A STUDY

A

STUDY ON THE WORKING OF CPCs AT AMRITSAR CENTRE

BY

ALOK SHARMA CHIEF MANAGER STATE BANK LEARNING CENTRE JAMMU

STUDY REPORT

This study has been conducted on the instructions received from H R Deptt., Chandigarh L H O vide note No.HR/L&D/HCS/1083 dated the 20th June 2009. The study has been conducted by Alok Sharma, Chief Manager (L) from SBLC Jammu at Amritsar Centre. The under noted CPCs were covered for the Study. a. RASMECCC, Amritsar b. SAARC, Amritsar c. CCPC, Amritsar The main areas covered by the study are:1. Workflow at CPCs as also whether it is able to match the expectations of the bank. 2. How CPCs can be best utilized by the Branches. 3. Common reasons for Rejection/ return of the loan proposals and how these can be reduced 4. How Branches and sales outfits can have qualitative synergy with CPCs for early sanction of proposals.

I would like to thank Sh. S C Arora, Assistant General Manager, who choose me to conduct this study and he also helped/guide me to conduct this study. I also thank my other trainers to their moral support given to me to conduct the study.

( ALOK SHARMA) Chief Manager SBLC JAMMU 28.07.2009

RASMECCC AMRITSAR

RASMECCC, Amritsar was opened in March 2005 and is headed by Assistant General Manager and supported by two Chief Managers. 24 Branches, which are under Regional Business Office, Amritsar are linked to the Cell. The Cell is located in the building of Amritsar Cantt Branch and RBO is also functioning on the same floor. The Cell is easily accessible by the customers. The loan applications are sourced by MPST and Branches and forward the Cell for processing and sanction. The position of the business handled by the above centre is furnished as under:(Rs. In crores)

Accounts handled Irregular Accounts NPAs

31.03.2008 No. of Amt. A/Cs 7576 277.47 3076 119.73 153 4018

31.03.2009 No. of Amt. A/Cs 7856 344.78 3640 178.05 37 0.94

2 The details of the Accounts handled by the RASMECCC as on 30.06.2009 is as under:-

No. of accounts No. of applications received from 01.04.09 to 30.06.09 No. of applications sanctioned No. of applications Rejected/Returned No. of applications under process Inspection rating

Retail 6551 410

SME 1968 214

393 12 5 A+

193 8 13

OBSERVATIONS •

The concept of Centralized Processing Cell under BPR was introduced with an objective to enhance customer satisfaction by prompt processing of proposals and free the Branches to focus on sales and marketing of Bank’s various products. However, it has been observed that linked branches have

not taken new role seriously and the number of new proposals sourced by the linked branches does not match the potential available at the Centre. •

Many times, incomplete applications/proposals are forwarded to CPC by the Branches. The general deficiencies observed are as under:a. Photo copies are not authenticated from the original documents. b. Eligibility of the Borrower is not correctly worked out properly. c. Property offered as security to finance, does not fall in approved area/plan. d. Documents obtained from the applicant & forwarded by the branch to the Cell are not complete and some of the mandatory documents are not submitted in the first instance.

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On the other hand, sourcing agencies are of the opinion that attitude of the staff posted at CPC is generally non cooperative and negative. Proposals forwarded by the Branches are not given weight-age. Generally, the proposals are returned/rejected with one or the other reasons. CPC staff strictly follows the check list without any deviation. Like if the applicant is non income tax payee, he is being asked for a copy of Income Tax return or Form 16 for Housing Loan.

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In some cases, a proposal is forwarded by the branch to the Cell just to please the customer and to avoid a complaint. Even though, the Branch officials are aware that the proposal does not merit consideration.

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After sanctioning the loan at CPC, only a copy of the sanction letter is sent to the concerned branch. The Branch remains un-aware of the terms and conditions of the sanction of loan for want of copy of arrangement letter.

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The Assistant Managers posted at the Cell are newly promoted officers from clerical staff and they are not fully aware of their roles. Moreover they are not having any exposure in advances.

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Customer relation programme is not being held by the CPC to educate the borrowers of the working of the Cell. Therefore, required liaison between the CPC and the customers is missing.

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The space available with the Cell is also inadequate. Even though very few customers visit the Cell, but they are not able to get the proper seating and other amenities.

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It has been observed that after sanction of the loan, neither the Cell nor the Branch owns the customer and he is required to visit cell for further information even if the same is available in the system.

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Customers feel the difficulties in submission of stock statements/ financial data, which they have been submitting at the Home branch. The Branches does not like that the customer should submit the stock statement and financial data to them. He is made to run between the two for further clarification or for additional loan facility.

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The proposals received at the Cell not being entered into the system on the same day but are entered in bunches. Some of the proposals have been returned to the sponsoring branch/MPST without entering in the system with a view to show lesser rejection percentage.

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There is no system of obtaining advance cheques for processing and other charges. The charges are recovered after the loan is sanctioned. The cheque for charges has to be obtained by the sponsoring branch or MPST and should be forwarded with the proposals.

