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Last updated on 09.11.2022

CREDIT MONITORING POLICY – A GLIMPSE

1. INTRODUCTION

Credit Monitoring function is considered to be backbone of the modern-day banking and placed
as an inseparable part of banking activity. The efforts of the Bank in expanding credit can be
sustained only when the health of the credit portfolio is maintained in good condition.
Continuous monitoring of the performance and constant evaluation of associated risks during
the post sanction period goes a long way in maintaining the quality of assets of the Bank.

2. OBJECTIVES OF THE POLICY

a. Monitor the health of loans and advances on an on-going basis.

b. Maintenance of Asset Quality by taking corrective action to preserve asset quality.
c. Maintain the asset quality and meeting the asset management challenges.
d. Compliance of delegation of powers and adherence to policy guidelines with respect to
scrutiny of sanctions.
e. Ensure that Assets in the Standard Category do not slip to SMA/NPA.
f. Identify weak/stressed accounts and take corrective action to protect the quality of
asset
g. To mitigate and minimize the risks associated with the lending by fine tuning the
systems and controls to ensure effective and meaningful monitoring.

3. ROLES AND RESPONSIBILITIES

a. Corporate Office: Credit Monitoring Department at Corporate Office shall be primarily

responsible for framing of Policies relating to Credit Monitoring. Additionally, Scrutiny/
Review of sanctions of FGMO/of various sanctioning authorities, review under Loan
Review Mechanism(LRM) Review of NFB portfolio, follow up of SMA accounts and
Maintenance/Reporting of CRILC platform are among the main functions of the
department.

b. FGM Office: Field General Managers have the overall responsibility of monitoring the
health of the credit portfolio in Zones/branches within their jurisdiction apart from
monitoring / scrutinize the sanctions made by ZLCC.

c. Zonal Office: Zonal Managers have the overall responsibility of monitoring the health of
the credit portfolio in their branches also for monitoring of high value advances through
Monthly CRM reports. Zonal Risk officer and/or designated Credit Monitoring Officer
shall be responsible for monitoring risks associated with credit portfolio of the Zone.

d. Branch: At branch level, the Branch Manager and the Officer in charge of Credit is
responsible for all Credit Monitoring related activities.
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4. MONITORING TOOLS

To ensure proper credit monitoring at different levels of administration, several tools can be
made use of for taking remedial action. Some of the important credit monitoring tools is:

a. At Branch Level:
i. Unit/Factory Visit Reports
ii. Stock Statements/Book Debts Statements
iii. Reports on Concurrent audit, Credit Audit, SMA Audit, Risk Based Internal
Audit, Statutory Audit, RBI Inspection, Stock Audit, Legal Audit etc.
iv. Quarterly Information System (QIS).
v. Monthly Credit Relationship Manager Report (CRM REPORTS)
vi. Scrutiny of operations in the account
vii. GST Returns / Production Report / Account Operation / Balance Sheet /
Quarterly Progress Report etc.
viii. Audited/Provisional Financial Statements
ix. Annual accounts filed with Registrar of Companies.
x. Adverse newspaper, market reports.
xi. Exchange of information/reports with other banks in consortium meetings.
xii. External / Internal Credit Rating.
xiii. Sharp fall in the share price of the Company
xiv. Down ward migration of external/ internal credit rating. (It is stipulated for
undertaking Mid-term review of all Corporate & MSME accounts with
aggregated exposure of Rs.25 Cr and above)

b. At ZO / FGMO / Corporate Office (CO) Level:

i. Due diligence certificate and Advocate’s Report on Documentation.
ii. Unit visit report of Branch/ZO Officials
iii. Monthly Credit Relationship Manager Report (CRM REPORT).
iv. GST Returns / Production Report / Account Operation / Balance Sheet /
Quarterly Progress Report etc.
v. Frequent devolvement of LCs/invoking of BGs.
vi. Consortium Meeting Minutes/Exchange of information with other Banks
vii. Visit report by Officials from Controlling Offices to Branches
viii. Credit Audit Report/Internal Inspection Reports/Special Audit Report/RBI
Inspection Report/ Statutory Audit Reports/Stock Audit
ix. External/Internal Credit Rating
x. Audited/Provisional Financial Statements
xi. Information from Market/Media.
xii. Call Centre.
xiii. Down ward migration of external/ internal credit rating. (It is stipulated for
undertaking Mid-term review of all Corporate & MSME accounts with
aggregated exposure of Rs.25 Cr and above)
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c. GST Return as a Tool for Monitoring (At all levels):

