Top insights into the domain of credit audit

Financial institutions with splendid portfolio attempts to improve quality of the same by getting credit audit conducted for accurately mapping risk profile and gain practical insights to plug the loopholes. The Audit ascertains compliance with existing sanction and post sanction procedures adopted by the bank. 

Objectives of audit

•   To improve the credit portfolio quality
•   Reviewing of sanction procedure of large loans and compliance status
•   Receive feedbacks on regulatory compliance
•   Get credit risk assessment done independently
•   Detect early warnings and adopt suitable remedial measures
•   Get corrective actions recommended for improving credit quality, administration of credit    and competence of staff

 Functions of credit audit agency

•    Processing credit audit reports
•   Analyzing audit findings and advising concerned functionaries
•   Following up with controlling authorities
•   Apprising higher management
•   Processing responses received and arranging for closure of relative audit report
•   Maintaining repository of advances subjected to audit

 Scope and coverage of audit

•  Portfolio review: Examining credit and investment portfolio quality, and suggesting improvement steps involving slashing of concentration in particular sectors as stipulated in loan policy or limits suggested by highest regulatory body
• Loan review: Reviewing sanction procedures and  post loan sanction processes of the entire array of fresh loan proposals, renewal proposals, randomly selected procedures, and accounts of sister , group or associate concerns.
• Action points review: Verifying compliance to policies framed by bank and checking sanction approval compliance with regulatory stipulations, examining sufficiency of documentation, conducting credit risk assessment, examining line functionaries roles in the perspective of conduct of account and follow up, overseeing action initiated by line functionaries to tackle serious irregularities, and detecting signals of early warning and suggesting suitable remedial measures

Review frequency

The review frequency is assessed based on the risk magnitude with high risk accounts requiring review at shorter intervals compared to low risk ones. The review frequency is also based on certain other factors like

•   Examining sufficiency of policies, practices and procedures
•   Feedback to be provided to ascertain regulatory compliance
•   Reviewing of credit risk assessment techniques
•   Examining adequacy of reporting system and pointing out exceptions
•   Recommending of corrective actions for proper credit administration
•   Forecasting happenings in near future

Procedure for credit audit

The audit will be conducted on site at the bank’s branch which has evaluated the advance and makes available primary operative credit limits.

Credit audit will seek to iron out any irregularities in the system. It is imperative for the overall health of the financial institutions.

To learn more about credit analysis and credit audit at http://www.ceisreview.com/pages/Services/2/109/Credit_Analysis. all us at Toll Free at 888.967.7380.