Systemic Improvements

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Vigilance and Systemic Improvements

Credit Areas

.Gold Loan

In the recent past many instances of frauds have been reported under gold loan portfolio across banking industry. On the basis of our internal incidences & after diligent analysis of fraud cases reported by various banks, we have made various systemic improvements under our gold loan portfolio such as Enhanced Due Diligence,Introduction of Super appraiser concept, installation of karatometer at various branches etc.

Systemic Improvement- Gold Loan Portfolio

1. Enhanced Due Diligence of Gold Appraiser:

Introduction of Cooling Period: Initially, Gold appraiser to be appointed for 1 year and thereafter renewal for another 2 years based on annual performance review. Thereafter there should be a provision for cooling period of 1 year which may also be incorporated in agreement.
Generation of CIBIL: CIBIL Report is to be scrutinized to check credit history and gold loan availment. If he has availed gold loan from other bank where he is on panel as gold appraiser, then enhanced precautions to be taken.

2. Empanelment a pool of gold appraiser:

Pool of gold appraiser have been empanelled.

3. Concept of Super Appraiser:

Reputed gold appraisers appointed as Super Appraiser at Regional Office level for reappraisal of gold ornaments / jewellery. Regional Office (RO) will take efforts for re appraisal of gold loan security by Super Appraiser in the presence of RO / Branch Official especially in branches where large numbers of gold loan accounts are sanctioned.

4. Installation of Karatometer on pilot basis:

installation of Karatometer in branches having large number of gold loan accounts

5. Special Gold Loan Audit:

Surprise Verification & reappraisal of security under gold loan.

6. Training of Staff for Gold Appraisal:

Provision of Training program for branch staff implemented by the bank.

.Trust receipt & Invoice financing(TR&IF) in case of Foreign Branches

In overseas branches traders are availing trade finance facility in the form of trust receipts/invoice financing. It is observed that while they avail import limit from a particular Bank, the export proceeds are routed by them through other Bank therefore having no control on the receivables.After diligent analysis of portfolio, systemic improvements suggested to make the monitoring system with respect to TR & IF more effective.

Systemic Improvement- Trust receipt & Invoice financing Portfolio

Improving monitoring by obtaining necessary documents which confirms actual movement of goods.
Due diligence/credit report/genuineness of buyers to whom borrower has sold the goods to carried out.
Ensure routing of export leg of transaction mandatorily through our bank to have control on receivables.

.Vehicle loans

Vehicle loans comprises substantial part of retail portfolio. Many instances of frauds have been reported under vehicle loan portfolio. In majority of the cases, the quotation was issued from a fake dealer & amount remitted to their account was siphoned off & no asset created. To have more robust system of monitoring of retail portfolio systemic improvement implemented under vehicle loan portfolio.

Systemic Improvement- Vehicle Loans

List of approved dealers/sub-dealers along with address, account number and IFSC details have been uploaded in LAS so that loan amount the disbursed to correct account only through RTGS/NEFT
Confirmation of account statement submitted by the borrower from the bank where the borrower is maintaining account as part of due diligence.
Registration of vehicle outside the state if requested by the party will be entertained selectively based on past satisfactory dealings of the customer and it will form part of deviation for which approval of next higher authority to be obtained.

.Overdraft in SB/CD accounts

Bank sanctions credit facilities to their customers based on their eligibility & nature of business. Though any type of excess over limit is normally discouraged by the Bank, however to tide over the difficulties,based on request of borrower Bank sometimes grants excess over limit/TOD as an exception. To monitor & restrict the grant of ELO/TOD within delegation, suitable checks were incorporated in CBS to check EOL/TOD as per delegation in CD/OD/CC accounts. It was further observed that some branches started giving OD in SB accounts of borrower & in CD accounts also even when there was a sanctioned limit to the customer, to check this anomaly systemic improvement is proposed in this area.

