CAUSES FOR NPA

REASONS FOR BORROWER ACCOUNTABILITY

Internal

1. Failure of the business

2. Funds borrowed for a particular purpose but not use for the said purpose.
3. Project not completed in time.
4. Failure to maintain financial discipline
Eg: failure to route transactions through Overdraft account
5. Will full defaults, siphoning of funds, frauds, disputes, management disputes and
misappropriation.
6. Non-compliance with sanction terms
Eg: failure to complete with term of stage release
7. Excess capacities created on non- economic costs.
8. Internal issues
Eg: Death of borrower, Conflict among parties
9. Non submission of necessary documents or data within the stipulated time
10. Diversion of funds for expansion/ modernization/ setting up new projects/ helping or
promotion sister concerns.
11. In ability of the corporate to raise capital through the issue of equity or other debt
instrument from capital markets.

External

1. Regulatory reasons
Eg: Changes in legal regulations
2. Industrial recession.
3. Government policies like excising duty changes, importing duty changes etc.

REASONS FOR STAFF ACCOUNTABILITY

Pre sanction & sanction stage

1. Failure to ensure KYC compliance for borrower and guarantor

2. Failure in verification of the borrower/borrowers/unit to be done by the branch and
sanctioning authority with
  CIBIL
 RBI defaulters list
 SAL list/defaulters list of ECGC in the case of export advances
 ROC for details as well as ROC charges wherever applicable
 CRILC
 Whether the borrower known to be of dubious integrity
3. Whether Credit Limits sanctioned in contravention of the Loan policy of the Bank
prevailing at the time of sanction
4. the recommending Officer suppressed material information / provided misleading
information.
5. -the sanction failed to stipulate terms / conditions usually necessary for such credit
facility
-Whether repayment schedules were correctly fixed.
6. the sanctioning authority has exceeded his discretion / has flagrantly abused his
power with / without malafide intention.
7. -Whether Pre sanction inspection of the unit was done as per rules and any anomaly
noticed
-Whether the collateral securities of the unit was inspected as per norms
8. -Whether property accepted as collateral security was valued correctly as per the
norms of the bank.
-Whether the property is identifiable, boundaries can be located.
-Whether the value quoted in the property valuation report is in line with market
value.
-Whether expert valuation of property is done where ever applicable.
9. Whether insufficient / absence of sufficient market intelligence / information about
the borrower is noticed on the verification.
10. -Whether subsequent enhancement was recommended after original sanction on
obtaining fresh market intelligence.
-Whether the subsequent enhancement is justified by the projections, account
operations etc.

Documentation, disbursement and monitoring stage

1. any of the terms and Conditions stipulated in the sanctions were not complied with /
flagrantly violated
2. documentation was done as per norms.
document verification was done as per requirement
comments on document verification were rectified as per rules.
Whether LSR approval was done as per requirement
Whether all comments in the LSR approval were rectified.
3. Registration of charge not done with Registrar of Companies (in the case of
companies)
Registrar of societies (in case of societies) or lacuna in creation of charge on the
security is noticed (As applicable)
 Whether CERSAI registered for the securities as per rules
 Whether Liens noted, if applicable
 Whether PAs registered (in case of contract works)
 Whether SRO registration of MOD done if applicable
 Whether EM created as per rules
o If there is any deviation, give details and reason for the same if any
4.
 Payments were made direct to supplier
 Whether end use is properly verified and proper records obtained as per sanction
order
 Whether frequent unreasonable cash withdrawals allowed
 Whether receipts and payments not related to the activity of the business for which
loan was sanctioned and diversion of funds noted.
 Whether current account was allowed to be operated in case of working capital limits
with our bank or other banks, without the permission of sanctioning authority.
 Whether the transactions in the current account allowed by the sanctioning authority
are genuine and reasonable
 Any fund diversion noticed in such transactions
5. Whether
 periodical inspection of stock and unit visits were made and properly recorded
 In term loans stage releases were made after verification of progress of work.
 Housing Loans: stage release done as per norms, duly conducting and recording the
site inspection
 Education Loan: Payment made direct to institution and mark list of previous years
are obtained
 In case of project loans, proper follow up of DCCO were done
 Whether DCCO is achieved and if not the reasons thereof
 Whether the account was allowed to be operated without drawing power or without
adequate stock of primary security or without ensuring sufficient book debts.
 Whether Frequent TODs/Adhoc limits were granted in the account beyond authority.
 Whether excess drawing reports were not sent to RO/HO and got ratified.
 Whether documentation for TOD/Adhoc limit were taken as per rules
 Whether there are any irregularities in the conduct of the account/erosion in the value
of primary/ collateral security which should have been reported were not brought to
the notice of Controlling Offices/sanctioning authority
6. Whether early warning signals emanating from various sources were taken
cognizance of and mitigation measures taken.
7. Whether revival documents/AOD/ADS/ Confirmation of balance has not been
obtained and the documents have become time barred
8. Discounted Bills and cheques for accommodation or beyond discretionary powers
9. Failure to file suit within the time limit and allowing document to become time barred
10. Failure to initiate SARFAESI / any other recovery action initiated