i. The GST Report of the customer needs to be analysed quarterly as a part of

tracking the health of the account and finding out incipient stress in the account,
if any
ii. GST Sales & Purchase of the Borrower to be used to verify the Sales in the
Balance Sheet
iii. GST Sales & Purchase and Turnover in the Bank account to be compared
iv. Borrowers repayment capacity can be checked through Bank Statement and
GST returns
v. GSTIN report will assist Lender Bank in following aspects:
1. Legal Name of the business and Trade Name of the business
2. Nature of Business Activities
3. Constitution of Business

5. STAGES OF MONITORING
The Monitoring of loan assets is a continuous process and is essential at each stage of the life
cycle of any credit asset. Various Monitoring tools at different stages are:

A. Funded Facilities
a. Pre-disbursement:
i. All the pre-release terms and conditions viz Mortgage formalities, CERSAI, ROC
charge etc stipulated in sanction letter should invariably be complied with and
ZO should monitor each sanction and ensure that Branch has submitted all
annexures like NBG clearance (New Business Group) if required, due diligence
report, legal opinion, engineer valuation, Rating, Visit report (unit and security)
etc., in respect of ZO / FGMO / CO sanctions.
ii. Documentation: Should be completed before disbursement and legal audit may
be obtained wherever required and Concurrent Auditor has to verify the
completion of documentation before disbursement.

iii. Pre-Release Audit / DeVA*:

1. The system of “Pre - Release Audit” is in place for all advances (fresh or
enhancement) of Rs.50 lakh and above. Wherever concurrent auditor
certifies compliance of terms and conditions in the prerelease stage,
separate pre –release audit need not be conducted by other officers.
Branches are not permitted to make disbursement of the loan without
approval from Zonal Office on the pre-release audit report submitted.
2. Wherever pre-release audit is conducted by concurrent auditor, the
report should be signed by partner of the concurrent audit firm.
3. Wherever there is no Concurrent auditor, Zonal Office should depute an
internal auditor (Our Bank Officer in Scale IV and above) for conducting
Pre-release audit for all the branches under the controlling area from
nearby branch / Zonal Office to ensure that all the terms and conditions
of the sanction letter are complied with before release of limits (fresh or
enhancement) of Rs.50 lakhs and above.
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4. For LCBs and MCBs, Pre-release audit to be conducted by internal

auditor/ Officers of Scale IV and above from FGM Office.
5. Branches (other than LCBs and MCBs) are permitted to make
disbursement of the loan on the pre-release audit report, if, all the terms
and conditions are complied with.
6. LCBs are permitted to make disbursement of the loan with approval from
LCB’s Head (Note to be approved by Branch Head of LCB) on the pre-
release audit report, if, all the terms and conditions are complied.
7. The services of Concurrent Auditor in LCB should not be utilized for this
purpose
8. For any deviation or pending compliance, approval to be obtained from
respective sanctioning authority.
9. Branches which are covered under DAMC and who submit proposal
through DeVA approval are exempted for conducting pre-release audit.
10. All the loan documents (including mortgage) should be uploaded in
“DeVA” (Document Electronic Verification and Archival) and be approved
before release of any fresh/ enhanced Credit Facilities in any loan
account.
a. For all New Loans - Loan Documents to be uploaded in DevA
and after obtaining DeVA approval certificate, loan should be
disbursed.
b. For Review/Renewal:
i. In case of enhancement of limit fresh documents has to
be uploaded in DevA and after obtaining DeVA approval
certificate, loan should be disbursed.
ii. Where there is no change in limit DeVA approval will still
be obtained by uploading renewal application, sanction
letter, acknowledgement of sanction letter, fresh AOD and
limit Pronote
iii. In both the above cases DeVA approval certificate relating
to the previous documents should be uploaded.
11. For Adhoc limit: Fresh Loan documents along with DeVA approval
certificate relating to the previous documents should be uploaded
12. Wherever DeVA is introduced, pre-release audit can be dispensed with
for the loans falling within ambit of DeVA. Wherever DeVA is exempted,
pre-release audit should be continued.
13. The scope of DeVA would not include scrutiny of the Sanctions appraisal
notes. MDA scrutiny is carried out as a separate activity.

