JAIIB AFb Unit 25 - Operational Aspects of Loan Accounts

Types of Borrowers

1. An individual
2. Sole Proprietary Firm
3. Partnership firm and joint venture
4. HUF
5. Companies
6. Statutory Corporations
7. Trusts and Co-Op societies

Go through these following terms in details with book

1. Funded and Non-Funded Credit Facilities
2. Term Loans
3. Demand Loans
4. Bills Purchased
5. Bills Discounted
6. End use of funds
7. Primary Securities
8. Collateral Securities
9. Personal Security of Guarantor
10. Fixed Charges
11. Floating Charges
12. Margin
13. Priority Sector
14. Refinance
15. Credit Risk Management
16. Credit Exposure Norms
17. Base Rate System of Interest on Advances
18. Fixed/Floating Rate of Interest on Loans
19. Penal Rate of Interest
20. Security
21. Documents of Title of Goods
22. Banker’s General Lien
23. Negative Lien
24. Restrictions on Advances
25. Rehabilitation
26. Recovery
27. Fair Practice Code

Operational Process of Loans in the Banks

1. Receipt of Loan Application
2. Assessment of viability and credit worthiness
3. Sanction
4. Disbursement
5. Monitoring and supervision
6. Inspections
7. Review of the conduct of the account
8. Renewal of advances

Operating instructions – Advance against Goods and Warehouse Receipts

Go through these following operating instructions in details with book

1. Documentation
2. Margin
3. Valuation
4. Marketability
5. Godown Board
6. Insurance
7. Godowns in a Pledge Account
8. Pledging of Stocks
9. Storage of goods pledged in the godowns where goods not pledged are also stored
10. Delivery of stocks pledged
11. Submission of stock statements in Hypothecation accounts
12. Goods hypothecated in the godowns where goods not hypothecated are also lying
13. Staff accountability
14. Charges for inspection of Godowns/Assets/Securities etc.
15. Godown charges
16. Selective credit control
17. Advances against warehouse receipts

Operational aspects of few common loan products

Gold Loans

1. Must be covered under policy framed by Bank’s Board
2. Prohibited from granting any advance against bullion/primary gold
3. End use of the funds to be ensured
4. Ownership of the ornaments to be ensured
5. Valuation of gold ornaments to be done
6. Prefer hallmarked jewellery
7. Purpose of loan can be for both Agriculture and non-agriculture purposes
8. Loan to Value (LTV) to be maintained (Max. 75 % of value of gold ornaments)
9. Maximum amount of loan should be within board approved limit
10. Record of security
11. Custody of ornaments
12. Repayment should not be more than 12 months (other than agriculture)
13. Return of ornaments on repayment
14. Delivery to third parties should be by a letter of authority from the buyer
15. Default is to be informed to the borrower that the ornaments would be auctioned
16. Should be insured for the approved value
17. Surprise verification of the pockets to be carried out

Educational Loans

1. Service area norms
2. Eligibility criteria
3. Student eligibility
4. Expenses considered for loan
5. Quantum of finance
6. Margin
7. Security
8. Documentation
9. Sanction
10. Disbursement
11. Repayment
12. Follow up
13. Processing charges
14. Capability certificate

Home Loans

1. Valuation of property
2. Eligibility
3. Loan to Vale (LTV) ratio
4. Interest rate
5. Security
6. Insurance
7. Disbursal – for purchase of constructed property/built up property
8. Disbursal – for building construction
9. Repayment
10. No Foreclosure charges/Prepayment penalty for floating rate individual borrowers

Vehicle Loans

1. Purpose of Auto Loan – New/used Car, MUVs, SUVs, Two wheelers
2. Eligibility
3. Documents required to be submitted
4. Loan Tenure
5. Loan to Vale (LTV) ratio
6. Interest rate – Fixed/Floating
7. Calculation of interest
8. Penal interest
9. Bounced cheque/ECS or SI dishonorurs
10. Intimation of change in base rate
11. Repayment
12. Security
13. Insurance
14. Prepayment penalty is waived
15. Inspection
16. Fees and charges
17. Disbursement

Apart from the above, all the loans sanctioned must comply with :

1. KYC – proper verification of KYC
2. CIBIL disclosure – Borrower should agree and give consent for disclosure by the Bank
3. Default – In case of default, the borrower must be sent with reminders through post, fax, email, SMS
4. Time taken for disposal of allocations – should be disposed within stipulated time