Post-Sanction
Surveillance & Asset Health
Continuous oversight mechanisms (QIS, Monthly Surveillance, and Stock Audits) to ensure the sustained quality of bank assets and early detection of incipient sickness.
The Monitoring Triad
QIS Analytics
Quarterly Information Systems (Tandon/Chore) for financial trend monitoring and NWC tracking.
Physical Verification
Surprise godown/factory visits to ensure existence and quality of inventory supporting DP.
Continuous Surveillance
Monthly surveillance data (Turnover, Debits, Bills) for ongoing liquidity tracking.
While Credit Administration encompasses all aspects of credit lifecycle, Monitoring refers specifically to the drill of overseeing the advance continuously to ensure the health of the asset remains "Standard."
The QIS Lab: Forensic Scenarios
Real-world case studies demonstrating how QIS data reveals shifting risk profiles.
SCENARIO I: Fine Chemicals Ltd (Consortium Audit)
Consortium PBF Audit| ASSESSMENT DATA (Oct '94) | |
|---|---|
| Raw Materials (Imported + Indig.) | 80.00 |
| Work in Progress (WIP) | 15.00 |
| Finished Goods & Receivables | 45.00 |
| Total Current Assets (A) | 140.00 |
| Other Current Liabilities (Supplier Credit) | 40.00 |
| Working Capital Gap (A-B) | 100.00 |
| Projected NWC (Margin 25%) | 40.00 |
| Permissible Bank Finance (PBF) | 60.00 |
Forensic Insight
The availability of 180-days DA terms for imported alcohol significantly increased Current Liabilities (Rs. 40 Cr). As a result, the **PBF was reduced by Rs. 10 Cr**, ensuring the bank doesn't over-finance when supplier credit is available.
SCENARIO II: Beta & Co (Textile Unit)
Change in Creditor Holding| IMPACT OF TRADE CREDITORS (Sept) | |
|---|---|
| Total Current Assets (Projected) | 30.00 |
| Trade Creditors (Shift: 1m to 2m) | 6.00 |
| Other Current Liabilities | 5.00 |
| Permissible Bank Finance | 11.00 |
| * Previous Sanctioned Limit | 14.00 |
Monitoring Verdict
When Trade Creditors increase from 1 to 2 months, the Working Capital Gap narrows. The **Operative Limit was reduced to Rs. 11 Cr**, even though the sanctioned limit was Rs. 14 Cr. This prevents fund diversion.
SCENARIO III: DEF Ltd (Fireworks Industry)
Seasonal FlexibilityIn seasonal sectors like fireworks, monitoring must be dynamic. QIS II revealed peak periods (Oct-Dec) where **Bills limit was increased to Rs. 210L** while CC was reduced to Rs. 70L, maintaining the total cap of Rs. 280L.
Gallery of Failures: Red Flags in Physical Verification
Real occurrences where neglect of physical verification led to collapse of credit lines.
Entire hypothecated stock (Finished Goods) used to construct a sister-unit's factory. No visit for 1.5 years. **Result: Total Loss.**
Rs. 8 Crores of "Stock" turned out to be processing dust. Shortfall masked by non-verifying officials. **Result: Liquidty Shock.**
Factory under "lockout," but night-time production removed clandestinely. Detected via high electricity bills. **Result: Scam Exposed.**
Alcohol quota sold in black market instead of manufacturing. Verified via end-use of funds audit. **Result: License Revoked.**
Shortfall in stock explained as "Out for Job Work." Verification of the job-site revealed a closed house. **Result: Recovery Initiated.**
Godown supposed to hold chemicals was filled with common salt to maintain volume visual. **Result: Immediate NPA.**
In a Maida Mill case, neat stacks of Maida looked full until a Food Corporation of India official threw a stone over the room—it hit the floor, revealing a hollow center. **Routine inspection is no substitute for Wisdom.**
Monthly Surveillance of Large Accounts (>50L)
A system to ensure that bank failures do not come like a "bolt from the blue." All data is compiled internaly by the branch.
STATEMENT OF OUTSTANDINGS & OPERATIONS
FORM_MONTHLY_S_DATATURNOVER AUDIT
- - Monthly routing thru CC a/c
- - Relationship to Annual Plan
- - Consortium Share Pro-rata
DEBIT SCRUTINY
- - Large payments audit (>2L)
- - Cash withdrawal frequency
- - Identification of unrelated beneficiaries
BILLS MONITORING
- - Lodgement vs Payment Velocity
- - Overdue age analysis
- - Returned Unpaid (Vigilance)
The Case of Diversion Partnership
An electrical component unit diverted CC funds to 4 partnership firms (family-owned) by creating bogus supply invoices. The Monthly Surveillance showed debits to "new parties" who had no manufacturing capacity. **Detected via the "Large Payment Audit" at the CC debit level.**
The Counselor's Corner: Strategic Risks
Lessons from good intentions that led to poor outcomes.
The Case of the Tooth Brush
A small unit tried "Backward Integration" (manufacturing its own bristles). **Failure point**: They lost the 90-days credit available from the external bristle supplier and had to pay cash for raw chips. **Result**: A Rs. 17L liquidity strain they couldn't survive.
The Case of the Bucket
A bucket manufacturer took a bulk order for a washing-powder free-gift scheme. **Failure point**: Once 1 lakh free buckets hit the market, his retail sales crashed to zero for 12 months. **Result**: Cash losses and repayment default.
Monitoring Wisdom
"Wise men learn from others' experience." Banking experience is often acquired through difficult credits and delinquent borrowers. Use every tool (QIS, Visits, Data) to keep your asset "Standard."
The Monitoring Drill
- Scrutinize QIS for NWC erosion
- Verify physical stock end-use
- Monitor large CC debits monthly
- Audit Bill-Velocity vs. Real Sales