iv. CRILC: RBI has set up the CRILC to collect, store and disseminate data on all
borrowers' credit exposures including Special Mention Accounts (SMA 0, 1 & 2)
having aggregate fund-based and non-fund based exposure of Rs.50 million
and above. Information about Non-Cooperative Borrowers, Wilful defaulters,
RFA/Fraud accounts, written-of accounts and current accounts is also available
at CRILC portal. The Bank shall submit CRILC returns as per RBI guidelines
periodically
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v. Legal Entity Identifier (‘LEI’) code for large corporate borrowers: LEI is a
20-digit unique code to identify parties to financial transactions worldwide. It is
mandatory on the part of all borrowal accounts having aggregate credit limits
(FB+NFB) of Rs.5 crores and above, to obtain LEI code. LEI code must be
captured in CRILIC

b. Disbursement and End-Use Verification:

Monitoring during disbursement is very important, especially; to ensure that the

borrower has not diverted and/or siphoned off the loan proceeds and the amount has
been used for the purpose for which it was extended.

i. Term loan
1. Original invoices should be obtained in respect of machinery / vehicles /
equipment / builders etc and same amount mentioned should be
checked.
2. Term Loan amount shall be made direct to the suppliers as far as
possible and shall not be made to current/cash credit accounts unless
specifically approved by the sanctioning authority.
3. The disbursement of the loan amount should be made after collecting
the margin money from the borrower
4. Where the loan is to be disbursed in instalments, it should be done only
after satisfying the progress made and that the borrower has complied
with the prescribed conditions.

ii. Working Capital

1. Disbursement should not be in cash or transfer to accounts of sister

concern or to unrelated Accounts or to borrower’s current / savings
account, without proper justification and shall be as per terms of
sanction.
2. Adequate insurance for the stocks with Bank Clause shall be ensured.
3. Availability of Drawing Power subject to verification of stock/Book debt
statement shall be ensured.
4. In case of new projects, releases are to be made in proportion to
achievement of sales and build-up of inventory/debtors.
5. In the case of working capital advances, particularly to new borrowers,
disbursement should not be made in one lump sum and drawings should
be regulated on the basis of level of production/business activity as also
scale of operation.
6. Utilization of large value working capital limits shall be tracked,
particularly in the corporate and export segments, to identify instances of
unusual increases in credit growth not in consonance with the regular
requirements of the borrowers.

Adherence to the terms and conditions has to be brought out in pre-release audit
report/ DeVA approval. Disbursement should be made after ensuring fulfilment of
all Terms & Conditions
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c. Post disbursement

Post disbursement monitoring is very important to identify early warning signals and to
take remedial measures wherever warranted to monitor asset quality.

i. Pending Charge Creation if permitted post disbursement

ii. Unit Visit to be conducted regularly and recorded properly

Exposures of 2.00 Crore & above are classified into 4 categories namely A, B, C
& D. As per this category different level of Executives/ Officers at Zonal level are
required to conduct unit visits, details of which are furnished below:

Category Exposure ZO executive / Periodicity of

official to conduct the unit visits
the unit visit
A Rs.25 Crore & above Field General Yearly
Manager
B Rs.10 Crore to 25 Deputy General Yearly
Crore Manager / Zonal
Manager
C Rs.5 Crore to 10 AGM/ Deputy Zonal Yearly
Crore Manager
D Rs.2 crore to 5 Crore Chief Manager at Yearly
Zonal
Office (Including
Branch sanctions)

