ADVANCES- PRE

SANCTION & POST

SANCTION
N.CHANDRASEKARAN
ADVISOR-FACULTY

Pre Sanction
1.Following KYC norms scrupulously.
2Sanctioning limits NOT ignoring / flouting laid
down guidelines.
3.Sanction of facilities / additional facilities with
proper assessment.
4. Do not Act on extraneous influence in sanctioning
loan though nothing is on record.
5. Undue reliance on certificates given the CA,
opinion of lawyers and valuation by valuers.
6. Try to know whether assets are mortgaged to
other banks.

. Gathering information from the market and

secondary sources on the applicant firm /
company and the activity
Details of existing borrowing arrangements
with our bank and others
Audited financials for the last three years
Refer to the defaulters list
Ascertain IRAC status and borrowing
relationship of associate firms/ business
group
Determining whether proposal is in
conformity with bank's guidelines loans to
the sensitive sectors

Obtain photograph, IT PAN, sales tax/excise

registration number, shop and establishment
registration number, etc. of the person
authorised to operate the account.
Give a loan application form only if found
eligible under the bank scheme.
Receive the loan application form if filled in
properly and submitted along with
project proposal, the last three years projected
statements (audited balance sheet, profit &
loss account and cash flow statement; copies
of the relevant certificates; bio-data of
the promoter, etc

Issue a receipt of the loan application form

and enter into the Loan Application Received
Register.
As part of credit appraisal, scrutinise
documents (as the case may be) such as
partnership deed, certificate of incorporation
cum articles of association, resolution of the
board to raise borrowings, trust deed,
certificate of registration, and verify the
registered office/business office address.
Obtain the market report of the borrower, the
credit report from the existing bankers, and
reference letters

 Scrutinise the details of the guarantors which

include their relationship with the borrower, net
worth , business activities, if any, securities to be
offered, etc.
Background of the borrower
Position of present business activities
Proposed business activities
Project cost and sources of funds details
Assessment of feasibility of the project
technical, commercial, financial and managerial
aspects.
Study the balance sheet and reports of directors
and auditors.
Work-out key ratios D:E, CR, DSCR, BE point,
IRR, etc., to assess financial feasibility

Approve the projected figures as stated in the

proposal should be based on convincing
assumptions and verify certificates of auditors and
architects.
Exposure norms as applicable to the bank.
Refer to list of sensitive sectors.
Refer to the list of wilful defaulters.
Rating of the borrowers.
Compliance of guidelines relating to take-over of the
loan account from the other bank/s.
Profitability per borrower account.
Social cost : benefit analysis

Conduct pre-sanction inspection to

verify information as furnished in the
loan application form and assess the
antecedents of the
promoters/guarantors. Verify the
details of the securities to be offered;
proof of the residence, lease deed,
sales deed, rent agreement, etc. and
obtain a search report.
Interview the applicant and record the
conversation in brief.

Sanction credit facilities keeping in mind the

lending powers and send a draft letter of
sanction to the borrower stating the required
details including the terms and conditions
and obtain his written consent. If decided
not to sanction, state reasons thereof.
Observe the time limit set for loan sanction.
Execute documents as per guidelines of the
bank. Obtain documents properly stamped
and vetted. Create legal charge over the
assets financed including collaterals.

Disburse the loan amount as per bank

guidelines. Promoters contribution
should be deposited first before
disbursement of the amount. The
amount should be disbursed as per the
progress report

POST SANCTION STAGE

1.
2.
3.
4.

Reckless lending
Ensure end use of funds
check diversion of fund
Monitor large value transaction

5. Pre sanction / post sanction / supervision

deficiencies e.g non verification of security/over
valuation of security

6. Not routing transaction from account

POST SANCTION STAGE

Not noticing loans/limits taken by the borrowers
from several banks on same property.
Record of inspection not maintained.
Not taking cognizance of borrower nor routing
transactions through the accounts.
Opening LCs for accommodation purposes.
Discount/purchase of Foreign Bills without
obtaining opinion reports on buyers.
Negotiating/discounting/purchasing bills
accompanying fake documents.

POST SANCTION STAGE

Delay in submission of stock / financial / control
statements
Return of cheques issued by borrowers
Devolvement of DPG instalments and the non
payment within a reasonable period
Frequent devolvement of Letters of credit and
non-payment within a reasonable period
Frequent invocation of bank guarantees and nonpayment within a reasonable period

Documents time barred

Non renewal of limits

POST SANCTION STAGE

Excess granted and remains unadjusted within
the agreed time
Excess allowed without the adequate DP
Non-payment of bills discounted or under
collection
Poor financial performance in terms of declining
sales and profit, cash losses, net loss and erosion
of net worth etc.
Incomplete documentation relating to creation /
registration of charges/ mortgages
Non-compliance of terms and conditions of
sanction

POST SANCTION STAGE

TOOLS FOR MONITORING

Monthly Stock statement .

Debtors Statement
CSS
Unit Inspection and interaction with the
Borrower
Quarterly working results published in
the News papers
Review /Renewal

Let us make quality assets

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