTENANCE OF

BOOKS IN CASE OF MANUAL BOOKS

LFAR - GENERAL

COMPUTERISED BRANCHES

• PRINTING OF HARD COPIES

• ACCESS CONTROLS

• DATA SECURITY MEASURES

• REGULAR BACK-Ups

• OFF-SITE STORAGE

• EXISTENCE OF DRP

LFAR - GENERAL

RECONCILIATION OF CONTROL AND

SUBSIDIARY RECORDS

• STATUS AS AT THE YEAR END

LFAR - GENERAL

INTER BRANCH ACCOUNTS

• FORWARDING OF DAILY STATEMENT

• TALLYING OF HO BALANCE IN THE SAID

STATEMENT WITH HO ACCOUNT

APPEARING IN BRANCH GL

• OUTSTANDING DEBITS IN HO ACCOUNT

• YEAR - END STATUS OF UNRESPONDED

QUERIES AS REGARDS UNMATCHED

TRANSACTIONS AND OLD ENTRIES

LFAR - GENERAL

AUDIT/ INSPECTIONS

• CONCURRENT AUDIT OR ANY

OTHER AUDIT/ INSPECTION DURING

THE YEAR

• PERSISTING IRREGULARITIES -

PREVIOUS AUDIT, CONCURRENT

AUDIT, STOCK AUDIT, INTERNAL

AUDIT, RBI INSPECTION

MISCELLANEOUS

• POSSIBLE WINDOW DRESSING

• MAINTENANCE OF FIXED ASSETS

RECORD

• ANY OTHER MATTERS WORTH

REPORTING

LFAR - GENERAL

LFAR

BRANCH OBLIGED TO PROVIDE BORROWER-WISE DETAILS OF ALL ADVANCES OF Rs 2 CRORE AND ABOVE IN THE DETAILED SPECIFIED FORMAT COVERING 25 POINTS:

• NATURE OF FACILITIES

• NATURE AND VALUE OF PRIME AND COLLATERAL SECURITIES

• MARGIN

RESTRUCTURING

RESTRUCTURING

A RESTRUCTURED ACCOUNT IS ONE

WHERE THE BANK, FOR ECONOMIC

OR LEGAL REASONS RELATING TO

THE BORROWER'S FINANCIAL

DIFFICULTY, GRANTS TO THE

BORROWER CONCESSIONS THAT

THE BANK WOULD NOT OTHERWISE

CONSIDER

MODIFICATION/ALTERATION OF

• REPAYMENT PERIOD

• REPAYABLE AMOUNT

• THE AMOUNT OF INSTALMENTS

• RATE OF INTEREST

RESTRUCTURING

RESTRUCTURING

NO RESTRUCTURING WITH RETROSPECTIVE EFFECT

NON-VIABLE ACCOUNTS NOT TO BE RESTRUCTURED

FRADULANT CASES INELIGIBLE FOR RESTRUCTURING

BIFR CASES NOT ELIGIBLE WITHOUT EXPRESS APPROVAL

W.E.F. APRIL1, 2015, A STANDARD

ACCOUNT ON RESTRUCTURING

WOULD GET CLASSIFIED AS SUB-

STANDARD

EXCEPTION IS CHANGE IN DCCO

(PAGE 11 TO 16 OF IRAC MC)

RESTRUCTURING

PROVISION REQUIRED

• NORMAL 5% AND

• PROVISION FOR DIMINUTION IN

FAIR VALUE OF LOAN

RESTRUCTURING

SMA

SMA-0 < 30 DAYS

SMA-1 31 - 60 DAYS

SMA-2 61 - 90 DAYS

CENTRAL REPOSITORY OF

INFORMATION ON LARGE CREDITS

(CRILC)

Thank You