iii. Verification of Stock/Book Debt and Submission of stock statements

• The borrowers enjoying credit facility against hypothecation of stocks /

Book Debts will have to furnish regular stock / Book Debts statement in
the prescribed form at such intervals as may be laid down in the terms
of sanction.
• Borrowers should be advised that penal interest will be charged when
the stock statement for any month is not submitted before the 7th of
the succeeding month till the date of submission. However, the time
limit of 7 days may be extended upto 1 month by the sanctioning
authority (not less than FGMLCC) on case to case basis at the time of
sanction / renewal of the proposal.
• Non-submission of statements or habitually delayed submission of
statements by any borrower should be dealt with by the Branch
Managers and take suitable action either by cancellation of the facility
or not renewing the same, as proper and up-to-date maintenance of
books of accounts and stock register is the most essential requirement
in these advances.
• Systemic checks in CBS have been implemented for capturing Stock /
Book Debt details. Drawing Power will be Zero upon expiry of Stock,
Book Debt. On Expiry of Stock / Book Debt statement, the DP will
become Zero and SMA tracking of account will start as per IRAC
Norms.
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iv. Stock Audit: Stock and book-debt audit should be conducted on yearly basis
for all advances except NBFC (sanctioned against stocks/books debts as
primary security) having aggregate fund based and non-fund based exposure
equal to or above the threshold limit as given below:

Sl. Type of customer Threshold limit (FB+NFB) for Stock Audit

No. in crore
1 Individual / 1.00
Partnership Firm

2 Private Limited 2.00

Companies

3 Public Limited 5.00

Companies
4 Public Sector a) All PSU borrower covered by
Undertakings Government Guarantee- Exempted

b) All PSU borrower not covered by

Government Guarantee- As per sanction
terms
5 Consortium Advances As mentioned above in Sl. no 1 to 4
- As Leader

6 Consortium Advances As per policy of leader

– As Member

7 Multiple Banking As per the policy of the Bank having the

largest Exposure

8 Contractors (first class As per the constitution of the borrower

contractors who
are contractors for
highways,
power
projects and other
infrastructure projects)

Annually for Working capital limit of Rs.5.00

9 For NPA Account Crore and above

The gap for conducts such stock / Book Debt audit should not be more than 12 months.

v. SMA Audit

1. For enhanced monitoring system for accounts with exposure of more

than Rs.10 Crore frequently appearing in SMA 1 / SMA 2.

2. SMA Audit should be conducted for accounts with exposure of Rs.10

Crore and above other than Government accounts

3. The account appears in SMA 1 or 2 twice in the last 6 months. SMA

Audit should be completed before the account moves to SMA 2 status.
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4. It includes the verification of complete loan documents, Pre-release

audit, EM details, Unit inspection, stock / book debt verification and
analysis of balance sheet etc.

5. SMA Audit will be conducted by external auditors (Qualified CA only).

6. Stock Audit is exempted for the accounts falling under SMA Audit.

vi. Legal Audit:

1. Legal audit to be done for accounts with exposure of Rs.100 Lakh and
above where mortgage of property is involved.
2. In case of consortium accounts, where our Bank is the lead Bank and
the mortgage is created with our Bank, legal audit is to be carried out by
our bank and in case we are members, carrying out such legal audit will
be guided by the decision of the Consortium
3. In case of Multiple Banking Arrangement, legal audit is to be carried out
by our bank, if the mortgage is created with our Bank
4. Whenever legal audit is not completed within 3 months, the issue has to
be escalated to the next higher-level authority
5. Periodical legal audit to be done within three years from the last legal
audit in case of all credit exposure of Rs. 5.00 Crore and above

