Sep 02, 2024 .
BANKING & AUDIT
Aman Marodia
CA, DISA, REG VALUER (SFA)
Partner, A S H A & Associates
Chartered Accountants
SECTION 1 – BANKING: A REVERSE ROBINHOOD
Reverse Robinhood in the context of banking typically refers to practices where financial systems or policies benefit the wealthy at the expense of those with less money.
BASIC STRUCTURE-1
| Credit Balances (Deposits) | Debit Balances (Advances) |
|---|---|
| Savings and FD | Loan |
| Govt. Borrowing | Investment & Others Repo & Capital |
BASIC STRUCTURE-2
| Expenses (Deposits) | Incomes (Advances) |
|---|---|
| Savings and FD | Loan |
| Govt. Borrowing | Investment & Others Repo & Capital |
MCLR/EBLR
- Marginal Cost of Funds based Lending Rate (MCLR)
- Interest rate on loans where profit is ₹0/-
- Means zero profit and zero loss for the bank after paying interest on deposits, salary, and other expenses.
REPO RATE
The repo rate is the interest rate at which the Reserve Bank of India (RBI) provides financial assistance to commercial banks by lending them money. The current repo rate stands at 6.50% as per the recent update.BANKING PRODUCTS – ADVANCES
| Sr. No. | CC/OD | DL/TL (Term Loan) |
|---|---|---|
| 1 | Cash Credit (Business with Stock Mortgage) | New Business (Trading) for Stock Purchase |
| 2 | Overdraft/ Mortgage/AGRI/ Business/Personal | New Business (Manufacturing) Machinery & Equipment |
| 3 | KCC (Agricultural land) | Retail Loan
– Housing/Car/
Education/ Personal |
STANDARD ASSET OR PERFORMING ASSET
- Asset: Advances without any problem.
- Does not disclose any credit weakness.
- Does not carry more than normal risk attached to business.
- Regularly generating income.
NPA – NON-PERFORMING ASSETS
Basic Conditions:
- CC/OD: Interest overdue for 90 days or more from the date of order.
- TL: 3 EMI overdue.
- KCC: Treated as NPA if interest and/or installment remains overdue for:
- Two crop seasons in case of short-term advances.
- More than one crop season in case of long-term advances.
PROVISIONING
- To protect banks from defaulters, banks keep aside a certain percentage of funds and book it as an expense for future uncertainties.
- 15% for substandard assets – NPA up to 12 months.
- 25-40% for doubtful assets – NPA for more than 12 months.
CBS – CORE BANKING SYSTEM
- Examples: FINNACLE, BANKS, FLEXCUBE, etc.
SECTION 2 – AUDITING
Checking for all the compliances with banking & RBI policies and reporting deviations as per the scope of work.
AUDIT TYPES FOR CAs
- Statutory Audit: Balance Sheet Audit – Yearly
- Concurrent Audit: Internal Audit – Monthly
- Revenue Audit: Internal Audit – Yearly
- Stock Audit: Independent Audit as per assignment
- Due Diligence: Based on case to case.
- Specialized Monitoring: Internal – Monthly (Large Accounts)
MUDRA CHECKLIST
- Proof of identity – Self-certified copy of Voter ID card/Driving License/PAN Card/Aadhaar Card/Passport/Photo IDs issued by Govt. Authority, etc.
- Proof of residence – Recent telephone bill, electricity bill, property tax receipt (not older than 2 months), Voter ID card, Aadhaar Card, Passport of Individual/Proprietor/Partners, Certificate issued by Govt. Authority/Local Panchayat/Municipality, etc.
- Proof of SC/ST/OBC/Minority, if applicable.
- Proof of Identity/Address of the Business Enterprise – Copies of relevant Licenses/Registration Certificates/Lease or Rent Agreement/Other Documents pertaining to the ownership, identity of address of business unit/Udyog Aadhaar Memorandum.
- Statement of Account from the existing Banker for the last six months, if any.
- Last two years unaudited balance sheets of the existing units along with income tax/sales tax returns, etc. (Applicable for loans of ₹2 lakhs and above).
- Projected balance sheets of start-ups/existing units for one year in case of working capital limits and for the period of the loan in case of a term loan (Applicable for loans of ₹2 lakhs and above).
- Sales achieved during the current financial year up to the date of submission of application (in case of existing units).
- Proforma invoices/quotations for the assets to be purchased and estimates for the civil works, if any, to be undertaken. Aspect of technical feasibility and economic viability may be discussed with the borrower if felt necessary.
- Asset & Liability statement of the borrower, including Directors & Partners.
- Memorandum and Articles of Association of the company/Partnership Deed of Partners, etc., wherever applicable.
- Photos (two copies) of applicant/Proprietor/Partners/Directors not older than 6 months.
HOUSING CHECKLIST & WHERE PROPERTY IS INVOLVED
- KYC/CIBIL Compliance
- Income Proof
- Pre-Sanction Survey
- Opinion Report
- Plan Approval, Valuation Report, Title Search
- EM Creation (Equitable Mortgage)
- PDC
- CERSAI
- Insurance