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Welcome

Sanjeeva Pieris Blog — Sun, 31 Aug 2008 05:44:00 GMT

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Welcome to my site.....!!

Here you can browse through some of the projects which were spear headed by me and read through several articles written by me on Banking Subjects.....

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Thank you,

Sanjeeva Pieris

SECURITIES FOR ADVANCES

Sanjeeva Pieris Blog — Sun, 31 Aug 2008 05:23:00 GMT

Types of Advances

FUNDED

o OVERDRAFT

o ALL TYPES OF LOANS

o CHEQUE PURCHASE

o BILLS PURCHASE

o LEASES

o CREDIT CARDS

NON FUNDED

o GUARANTEES

o LETTERS OF CREDIT (SIGHT / USANCE)

WHAT ARE THE IMPLICATIONS WHICH MAY ARISE

UNABLE TO PAY

o OVERDRAFT

o LOANS

o LEASES

o CREDIT CARDS

DISHONOURED

o CHEQUES PURCHASED

o BILLS DISCOUNTED

UNABLE TO SETTLE CLAIM

o GUARANTEES

UNABLE TO RETIRE DOCS

o LETTERS OF CREDIT

WHAT IS SECURITY………??

SECOND MODE OF REPAYMENT

A FALL BACK SITUATION

CHARACTERISTICS OF SECURITY

EASY TO ACCESS

EASY TO IDENTIFY THE TITLE

EASY TO OBTAIN

EASY TO REALIZE

STABLE IN VALUE

POINTS TO NOTE WHEN OBTAINING SECURITY DOCUMENTS

Title

Authority

Value

Easy to realize

Identity & accessibility

Formalities

TITLE

Proper title / without defects

Any other party having a right (get a charge over it.)

Are we getting all rights over the asset

Free of all encumbrances

AUTHORITY

Does he have authority to charge the asset.

In what capacity

VALUE

Is the value adequate

What will be the value in a forced sale

Is it stable over time

EASY TO REALIZE

How easy is it to realize

Cost of realization (financial , image of the bank)

Time taken to realize

Any other obstacle

IDENTITY & ACCESSIBILITY

Easy to identify / Locate

Easy access to security

FORMALITIES

Proper documentation & legal formalities

Prior notice to various authorities

Registration requirements

Periodic inspections

Insurance

PRIMARY & SECONDARY SECURITY

PRIMARY SECURITY

The security you rely most.

SECONDARY SECURITY

The other supporting documents which cover incidence typical to the type of facility

MOST COMMON PRIMARY SECURITY

CASH

LIFE INSURANCE POLICIES

ABSOLUTE OWNERSHIP OF VEHICLES

MORTGAGES

– Property

– Stocks

– Vehicles

– Book debts

– Machinery

SECONDARY SECURITY DOCUMENTS

DEMAND PRO NOTES

FACILITY AGREEMENT FORMS

TERM LOAN AGREEMENT

OVERDRAFT AGREEMENT

GUARANTEE BONDS

INDEMNITIES

GENERAL SECURITY AGREEMENT

SERIES OF LOANS

PLEDGE LOAN AGREEMENT

Please Note……….

Some times secondary security docs are considered as primary security

For PAL Loans

TODs…..etc…..

Primary Securities

CASH

SET- OFF

3^rd PARTY SET-OFF/GUARANTEE

OTHER DOCS FOR THE FACILITY

LIFE INSURANCE

ORIGINAL POLICY

– Age Admitted

– Any Beneficiaries

ASSIGNMENT OVER POLICY * 3

DOCS FOR THE FACILITY

SHARES TO BE LODGE IN SLACH A/C

SHARE TRANSFER FORMS

IRREVOCABLE POWER OF ATTORNEY

o ( To be registered at The Registrar General )

MORTGAGE OVER SHARES

o ( To be registered at The Land Registry. If the borrower is a Limited Liability Co.. The Document Should be registered in The Land Registry & The Registrar of Companies.)

OTHER DOCS FOR THE FACILITY

MORTGAGES

MORTGAGE OVER PROPERTY-NOTARIALLY EXECUTED

OTHERS -EXECUTED IN THE BANK

– Internal formatted Documents are used for this purpose

Mortgage over vehicles

Mortgage over stocks/Book Debts (Affidavit to be obtained )

Mortgage over machinery

By

Sanjeeva Pieris

Bad Credit

Sanjeeva Pieris Blog — Sun, 31 Aug 2008 05:17:00 GMT

Five ‘C’s Of Bad Credit

Complacency

Over reliance on past performance.

Carelessness

Bad evaluation / documentation. Lack of information.

Communication

Ignore early warning signs. Not in touch with the client after granting facilities.

No follow up / monitoring.

Contingencies

Ignore what the financials told us. Did not say no to the client when we should have.

Competition

Being in competition with other banks. Lending to the same client doing the same business.

Early Warning Signals through Bank Records.

Cheque returns for lack of funds.

Frequent excesses in the current account.

Request to pay cheques in the morning & agreeing to deposit in the evening.

Loan installments & import loans become overdue.

Frequent request for TOD s

Signs of desperation for enhanced facilities/ agreeing to any rate of interest.

Drawing inter company cheques (Cross Firing).

Issue of cheques for round sums.

Drop in pay-ins.

Hardcore in the overdraft.

Increase tendency to draw against un cleared effects.

Request to convert short term / temporary facilities to a TLN

Other Early Warning Signs.

Sudden resignation of key people.

Disputes among key people.

Customer becoming too friendly or distance from the bank.

Inefficient, untidy & disorderly business premises.

Lethargic attitude of the management & employees.

Dissatisfied employees.

Change in attitude towards risks (Increase risk taking or overcautious).

Diversion of funds.

Change of accounting practice or auditors.

Delay in submitting management information.

Creative accounting / window dressing.

Adverse performance indicators in the financials.

20 Common Reasons for Credit Loss

1. Security overvalued / No valuation obtained / improperly margined.

2. Disbursement of funds prior to completion of documentation,

3. By pass authority due to personal relationships or gain.

4. Advances to new ventures with inexperienced owner / manager.

5. Grant of additional facilities without proper evaluation and/ or without additional Security

6. Repeatedly rescheduling of facilities to cover over dues.

7. Non analyzing of borrowers cash flows and repayment capacity.

8. Failure to review loan status frequently.

9. Disbursement of funds not being monitored by the bank. Loan proceeds being utilized for personal use or to pay another bank.

10. Loans granted not in line with the banks credit policy, some times credit officers hiding the purpose if it’s out side the credit policy.

11. Repayment & other terms and conditions not being clearly advised to the borrower prior to agreeing on the facility.

12. Failure to obtain infrequent financial statements from the client.

13. Failure to realize security because the borrower raised nuisance legal defences

14. Bank failure to follow its own written policies and procedures.

15. Undue pressure to grant loans to certain sectors due to political reasons.

16. Ignore of early warning signs.

17. Failure to visit the borrowers business premises regularly.

18. Lending against fictitious financials with no qualified audit verification.

19. Ignoring of negative CRIB reports.

20. Failure to demand repayment or realization or collateral quickly when it has become obviously hopeless