Lesson No. 32 – Monitoring of Advance Accounts

Good morning my ¥gen f b friends
Saturday 5/3/16

We will continue our dissolution on Monitoring Aspects.
Let us discuss aspects about Stock Inspection.
1)The subject of present deep Concern and Focus in economy and Banking is surely the tumultuous growth in NPA.The Government , the Bankers, the Stake holders and even the general public is talking about the menace. One of the methods to control NPA is by regular inspection of Assets created out of loans/advances/credit facilities extended by us bankers. It is true that we are unable to pay full attention on this basic Tool of monitoring. Reasons are umpteen.
2)We are suppose to inspect
For Working Finance:- The Current Assets- Inventory part comprising of RM, SFG, FG, and Stores and Spares,Consumables ultimately meant for sale in the usual course of business.
These stocks are available in the Shop (for shopkeepers) or in their godowns, or rented godowns, ware houses or on Shop floor for manufacturing or given out to outsiders for processing or on job work. They are stored in Silo's or at jetty's or bonded godowns or with wharffingure's at the dock yards. They may be in the transit in or out. I remember having extended finance for stocks of Burma Teak Wood which was on a ship in high seas and sold there from in smaller lots. The stocks of perishable items such as Fruits, Meat, Fish, Flowers, vegetables,Dry fruits are mostly stored in Cold Storage or in Green houses and disposed off quickly. Thus there are umpteen possibilities some goods like eatables, medicines,chemicals even Dairy products, fruits and vegetables have certain shelf life only.The hazardous goods like petrol, petro - chemicals, chemicals and others have to be dealt separatelay. Similarly the class of medicines and intermediates. Remember that there are many restrictions on production of opium based products.
2 Receivables/Debtors:-
They are assets generated when goods are sold on credit.Book debts are merely arrived from the receipted bills/ challans/mere credit entries (puckka or Kutcha entries).The purchases are recorded as Debtors.(Consider credit from your grocer,medical shop etc.).We sanction OD or CC against them.
So far as Large business houses or Corporate borrowers are concerned they appear in the form of regular bills drawn on purchasers or Supply bills.
Since the value of goods sold will be received in future they are referred as RECEIVABLES.
3)We also inspect the the FA like Plant and machinery;Vehicles and other FA Assets financed by us
Now we will deal this inspection in two ways.
(a) Our monthly inspection by BM/Officer of branch.
(b) Detailed inspection by a dedicated Stock Inspecting Officer as per policies of bank.

a)INSPECTION by BM/Officers
i) There should not be a gap between first disbursement and inspection as this ensures the creation of Assets and have a pressure on borrower.
ii) The invoices/bills and payments be by Cheques /DDs issued or remittance by NEFT/RTGS directly after taking sutible margins.Put your tick on some bills and date.
iii) Some invoices/ bills for purchases be crossed chequed.
iv) For machinery vehicles check the make, type Chassis no or other identifying numbers.
v) Always use A B C technique of stock checking.Highest valued stock may be physically counted rest say B valued 10 to 20 % and C valued Random.(This is similar to our Cash Checking in Currency Chest ie Check Re.1000 notes actuals, few random bundles and packets of 500 and 100 and rest sample random check.)
VI) Focus on debits in the account, whether for purchase of goods or not. Withdrew CBS and with multi city clearing system and Net facilities it is becoming impossible for the bm to have am effective control over credit and debits in the account. However for large value transactions some effective system has to be developed.
vii)Receivables or Sundry Debtors - Again some bills be checked.Borrower should develop the sys to mark the paid bills and test check be effected.
viii) Now the inventory is maintained on line on computer particularly; particularly through packages like tally. The sys used by the Borrower is to be understood.

Let us close the discussion and meet again tomorrow.

Waman Gokhale