JAIIB - AFB - MODULE - D - Operational Aspects of Loan Accounts Unit - 25 : Operational Aspects of Loan Accounts Types of Borrowers An individual Sole Proprietary Firm Partnership firm and joint venture HUF Companies Statutory Corporations Trusts and Co-Op societies
Go through these following terms in details with book Funded and Non-Funded Credit Facilities Term Loans Demand Loans Bills Purchased Bills Discounted End use of funds Primary Securities Collateral Securities Personal Security of Guarantor Fixed Charges Floating Charges Margin Priority Sector Refinance Credit Risk Management Credit Exposure Norms Base Rate System of Interest on Advances Fixed/Floating Rate of Interest on Loans Penal Rate of Interest Security Documents of Title of Goods Banker’s General Lien Negative Lien Restrictions on Advances Rehabilitation Recovery Fair Practice Code
Operational Process of Loans in the Banks: Receipt of Loan Application Assessment of viability and credit worthiness Sanction Disbursement Monitoring and supervision Inspections Review of the conduct of the account Renewal of advances
Operating instructions – Advance against Goods and Warehouse Receipts Go through these following operating instructions in details with book Documentation Margin Valuation Marketability Godown Board Insurance Godowns in a Pledge Account Pledging of Stocks Storage of goods pledged in the godowns where goods not pledged are also stored Delivery of stocks pledged Submission of stock statements in Hypothecation accounts Goods hypothecated in the godowns where goods not hypothecated are also lying Staff accountability Charges for inspection of Godowns/Assets/Securities etc. Godown charges Selective credit control Advances against warehouse receipts
Operational aspects of few common loan products Gold Loans : Must be covered under policy framed by Bank’s Board Prohibited from granting any advance against bullion/primary gold End use of the funds to be ensured Ownership of the ornaments to be ensured Valuation of gold ornaments to be done Prefer hallmarked jewellery Purpose of loan can be for both Agriculture and non-agriculture purposes Loan to Value (LTV) to be maintained (Max. 75 % of value of gold ornaments) Maximum amount of loan should be within board approved limit Record of security Custody of ornaments Repayment should not be more than 12 months (other than agriculture) Return of ornaments on repayment Delivery to third parties should be by a letter of authority from the buyer Default is to be informed to the borrower that the ornaments would be auctioned Should be insured for the approved value Surprise verification of the pockets to be carried out
Educational Loans Service area norms Eligibility criteria Student eligibility Expenses considered for loan Quantum of finance Margin Security Documentation Sanction Disbursement Repayment Follow up Processing charges Capability certificate
Home Loans Valuation of property Eligibility Loan to Vale (LTV) ratio Interest rate Security Insurance Disbursal – for purchase of constructed property/built up property Disbursal – for building construction Repayment No Foreclosure charges/Prepayment penalty for floating rate individual borrowers
Vehicle Loans Purpose of Auto Loan – New/used Car, MUVs, SUVs, Two wheelers Eligibility Documents required to be submitted Loan Tenure Loan to Vale (LTV) ratio Interest rate – Fixed/Floating Calculation of interest Penal interest Bounced cheque/ECS or SI dishonorurs Intimation of change in base rate Repayment Security Insurance Prepayment penalty is waived Inspection Fees and charges Disbursement
Apart from the above, all the loans sanctioned must comply with : KYC – proper verification of KYC CIBIL disclosure – Borrower should agree and give consent for disclosure by the Bank Default – In case of default, the borrower must be sent with reminders through post, fax, email, SMS Time taken for disposal of allocations – should be disposed within stipulated time .