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Most Common High - Medium Risk & How To Improve Risk Rating of Branch - New

This document discusses common high and medium risk failures that can negatively impact the risk rating of bank branches. It identifies key areas where branches often lose marks, such as revenue leakage, non-compliance with audits, lack of proper insurance on collateral, overdue loans, and low cash recovery rates. The document then provides suggestions for how branch officials can improve their risk rating by scoring well on risk parameters related to business risk, control risk, operational risk, credit risk, IT risk and compliance risk. Areas of focus include loan documentation, cash management, risk-based customer due diligence, and timely initiation of NPA resolution actions.

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akshat nagar
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227 views11 pages

Most Common High - Medium Risk & How To Improve Risk Rating of Branch - New

This document discusses common high and medium risk failures that can negatively impact the risk rating of bank branches. It identifies key areas where branches often lose marks, such as revenue leakage, non-compliance with audits, lack of proper insurance on collateral, overdue loans, and low cash recovery rates. The document then provides suggestions for how branch officials can improve their risk rating by scoring well on risk parameters related to business risk, control risk, operational risk, credit risk, IT risk and compliance risk. Areas of focus include loan documentation, cash management, risk-based customer due diligence, and timely initiation of NPA resolution actions.

Uploaded by

akshat nagar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Most Common High / Medium Risk Failures &

How to Improve Risk rating of Branches


Components of RISK Rating

Business Risk
a) Credit Risk
b) Operational Risk
c) Earnings Risk
d) Strategy and business environment Risk
e)Liquidity Risk

Control Risk
a)Operational Control Risk
b)Credit Control Risk
c)Compliance Risk
d)IT Risk
Risk matrix

Marks for Composite Rating of Domestic Branches:


Marks as per Branch Marks as per Branch Marks as per Branch
Particulars   categorization categorization categorization
    I II III
Business Risk:        
Business Risk - Credit 280 275 265
Business Risk - Earning 65 65 70
Business Risk - Liquidity 30 35 40
Business Risk -
Operational 80 80 80
Business Risk - Strategy 45 45 45
Total Business Risk 500 500 500
Control Risk:        
Operational Control
Risk 140 190 240
Credit Control Risk 300 250 200
Compliance Risk 30 30 30
IT Risk 30 30 30
Total Control Risk 500 500 500
  Grand Total 1000 1000 1000
Major Areas under Business Risk where Branches
lose marks
During analysis of -63- High Risk Branches, we have observed that in Branches are
losing marks due to following Areas
% Branches
Sr No Parameter failed
%age of Revenue Leakage to total income excluding HO Interest detected by concurrent
1. auditors/ZIAD Auditors or any other audit/inspection during last one year 98.41%
Compliances to Inspection audit , CEMU alerts, credit audit and quality and timeliness of
2. actual compliance- timely submission of CREC 98.41%
3. Insurance cover on the Primary / collateral security as per the latest valuation reports 96.83%
4. LAD due >6 months for overall portfolio as on date of audit 92.06%
5. '% of cash recovery/upgradation to Gross NPA (same as gross NPA level) 90.48%
6. Timely submission of CRC/ QRC 88.89%
Percentage of accounts in the SMA -1 category and above to the total standard advances
7. of the Branch(Exposure Wise) 82.54%
8. Persisting irregularities/ Submission of QRC consecutively for 3rd time 79.37%
9. Standard Advances to Total Advances as of Last Quarter before the date of Audit 74.60%
Ratio of average cash retained to average payments (one day from each month of the
10. audit review period to be taken for average calculation) 68.25%
11. Documents not renewed- as on date of audit 66.67%

12. Quick mortality cases 63.49%


Business Risk (Credit Risk)
Branch Officials can improve the Risk Rating of the Branch by scoring
effortlessly in below mentioned parameters under Business Risk (Credit Risk)

