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

aa. 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
  18. Must be covered under policy framed by Bank’s Board
  19. Prohibited from granting any advance against bullion/primary gold
  20. End use of the funds to be ensured
  21. Ownership of the ornaments to be ensured
  22. Valuation of gold ornaments to be done
  23. Prefer hallmarked jewellery
  24. Purpose of loan can be for both Agriculture and non-agriculture purposes
  25. Loan to Value (LTV) to be maintained (Max. 75 % of value of gold ornaments)
  26. Maximum amount of loan should be within board approved limit
  27. Record of security
  28. Custody of ornaments
  29. Repayment should not be more than 12 months (other than agriculture)
  30. Return of ornaments on repayment
  31. Delivery to third parties should be by a letter of authority from the buyer
  32. Default is to be informed to the borrower that the ornaments would be auctioned
  33. Should be insured for the approved value
  34. 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
    1. Eligibility
    2. Loan to Vale (LTV) ratio
    3. Interest rate
    4. Security
    5. Insurance
    6. Disbursal – for purchase of constructed property/built up property
    7. Disbursal – for building construction
    8. Repayment
    9. No Foreclosure charges/Prepayment penalty for floating rate individual borrowers

Vehicle Loans

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

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