vii. Review / Renewal of borrowal accounts

1. All the borrowal accounts sanctioned under CO various discretionary

powers, should be reviewed (in case of term loans) / renewed once in a
year.
2. For RAPC / MAPC / ZO / FGMO / CO sanctioned accounts, branch
should submit the proposal at least three months in advance before the
due date to ensure sanction in time.
3. Account should be classified as NPA if regular review / renewal is not
accorded within 180 days from original regular review / renewal due
date, date of NPA should be 181st day from the expiry of regular review /
renewal date.
4. Limit / DP in the account will expire if, review/ renewal is not accorded on
or before the due date of renewal.
5. If, Regular review / renewal of account is not done on or before the due
date, short review / operational review of account may be allowed for
maximum on TWO occasions, each of maximum 90 days’ period.
6. Penal Interest to be charged upto 2% from the due date for renewal till
the required documents submitted by the borrower.
7. Branch to endeavour achievement of 100% review / renewal of borrowal
accounts and maintenance of such standards at all points of time
8. Analysis of the QIS/MSOD returns, quarterly / half yearly results, scrutiny
of Audit Report, Financial Statements shall be done as soon as they are
received from the borrower. These statements shall be verified to
compare the projections with the actual and the reasons for any unusual
variation shall be ascertained and explained with proper justification.
9. Wherever any warning signals are observed, suitable steps may be
initiated for restructuring the account in genuine cases as per laid down
norms /considering exit option or recovery steps may be initiated without
delay.
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viii. Monthly Credit Relationship Manager Report (CRM Reports)

For monitoring of high value advances of Rs. 1.00 Crore and above, the Monthly
Credit Relationship Manager Report (CRM REPORTS) is to be submitted
through the software made available in EWS portal

ix. Early Warning Signals

(EWS) are indicators that put the Bank on alert regarding weakness or wrongdoing in
loan accounts. Prevent, detect and prompt reporting of frauds to the RBI and the
investigative agencies Reduce the quantum of loss which the continuance of the fraud
may entail.

➢ EWS is a robust daily monitoring mechanism.

➢ All the alerts generated by software have to be analysed without any time
delay.
➢ It helps to strengthen asset quality and avoid slippage to SMA/NPA/Fraud.
➢ Alert which are serious in nature have to be escalated and RFA (Red
flagging of Accounts) committee will decide on red flagging/fraud or
otherwise.
➢ The threshold for EWS and RFA is an exposure of Rs.50.00 Crore or more
at the level of a bank irrespective of the lending arrangement (whether solo
banking, multiple banking or consortium) as per RBI direction
➢ However, the threshold for EWS and RFA is Rs. 25.00 Crore or more as per
our Bank Board direction
➢ This threshold can be scaled down to exposures of Rs 1.00 crore and above.

The following signals are being generated every month in EWS software for the loan accounts. These signals
are invariably closed by the branches and Zonal Offices for the reason that they are genuine business related
transactions.

1. Related Party Transactions

2. Interconnected Company transactions
3. RTGS to unrelated / unapproved parties and
4. Cash withdrawals

Authority for closure of EWS alerts are

Accounts with exposure of Authority for closure of alerts

Rs.10 lakhs to < Rs.1 Cr Branch Manager
Rs.1 Cr to < Rs.10 Cr CM (Credit) / AGM (Credit) at ZO
Rs.10 Cr to < Rs.25 Cr CM (Credit) / AGM(Credit) at FGMO
Rs.25 Cr and above DGM (CMC) at Corporate Office
LCB Accounts DGM (CMC) at Corporate Office

However, the following type of alerts to be closed as follows:

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Nature of Alerts Authority for Closure of Alerts

1. Serious alerts Huge Cash withdrawals in loan
accounts
(This list is only
illustrative and not Substantial related party
exhaustive.) transactions

Large number of transactions

with interconnected companies
and larges outstanding from such
companies In case of accounts sanctioned by
1. Branch / Zonal Office to place note
High value RTGS payment to to ZLCC
unrelated parties 2. FGM Office to place note to FGMCC
3. CO to place note to RFA Committee
Bouncing of high value cheques

Not routing of sales proceeds

through consortium / member
bank / lenders to the company
2. Alerts which are frequently generated in an account
3. Alerts of customers with more than three alerts in a
month either of same or different category

* All the alerts generated by the software for exposure of Rs. 25.00 Crore and above, are being
analysed by CO/ Credit Monitoring Department taking into account, the views /recommendations
submitted by branches and Zonal offices.

* All alerts of serious nature for exposure of Rs. 25.00 Crore and above are placed to the RFA
Committee and deliberated and suitable directions given to the FGMOs / Zones/Branches.

* Alerts of non-serious nature are closed at the Department level by placing a Note to Deputy
General Manager (Credit Monitoring).

