Page 25 - Banking Finance June 2021

ARTICLE

observed that, stress assets of Indian banks in general and Y Ensuring legal enforceability of documents
public sector banks in particular has increased manifold in Y Ensuring end use of funds for the purpose they are
recent years. Some of the common activity that a bank disbursed
needs to monitor may be broadly categorized like ensuring
compliance of terms and condition along with legal Y Ensuring the safety of Primary and collateral security
enforceability of documents. In this connection banks have offered to the bank
started appointing external agencies for continuous Y Studying Early warning signals which are emitted at
monitoring of loans account of Rs.250.00 crore and above. each stage
Lead bank in a consortium of bank will select any particular
Y Initiating preventive steps for resolution of the stress in
agency and give the assignment to it for monitoring of the borrowal account
account.
Y Ensuring proactive monitoring of loan account to
ascertain that income generation capacity and future
Need of ASM: cash flow are not impeded.
To keep a tab on the increasing cases of frauds in the banking
space the IBA in March 2018 had setup a committee of All these activities together constitute credit monitoring
senior banker to shortlist the agencies which are having and to safeguard Banks interest .ASM is and entity having
expertise in monitoring of big borrowal and complex nature professionals with good domain knowledge, experience and
of transaction. By appointing ASM it's not necessary that skill in different sectors, industries etc. In case of large
we will only focus on stressed loans but all type of accounts exposure or exposure of specialized nature, such agency
above threshold will be looked after by monitoring provides services of inspection, stock audit, cash flow
agency.IBA has prepared a list of agencies for specialized monitoring and end use verification etc.
monitoring which may help banks to monitor stressed loan
accounts. With the help of ASM we came to know the Purpose of Empanelment of ASM:
problem in advance like inventory buildup, delay in
receivables and diversion of funds. With the help of Under given disruptive situation like recession, pandemic etc.
specialized monitoring agency, all the transaction will be banks needs to have special monitoring capability to
under a strict vigilance. As employees of the banking industry effectively monitor loans with large credit exposures and
don't have such expertise in all the sectors and related exposures of specialized nature.ASM which are better
business transaction the services of ASM to closely track the equipped in this regard and it would be prudent to engage
ASM for following purpose.
activity of complex nature of transaction of borrower is to
Y To have onsite presence at the place of business and a
be tracked on each stage. The activities that a bank needs
timely, fair and transparent monitoring of borrowal
to monitor may be broadly as under:
account is expected.
Y Ensuring compliance of terms and condition of sanction
Y To monitor the borrowal account in Technical as well
as Financial matters and guide the bank for further
course of corrective action.
Y Timely reporting to the lenders on the borrower
business situation on real time basis
Y ASMs are also expected to look into other aspects like
Government notifications which may have material
impact on borrowal company, all approvals and
clearance.
Y ASM is required to analyze, supervise, monitor and
suggest on the business activities of the borrower.
Y To monitor end use of funds on account of their on-site
presence as well as off site.

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