Page 24 - Banking Finance June 2021

COVER STORY

AGENCY FOR

SPECIALIZED

MONITORING (ASM) -

A TOOL FOR

MONITORING OF BIG

BORRWAL ACCOUNTS

Introduction: According to the RBI, frauds have emerged as the most-
serious concern in the management of operational risk, with
The Govt. of India has introduced several governance
reforms, in order to keep a watch on fraudulent activities 90 per cent of them located in the credit portfolio of banks.
and to prevent diversion of funds, has introduced the Most of PSBs have deployed IT based Early Warning Signals
Agencies for specialized monitoring mechanism, under the leveraging third party data, which have enabled early, time
bound action in stressed accounts. Monitoring has also been
ASM banks will now appoint specialized monitoring agencies
strengthened by developing agencies for specialized
to closely track the activities of the borrower including
monitoring.
purchases, invoices, actual production vis-à-vis projection,
high value transaction, payments, cash inflow and cash
outflow. The move to appoint an external agency to monitor Credit monitoring is one of the vital activities in banking
loans comes in the backdrop of banks reporting a 72 per cent industry particularly in present scenario. Banks lend money
year-on-year jump in frauds at Rs. 41,168 crore in FY2018, for purpose of earning interest fee, common etc. which are
generated mainly productive use of money collected from
against Rs. 23,934 crore in FY2017 and cases of fraud at
banks and financial institutions increased 28% in volume depositor. Thus, it is important on part of banks to develop
terms during financial year 2020 as per RBI's annual report. a mechanism to track the performance of the business for
which it has been lend the money and ensure proper end
use of funds and bank needs to maintain a watch on the
About the author happening inside as well as outside of the entity which has
borrowed money.
Chander Pandey
Senior Manager (Faculty) A prudent banker must be able to ascertain the stress in
Union Bank of India any of its asset well in advance so that timely corrective
Staff College, Bengaluru
steps are taken and banks interest is safeguarded. It is

24 | 2021 | JUNE | BANKING FINANCE