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When a proposal is sanctioned, there is a delay of 2-3 days in handing over the documents to the maintenance wing at the same floor for execution of documents as a result TAT is not being maintained properly.

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The loan documents are not being revived at the given intervals. It has been reported that a large number of loan documents are time barred. The concerned staff is not taking this aspect with the seriousness it deserves.

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Assets verification officer/supervisor is conducting the inspection of the units. However, inspections are not being conducted at given intervals regularly. There is no system of inspecting the collateral security, after the loan is sanctioned and disbursed.

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The opinion reports are complied properly and copies of immovable property are enclosed.

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Inspection of the unit is not being carried out at regular intervals.

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Generally, AMOs keep a close follow up of the irregular accounts and send the notice to the borrower/guarantor.

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Loan documents are executed at the Cell and not handed over to the borrowers.

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Charge with ROC where reuired, is recorded well in time.

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In case of equitable mortgage, charge in revenue record is got noted & verified.

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RC` s of vehicles financed by the Cell are not on record in a large number of cases.

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A large number of accounts are due for renewals. Some of the accounts are due for more than 90 days.

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The Cell has many documents which are time barred and no efforts are being made to revive the documents.

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TIRs are obtained from the Bank` s Advocate through the borrower which is fraught with the risk. Similarly, valuation reports are also being collected through the borrowers.

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PDCs are not regularly processed at the Centre. If any PDC is received returned unpaid, no action under section 138 of the Negotiable Act is taken by the Cell.

SUGGESTIONS

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Regular meeting of Regional Manager and Branch Managers with RACPC officials should be held for better co-ordination and its minutes should be submitted to LHO.

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Before returning/rejecting any proposal, RASMECCC should contact the sponsored Branch/MPST and discuss the rejections.

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Staff posted at the Cell should preferably have exposure in advances and they should be aware of the system and procedures to process and sanction the advances. They should also display helping attitude towards customers. The staff should be regularly deputed to SBLCs for learning. On site training programme can be arranged by SBLC to train the officials at the Cell.

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The Cell should on continuing basis review the functioning of Bank’s Lawyer and ensure that TIR is being submitted complete and in time. The documents should be delivered to the Advocate and the Valuer by the Cell itself to avoid any untoward incident and borrower should not be asked to collect the reports.

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When proposal is received at Cell and sanctioned Branch should be advised of the terms of sanction. So that after disbursement of the loan, the branch staff maintains a liason with the borrower. This involvement of branch staff will help in making recovery also in these accounts.

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When the branches forward the proposal to Cell, they should complete the KYC formalities and related documents should also be authenticated. This will help the Cell to process the proposals without any delay/fear.

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Branch staff should be aware of the fact that the customer linked to Branch by the Cell has to be attended to. The Branch should maintain liason with the customers. The Branch staff should accept stock statements and financial data submitted by customer for onward submission to the Cell. This will also help the Branch to cross sell the Bank’s products as well as technology products to the customers.

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The Cell should enter all the proposals received from Branches and MPST on the date of receipt itself. The rejections should be properly recorded and put up to the higher authority and TAT should be maintained.

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The staff posted at the cell should follow the workflow chart so that TAT is maintained in true spirit and customers` visits to Cell are curtailed.

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The AVO/AVS during their visit to the unit should have latest position of the account and necessary follow up for smooth conduct of account and obtaining financial data is made by them.

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The staff posted at the Cell is not getting any incentive and they have a psychological pressure of staff accountability. Necessary counseling should be done to make them comfortable for processing the loan proposals.

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The Bank` s Advocates should be advised to submit the Title Investigation Report to the Cell direct and borrowers should not be allowed to see the Advocate.

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Sincere efforts should be made to get the revival letters for the time barred documents.

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Borrowers should be contacted to get the copy of the RCs of the vehicles financed by the Cell and a copy of insurance policies where it is not on the record should also be obtained without any delay.

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Opinion reports are not being compiled properly. The copies of the relative documents/receipts should be attached to the same.

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Follow up of the irregular accounts is lax. Notices should be sent to the recalcitrant borrowers as soon as the account starts slipping towards NPAs.

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Staff is motivated but they feel that the incentive being passed on to the Branch for the loan processed and served by them should be maid available to them.

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Customer Relations programme should be held on regular basis which should also be attended by the Branch Managers of the linked Branches. This will strengthen the bond with the customers.

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It is suggested that PDCs should be regularly processed by the centre and where these cheques are received returned unpaid, a case should be filed against the borrower.