Systemic Improvement- Overdraft in SB/CD accounts

In Saving Bank accounts excluding Jan Dhan Account (where there is a provision for TODs) each TOD entry by invoking ACTODM menu option to be verified at Regional office.
In case of Current account, adherence of delegation power to be ensured. Where connected working capital account exists, TOD in current account not to be allowed by respective delegate.
A monitoring committee at Regional office introduced for periodical scrutiny of all TOD accounts.
The status of liquidation of such TODs made permanent agenda in ORMC at Central office.

.Keeping upfront amount offered for OTS in 'Escrow/No lien account

During settlement of NPA accounts, borrowers are hesitant in depositing their offer amount due to fear of appropriation of amount by the bank in the event of not accepting the borrower’s offer of settlement by the Bank. Further Bank park this amount in a sundry A/c which is open room for misuse of funds. To overcome this situation systemic improvement proposed for proper & transparent accounting of amount offered for OTS by the borrower.

Systemic Improvement- Keeping upfront amount offered for OTS in 'Escrow/No lien account

A Separate head under sundry deposit account is created for routing the transactions related to OTS amount offered by the borrowers. It is pointing type account so that the proceeds can be adjusted only in the account for which it is kept.

KYC

.Letter of thanks on opening of SB/CD accounts

Letter of thanks is effective tool for KYC compliance, however it is not being used effectively leading to various frauds.So, to prevent KYC related frauds we have undertaken systemic improvement initiative in this area to make our KYC process more robust…

Systemic Improvement- Letter of thanks on opening of SB/CD accounts

In case of accounts opened through DMS, data of returned letter of thanks to be obtained from the post office and accounts isfreezed for debit transaction.
In case of accounts opened at branch level including account opened through online mode a menu or flag is introduced in the existing system, where before allowing first debit transaction in newly opened Saving or Current account branches have to confirm whether letter of thanks have been delivered at customer’s/introducer’s address.
This process make the existing system of KYC more robust &chances of impersonation will be plugged.

.Surprise Cash check in Branches & ATMs

Surprise verification of cash is important to check the functioning of the branches & ATMs to prevent any untoward incident of fraud or embezzlement of cash. We have undertaken systemic improvement in this area to have robust monitoring of cash management of branches & ATMS.

Systemic Improvement- Surprise Cash check in Branches & ATMs

Monthly surprise cash verification by branch staff: Monthly verification of cash available at branch & onsite/offsite ATMs may be carried out by an official other than the joint custodians.
Quarterly surprise cash verification of cash available at branch & onsite/offsite ATMs may be carried out by officers from nearest branch or Regional office.

.Shell Companies

Shell companies are operating to evade taxes or indulge into money laundering practices. To prevent opening of new accounts of shell companies by the branches systemic improvements proposed in this area.

Systemic Improvement- Identification of Shell Company

Bank has implemented EFRMS portal.A data base of shell companies including Name, CIN & PAN details have beenmaintained &integrated with CBS through EFRMS portal.
In case of existing account identified as Shell Company, debit freeze of the account is being done.

KYE

.Four Eye Principle

Transgression of delegated authority is being seen in the branches. Where an officer process & sanctions the loan alone, compromising many rules/guidelines of the Bank. For effectiveimplementation of maker checker concept systemic improvement undertaken in this area.

Systemic Improvement- Four Eye Principle/ Two Mans Rule

Mandatory processing of all credit proposals at branch level by at least two officials for following basic Four Eye Principle to prevent fraudulent action or indiscriminate use of delegated authority by the branches.

.Delegated Powers

To mitigate the risk involved by the reckless finance of the delegatee who is about to retire in next 6 month, systemic improvement is proposed to protect interest of the bank as well as retiring official.

Systemic Improvement-Delegated power in case of officers due for retirement within 6 months

Delegated authority not to be exercised in individual capacity for officers due for retirement within 6 months.

Other Areas

.Recovery Agents

Many instances of misbehaviour of recovery agents have been reported. To bring uniformity in empanelment of recovery agents & to adopt fair practice code systemic improvement proposed in empanelment of recovery agents

Systemic Improvement: Empanelment/Engagement of Recovery Agents

Agreement format revised &important guidelines incorporated in the format in line with the code of commitment for the customers.
Due acceptance of agreement from RA/EA needs to be obtained for due performance and adherence.

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Systemic Improvements

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