** CO: Credit Monitoring Department shall place a note to MD & CEO every month capturing the
details of Red Flagged accounts classified as Fraud and accounts where Red Flags have been
removed during the month as decided by the RFA Committee

x. Credit Audit: The accounts covered under Loan Review Mechanism (LRM) and
Credit Audit put together will not be less than 50% of the standard non-food
credit outstanding as on the previous year-end.
1. Recommends independently corrective action to improve credit quality,
credit administration and credit skills of staff, etc. for following accounts

Category Limit
Standard borrowal A/Cs with rating of IB-BBB Rs.5 Crore and above
(Obligor) and above
Standard borrowal A/Cs with rating below IB- Rs.1 Crore and above
BBB (Obligor)
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2. Credit audit to be commenced within 3 months from the date of rating,

below BBB (Obligor), for all accounts with exposures of Rs 1.00 Cr and
above.

xi. LOAN REVIEW MECHANISM

• LRM is an independent assessment, which evaluates the effectiveness

of the loan administration, maintains the integrity of the credit rating
process, and assesses the loan loss provisions, portfolio quality etc.

• Coverage of Advances for Fresh / Enhancement/ Review & Renewal

proposals under LRM:

Sanctioning Exposure* Reviewing authority

authority
FGMCC / CO Rs 20 Cr and above CO LRMC

ZLSCC/ ZLCC Rs 2 Cr to less than Rs FGM LRMC

20 Cr
BM/ MAPC/ RAPC Rs 50 Lakhs and above ZO LRMC

All C & D rated accounts of Rs 5.00 Cr and above CO LRMC

• All Review/Renewal proposals with limits of Rs.5 Crore and above shall
be put under LRM (within 6 months from date of sanction).
• Proposals sanctioned under IBHL / IBVL / Educational Loans are
exempted from LRM.
• Coverage under LRM and Credit Audit shall not be less than 40% and
10% of the standard domestic credit outstanding as on the previous year
end, respectively. It should cover not only the value but also the numbers
adequately.
• Standard accounts with sanctioned limit of Rs.50 Lakh and above shall
be cut off limit.
• In case the standard accounts with limit of Rs 50 Lakh and above do not
constitute about 40% of the exposure under Zonal Office powers,
exposure excluding Jewel Loan and Loan against deposits portfolio shall
be considered and LRM to cover 40% of the remaining portfolios.

xii. SCRUTINY OF SANCTIONS

• The process of scrutiny of sanctions made by lower authority by next

higher authority is called “Scrutiny of Sanction”.

• The onus of getting the sanction scrutinized is on the sanctioning

authority.

• To facilitate scrutiny of sanction by next higher authority/ committee

within the stipulated time of 30 days, the sanctioning authority shall
ensure that all the necessary additional information called for by the
scrutinizing authority is furnished within a reasonable time.
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• Observations, if any made by the reviewing authority must be responded

immediately. All observation, adverse features, pointed out must be
rectified within 15 days from the date of observations.

• Scrutiny of sanction is to ensure that the sanction is as per Credit

Policy/Credit Risk Policy guidelines, is within the delegated powers of the
sanctioning authority and conforms to other extant norms in force.

Sanctioning Authority Scrutinizing Time period

Authority
Branch Sanctions (upto one scale ZLSCC The process notes,
lower than DZM) sanction letter
ZLSCC sanctions ( and MDL ZLCC along with
sanctions from the scale of DZM) applicable loan
Sanctions of ZLCC FGMCC review formats
shall be submitted
Sanctions of FGMCC CO: Credit to the reviewing
Monitoring Dept authority
immediately on
sanction of the
credit facilities and
in any case, not
later than 7 days
from succeeding
month.

B. Non-Funded Facilities

i. The due date of the LC / BG / Bill plays a major role in NFB monitoring.
Monitoring the NFB ahead of the due date will give the bank an update on the
position of the contingent liability.
ii. In case of default, alternate measures shall be put in place by recovering the
amount from the customer or in genuine cases, the tenor can be extended.

6. REFERENCES

Sl. No. Date Description

1 01.04.2022 Credit Monitoring Policy 2022-23