Common Issues in Bank Audit These are the common irregularities found by every bank branch auditor often, LFAR audit program shall include the...
Common Issues in Bank Audit
These are the common irregularities found by every bank branch auditor often, LFAR audit program shall include the following instances to be documented and reported by audit staff, for proper drafting of LFAR. Each file of borrower selected in the sample shall be observed for these frequent irregularities
2. The appraisal forms are not filled up correctly and thereby the appraisals and assessments were not done properly.
3. Loan application is not in the form prescribed by Head Office and in an improper format.
4. Basic documents such as Memorandum & Articles of Association, Partnership deed, etc., which are a pre-requisite to determining the status of the borrower, not obtained.
5. The opinion reports of the associate and/or sister concerns of the borrower are not scrutinized/called for/not updated/not satisfactory.
7. Ad hoc limits were granted for which sanctions were pending for a long.
8. Sanction letter was missing in the branch.
9. Guarantor as required in the sanction letter was not obtained.
10. Required promoters stake not invested before disbursement of the loan.
11. Term loan was disbursed by crediting the cash credit or savings account of the borrower.
13. Mortgage for the property given as security is not created.
14. Mortgage for the property given as security created, was inadequate, as compared to terms of sanction.
15. Documents of the registration of charges with ROC or any other concerned authority requiring the charging of assets are not obtained.
16. Copies evidencing lodgement of the original conveyance/sale deeds with the Sub Registrars for registration, not on record.
17. Authority letter/Power of Attorney to the bank to collect the original documents from the Sub-Registrar, not on record.
18. Advances for vehicle loans, Registration certificates, transfer certificates, etc. not obtained.
19. Work completion certificates, sale deeds, share certificates in societies, etc. not on record for housing loans.
21. The balance outstanding has exceeded the drawing power.
22. The stock and book-debts statements are not received regularly/promptly.
23. Financial statements/audited statements/, not received regularly/promptly.
24. Non-moving stock is not deducted to arrive at the drawing power.
25. The age-wise break-up of debtors is not found on record. The borrowers are allowed to
26. Wide discrepancies were observed in the stock statements and stock figures in the annual FS
27. No penal interest has been charged for delay in the submission of various statements as per
28. The projections submitted by the borrower stay far beyond the actual performance. Further, no explanation for the same is taken from the borrower.
29. Major sale proceeds of the borrower are not routed through the bank.
30. Renewal proposals of advances not received on time and in many cases the limits are not renewed.
31. Insurance cover for stock/property is inadequate/not on record/not renewed/not endorsed in favour of the Bank.
32. Inspection/physical verification of security charges, has not been carried out.
33. Limit not fully utilized by the borrower/No commitment charge is levied for the limit not fully utilized by the borrower.
34. Loan against TDR/STDR, which is matured, is neither renewed nor credited to the loan account.
35. The valuation report in respect of tangible security from a government-approved valuer has not been obtained.
Appraisal
1. Loan application not on record at the branch.2. The appraisal forms are not filled up correctly and thereby the appraisals and assessments were not done properly.
3. Loan application is not in the form prescribed by Head Office and in an improper format.
4. Basic documents such as Memorandum & Articles of Association, Partnership deed, etc., which are a pre-requisite to determining the status of the borrower, not obtained.
5. The opinion reports of the associate and/or sister concerns of the borrower are not scrutinized/called for/not updated/not satisfactory.
Sanctioning
6. Credit facility sanctioned beyond the delegated authority or limit of the branch7. Ad hoc limits were granted for which sanctions were pending for a long.
8. Sanction letter was missing in the branch.
9. Guarantor as required in the sanction letter was not obtained.
10. Required promoters stake not invested before disbursement of the loan.
11. Term loan was disbursed by crediting the cash credit or savings account of the borrower.
Documentation
12. The security against which the advance was sanctioned was not available/was not on record.13. Mortgage for the property given as security is not created.
14. Mortgage for the property given as security created, was inadequate, as compared to terms of sanction.
15. Documents of the registration of charges with ROC or any other concerned authority requiring the charging of assets are not obtained.
16. Copies evidencing lodgement of the original conveyance/sale deeds with the Sub Registrars for registration, not on record.
17. Authority letter/Power of Attorney to the bank to collect the original documents from the Sub-Registrar, not on record.
18. Advances for vehicle loans, Registration certificates, transfer certificates, etc. not obtained.
19. Work completion certificates, sale deeds, share certificates in societies, etc. not on record for housing loans.
Review/Monitoring/Supervision
20. The account is frequently / continuously overdrawn.21. The balance outstanding has exceeded the drawing power.
22. The stock and book-debts statements are not received regularly/promptly.
23. Financial statements/audited statements/, not received regularly/promptly.
24. Non-moving stock is not deducted to arrive at the drawing power.
25. The age-wise break-up of debtors is not found on record. The borrowers are allowed to
26. Wide discrepancies were observed in the stock statements and stock figures in the annual FS
27. No penal interest has been charged for delay in the submission of various statements as per
28. The projections submitted by the borrower stay far beyond the actual performance. Further, no explanation for the same is taken from the borrower.
29. Major sale proceeds of the borrower are not routed through the bank.
30. Renewal proposals of advances not received on time and in many cases the limits are not renewed.
31. Insurance cover for stock/property is inadequate/not on record/not renewed/not endorsed in favour of the Bank.
32. Inspection/physical verification of security charges, has not been carried out.
33. Limit not fully utilized by the borrower/No commitment charge is levied for the limit not fully utilized by the borrower.
34. Loan against TDR/STDR, which is matured, is neither renewed nor credited to the loan account.
35. The valuation report in respect of tangible security from a government-approved valuer has not been obtained.
COMMENTS