BANK AUDIT - SAMPLES OF SITUATION LEADING TO MOC

Samples of Situations leading to MOC

 

At least go into depth to find MOC for every aspect as below:

 

1.         Wrong EMI calculations. So short of excess recovery of intt/principal.

2.         Moratorium intt not added to principal for EMI calculation like edu loan.

3.         Incorrect feeding of Loan term, RoI, date of 1St EMI,

6.         Income leakage like processing, penal, inspection. Two rectification entries in MOC. One for leakage. 2nd for reversal of it.

7.         Non provision of expenses

8.         Wrong calculations of intt subventions

9.         Wrong entitlement of intt subvention. Like not a KCC, paid prompt but not a genuine source credit.

10.       Intt subventions not gvn for 3+3 moratorium period.

11.       Excess DP allowed for 90 days. Goods Rates far excess in stock statements either based of sale price or cost inc. gst itc.

12.       Renewal expired and due for 180 days. Renewal not done based on AFS.

 

16.       Sub std is actually D1 /D2/D3/loss this year.

17.       Unrealized Income reversals

18.       Short term loans not converted to KCC. Thus lost intt subventions claims.

19.       Creditors not considered for paid stock and DP

20.       DP allowed on very old debtors

21.       Totalling errors in stock statements

22.       Last year MOC entries pending on 31.03.2021

23.       Tds non/wrong/short deductions

24.       Wrong depreciations

25.       Capital assets charged to PL

26.       WC reduced margins Due to covid not restored on 31.03.2022. Leading to excess DP.

27.       Borrower-wise NPA not done. Check Other Loans thru Cust ID in ccdp usin g ctrl+f command.

28.       Stock statements older than 3 months and dp allowed further.

29.       On party visit, Stock St. matched with inventory quantity n cost and found excess fig. submitted. Excess dp allowed for 90 days. So MOC for npa.

30.       Long suspense entries (Dr. or Cr.) to be written off to PL.

31.       CCDP wrongly showing Std/Sub std/D1/D2/D3 as unsecured instead of secured. Decrease the amt of npa provision thru moc.

32.       Limit is inherently weak like 1/4th sales routed, debits diverted to other than stock.

33.       SMA0/SMA1/SMA2 actually slipped to NPA on or before 31.03.2023

 

Samples of situations leqding to MOC beyond loans and advances:

 

At least go into depth to find MOC for every aspect as below:

 

1. Non or short provision of intt on CASA for broken period at end of yr.

2. Non or short provision of tds.

3. Non or short provision of depreciation on FA.

4. Payment of prior period expenses but provision not provided for same in LY.

5. Excess or wrong claim of intt subvention debited to sundry assets on 31.03.21. (dont sign certificate for wrong fig. or gv a disclaimer on bottom of cert. )

6. Non provision of general charges like telephone, rent, elect., or TA claims submitted in 1st wk of april.

7. Long pending Suspense entries now due n pending to be written off.

8. Lost security items or stolen FA items.

9. Leakage of income like processing fee, inspection charges, insurance not debited to party acc.

10. Last year 2020 moc still not accounted for in branch books.

11. Non payment of gst liable under RCM.

12. Non claim of ITC paid on GC charges.

13. Accounting under wrong head of income/expense/liability/assets

14. Contingent liabilities like invoked or revoked Guarantees, LCs not or wrongly reflected in financials as comapred to BC/LC register

15.  In addition, you can have MOC for:

 

1. Basel II certificate

2. Unrealised interest in NPA accounts (though npa classified in early period we come accross such situations that reversal of URI not done properly)

 

3. Fixed assets if found short during physical verification

 

MOC in case of incorrect classification of standard advances among SMA0, SMA1, SMA2

 

1.         Refer to IRAC Circular dated 01.04.2022, Now SBA is required to check & verify IRAC norms not only relating to correct classification of assets into 4 categories std, sub, doubtful and loss,

 

2.         But also IRAC norms relating to correct classification of standard assets into SMA0, SMA1, SMA2. If any discrepancies found in above, declare MOC for revised & correct classification as such.

 

3.         Take PDF or print out of CC/OD and DL/TL balancing and go to column showing irac status. CCDP does not provide any classification as SMA0,SMA1, SMA2.

 

4.         Pick few samples from each category of standard advances of CC, OD, DL, TL and check whether the classification of SMA0, SMA1, SMA2 is correctly picked by the systems or not.

 

5.         Do not trust above classification as presented before us, go into details of correct feeding of product in system masters of loan term, rate of interest, date of first EMI due, calculation of EMI, correct Stock & debts values feeding  with reference to sanction letters or other governing documents.

 

6.         Basis of Classification: In case of DL/TL, If Principal or Interest payment or any other amount wholly or partly overdue between:

 

SMA-0 1-30 days

SMA-1 31-60 days

SMA-2 61-90 days

 

7.         In the case of revolving credit facilities like cash credit, Outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of the SMA sub-categories will be as follows:

 

SMA-1 31-60 days

SMA-2 61-90 days

 

As per irac cir. 01.04.22,

8.         Bank shall report credit information, including classification of an account as SMA to Central Repository of Information on Large Credits (CRILC) on all borrowers having aggregate exposure6 of ₹5 crore and above with them.

 

9.         Further the lenders shall submit a weekly report on instances of defaults of all borrowers having aggregate exposure of Rs. 5 Crores and above on close of business on every Friday.

 

10.       Example: If due date of a loan account is March 31, 2022, and full dues are not received before the lending institution runs the day-end process for this date, the date of overdue shall be March 31, 2022. If it continues to remain overdue, then this account shall get tagged as SMA-1 upon running day-end process on April 30, 2022, i.e., upon completion of 31 days of being continuously overdue. Accordingly, the date of SMA-1 classification for that account shall be April 30, 2022.

 

11.       Similarly, if the account continues to remain overdue, it shall get tagged as SMA-2 upon running day-end process on May 30, 2022, and if continues to remain overdue further, it shall get classified as NPA upon running day-end process on June 29, 2022.

 

12.       It is further clarified that the instructions on SMA classification of borrower accounts are applicable to all loans, including retail loans, irrespective of the size of exposure of the lending institution.

 

MOC declared for TDS and GST non compliances at branch during last year 2022. There is no concern of tds non compliances with tax audit whether being done at branch or not.

 

Reference: Ind. audit Report asks for complaince of other applicable laws.

 

1.         194C Tds @ 1%/2% not deducted on payments to security agency vendors, AMC provided by Dropbox for single payments >30,000 and aggregate payments >1L.

2.         194J Tds @ 10% not deducted on payments to , Gold Valuers >30000

3.         194H Tds @ 5% not deducted on payments of commissions to Few Car dealers for procurement of car loan files.

4.         194H Tds @ 5% not deducted on payments of commissions/incentives for AUCA recoveries.

5.         194A Tds @10% on Term Deposits of Few cases of schools & trusts not deducted. Form 15G/H either not obtained or not sent to income tax.

 

6.         No GST @18% deducted under RCM under sec. 9(3) on payments made to Advocates of 2250000.Propriety audit (need & justification for fees paid) was also done for the nature of payments made & benefits or recoveries as received by branch through advocates

 

7.         No Input or ITC claimed @50% for GST paid on rent for branch building and ATM premises. Rent Paid for the year 8370000.

 

8.         GST 18% wrongly paid to two vendors being security agencies as the same was charged by vendors in their invoices. Instead of deducting this GST under RCM and depositing the same to the Govt. Rectification entries passed thru MOC I.

 

9.         50% GST ITC not claimed as paid on 2 vaults and 4 desktops bought during the year.