SARC AMRITSAR The SARC was established at Amritsar on 31st October 2006 and is headed by Assistant General Manager and is supported by 2 Chief Managers, 4 Deputy Managers and 2 Assistant Manager. The details of accounts handled by the Cell and recovery effected during the period from 01.04.2008 to 31.03.2009 and 1.04.2009 to 30.06.2009 is submitted as under:-

Assets upgraded Rehablitated/Restructing Compromise Write off Lok Adalat organized Action under SARFASI Act AUCA recovery Recovery through Recovery Agents Inspection rating

31.03.2009 No. of Amt. A/Cs 135 6.10 4 18.58 150 3.29 221 3.67 2 56 5.47 3.14 140 0.33 A

30.06.2009 No. of Amt. A/Cs 71 1.99 53 1.28 32 0.73 35 0.73 0.48 45 0.21

OBSERVATIONS •

The premises are not sufficient to for the customers and the staff

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The Civil Suits filed in the court are properly followed by the concerned staff. Regular meetings of staff and Bank` s Advocates are being held to review their performance.

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After an account is transferred to SARC by the RASMECCC, necessary follow up is arranged by the Cell and necessary notices are sent by the Cell promptly.

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The Cell is utilizing the services of Recovery Agents for recovering dues from defaulting borrowers. During the period 1.04.09 to 30.06.09, recovery agents effected recoveries of Rs.0.21 Lacs.

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The Cell has written off 221 accounts with outstanding of Rs.3.67 Lacs during the year ended 31.03.2009 and 32 accounts with outstanding of Rs.0.32 Lacs during the current year. The accounts are being followed on regular basis.

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The Cell upgraded 135 accounts with loan amount of Rs. 6.10 Lacs during 2008-09 and 71 accounts with outstanding of Rs.1.99 Lacs during the current year.

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No targets have been fixed to City Case Officers for effecting recovery, compromise etc.

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Proper account wise action plan for recovery is required.

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Full particulars of the borrower and guarantor are not entered in the system/register for write off accounts as a result of which proper follow up for recovery is not viable.

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In certain cases, Branches upgrade the status of the account to Standard Assets with a view to show better position in the Annual returns, whereas SARC had already initiated the legal proceeding for recovery.

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It has been observed that when accounts are transferred by RASMECCC to SARC, only set of loan documents are handed over to the Cell. In most of the cases, the under noted documents are not supplied with loan documents. a. b. c. d. e. f. g. h.

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Remarks sheet of inspecting official Latest stock statement Up dated opinion report on Borrower/Guarantor Copy of inspection register Complete address/contact number of borrower/guarantor IRAC status is not changes Interest is being applied on the account NPA date given is wrong

SUGGESTIONS

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Regular meeting should be held between SARC,and RASMECCC to sort out the issues relating to shifting of accounts, value of the collateral and recoveries in the NPAs accounts. The outcome of these meeting should be monitored by Head Office. Branches are not authorized to upgrade any account and no tempering in CISLA be allowed to show better performance. To make recoveries, services of Recovery agents should be availed in a big way. A check list should be prepared by both SARC and RASMECCC and as per list all the documents should be given to SARC avoiding delay in taking legal action against the borrower/guarantor. This will enable to make the recovery fast to the bank. The Cell should have a system of maintaining the performance of the Recovery Agents at quarterly intervals. Some of the NPA accounts are being maintained by RASMECCC as staff accountability has not been determined and as a result of which delay in recovery efforts take place. To avoid delay, staff accountability should be ascertained as soon as account is marked NPA. Efforts should be made to enlist more Lok Adalats to make recoveries.

CCPC AMRITSAR The CCPC, Amritsar was opened in Amritsar on 22nd November 2006 and was fist CCPC in Chandigarh Circle. 18 branches of the centre are linked to the Cell. OBSERVATIONS •

The Module of clearing used by the Cell is not compatible with CBS. Therefore, the data received from the MICR centre has to be modified before posting to CBS.

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It is observed that cut off time for acceptance of clearing instruments is 12 noon. The cheque put in the drop box after 12 noon are cleared on the next day. It is causing dis-satisfaction among the customers.

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Cheques received at the branch are duly crossed & no instrument has been reported lost. Some times instruments are delivered to Data Entry Operators without entering into transit voucher book.

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80% of customer signatures are available in the system; however, if a cheque is received where scanning of signature is not found, confirmation is sought from the branch through fax.

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ECS is not being used by the Cell and at the branches as a result of which delay in collection takes place.

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Non MICR cheques if presented in clearing are being returned by the Cell to the Branches, which make delay in clearing of the cheques.

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Dividend warrants are not paid by the cell and are paid the Amritsar Main Branch as per instructions.

SUGGESTIONS 1. For smooth function of the Cell, Metro Module should be introduced at the Cell. 2. The cut off time for acceptance of the cheque should be extended to 1.30 PM or instruments should be collected from the branches twice in a day. 3. Branch should be advised to scan all the pending signatures immediately. 4. ECS should function at the Centre to avoid delay in clearing the instruments. 5. Non-MICR cheques should not be returned to the branches but should be paid at the Cell itself. 6. Software should be developed to pay the dividend warrants at the Cell. 7. Clearing CPC should follow the instructions advised in Cheque Collection Policy (CCP) – 2009.