 %age of standard advances reviewed (during review period) on


technical/short review to total advances
 Compliances to Inspection audit , CEMU alerts, credit audit and quality and
timeliness of actual compliance- timely submission of CREC
 Documents not renewed- (DNR)
 % of cash recovery/upgradation to Gross NPA
 Insurance cover on the Primary / collateral security as per the latest
valuation reports
 LAD due for more than 6 months
 Persisting irregularities/ Submission of QRC consecutively for 3rd time
 Timely submission of CRC/ QRC
Business Risk (Operational Risk)
Branch Officials can improve the Risk Rating of the Branch by scoring
effortlessly in below mentioned parameters under Business Risk (Operational
Risk)

 Customers complaint during last Financial Year vis-à -vis last to last Financial
Year
 Staff rotation in line with HR policy (in case of Officers more than three years
and in case of Business Associates more than five years)
 Whether Staff has completed the Mandatory Training Hours as required
under the HR Policy
 Staff in sensitive posts (identified) have taken leave for at least -10-
continuous days in a calendar year
Control Risk (IT Risk / Compliance Risk)
Branch Officials can improve the Risk Rating of the Branch by scoring
effortlessly in below mentioned parameters under Control Risk (IT/
Compliance Risk)
 Delay in payment of the professional Tax leading to breach of Regulatory requirement
 Compliance to statutory directives in respect of TDS on payment of rent, payment of
GST, TDS on Cash Withdrawal by the branch
 Compliance to requirement under Shop and Establishment Act
 Maintenance of muster roll as per labor laws
 Timely reporting of suspected Frauds
 Branch Ambience & Amenities
 Finacle IDs of transferred staff / separated staff / resigned staff are disabled deleted
 Restricted access to Enterprise PC, PCs, UPS
 Hardware maintenance is ensured
 Password sharing is not done
 Synchronizing Multiple Customer ID of Customer
Control Risk (Operational Control Risk)
Branch Officials can improve the Risk Rating of the Branch by scoring
effortlessly in below mentioned parameters under Control Risk (Operational
Control Risk
 Non monitoring of the Business correspondents engaged by the bank
 Non adherence of guidelines while sanctioning OD limit to BC
 Non monitoring of Inter SOL transactions at the branch
 Confirmations from customer for genuineness of transactions not obtained by the branch
 Breaching of cash retention limit caused due to holding of excess cash
 Surprise verification of cash not done
 Inadequate records maintained for delivery of debit cards / Non blocking of undelivered
cards
 Non compliance to enhanced due diligence norms for the High Risk customers
 Periodical updation of KYC norms of the customers depending on the Risk Profile of the
Customers.
 TOD given to ineligible customer
 Unauthorized Freezing/ unfreezing of customer account
 Spliting of Bulk Deposit
 Non-Adherence of KYC guidelines
Control Risk (Credit Control Risk)
Branch Officials can improve the Risk Rating of the Branch by scoring
effortlessly in below mentioned parameters under Control Risk (Credit
Control Risk)
 Branch has not obtained two 2 CIC i.e. CIBIL and EQUIFAX at the time of sanction
 Violation of DLP
 PSR of proposals sanctioned at Branch level (sending of information to RO for noting)
 Periodic Inspection of securities
 Noting of Bank Charge (CERSAI / RC / MCA) etc
 Insurance with Banks clause not obtained
 Legal Audit not carried out in eligible accounts
 Vetting of security documents not carried out
 SARFAESI Action not initiated in eligible accounts as per guidelines
 Search report from empaneled advocate not obtained in applicable case
 In case of Branch Sanction, Whether Cut off scores and investment grades norms as
per the product have been complied with.
Suggested steps to improve rating

 Pending Security perfection:


a) Takeover Loan-Penal clause should be incorporated in term and condition so
that non security perfection should attract penal charges after one month of
disbursement of credit facility.
b)Mandatorily Feeding of Mortgage Creation date in finacle for proper
monitoring.
c) TPA lapsed cases:-Penal interest to be levied after stipulated period is lapsed
as per extant guidelines.

 NPA Management:
a)Non Efficient NPA Management.
b) Asset verification of securities in NPA as per defined periodicity
Thank you

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