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Credit Monitoring System

Credit Monitoring is an integral part of lending activity. Banks have a great responsibility to maintain the quality of the assets and to recover the interest and other dues in time. Though adequate precautions are taken during assessment and sanction of a loan, a banker has to be more vigilant after sanction of the loan. Unless early warning signals are captured, a bank may not be able to take proper remedial measures to arrest the slippage in the quality of the asset. Banks need to put in place a very sound and effective credit monitoring system for watching the borrower’s account from various angles.

Credit Monitoring System


Business Challenges

Longer association of a customer with the bank was considered as one of the important parameters in deciding the value of the connection until last decade. However over the last few years, due to change in the economic environment, competition, globalization and advent of new management techniques etc., such sentimental subjective factor is slowly giving place to a more objective evaluation of the economic value of connection in terms of quantification of risk rather than mere longevity of the connection.

In order to ensure that the asset quality of each borrower account is not slipped from performing to non performing status, there is a need for an automated system which takes care of the following:

  • Symptoms of sickness, weakness and deterioration of asset quality must be recognized well in time and acted upon promptly through effective monitoring/ alertness to capture the early warning signal.
  • There should not be excessive reliance on securities in preference to viability and cash flow.
  • There should not be excessive lending to certain borrowers/ group accounts.
  • At the time of sanction of loans, there should not be over valuation of securities.
  • The charges on securities should be properly created.
  • Obsolete stocks should be monitored.
  • Stock statements should be submitted in time by the borrower.
  • Annual Financial statements should be submitted in time by the borrower.
  • All the covenants stipulated while sanctioning the loan should be adhered to.
  • The interest and instalments are paid as per the agreed schedule.

What We Offer

Kumaran Systems offers an effective Credit Monitoring System which includes solutions for all the above challenges listed and many other features. The various modules of the credit monitoring system are briefly explained below:

  • Dashboard: When you sign into Credit Monitoring System (CMS), the Dashboard screen displays. This is the central control panel for all credits, with the tabs like Work in Progress (WIP) and Search. WIP list displays all credits that have been approved by Risk Management. These credits are categorized into four (4) sections: New Credits, Renewals /Amendments (includes risk-rating reviews), Pending, and Cancelled. The Search tab on the Dashboard screen allows you to search and access any credit by any one or more of the following criteria: Borrower Name, Portfolio Number, Branch Number or Instrument Number
  • Security : There is a Security tab giving the details of security, documents and whether documents are verified or not.
  • Facility : There is a tab for Facilities where details of instruments, branch name etc., are captured.
  • Margin : Margin tab gives the details of margins. When the margins are entered, the credit monitoring officer should contact the credit specialist if he sees a deteriorating trend.
  • Things to monitor : The ageing of receivables e.g. are receivables increasing in the older age brackets as time passes; Is the proportion of inventory changing e.g. are finished goods accumulating? ; Categories of receivables e.g. are affiliated accounts increasing?
  • Covenants : Covenant stipulations are automatically downloaded from credit sanctions based on input from the Credit Sanctioning Officers. Covenants are automatically calculated from inputs in CMS. Covenant irregularities are only cleared by new input of financial data, changing the condition of the covenant or by a subsequent positive covenant. The Covenants tab allows you to verify which covenants are annual, semi-annual, or quarterly.
  • Irregularities : There is an irregularity tab where the irregularities are generated automatically based on the variations between covenant stipulations as per sanction and actual data input by credit monitoring officer. Irregularities will affect the risk rating of the borrower at a future date. Irregularities occur in four types such as Security, Covenant, Limit or reports.
  • Diaries : There is a tab for diaries and this is a tool for credit monitoring officers to remind themselves of actions that need to be taken. Diaries generate security expiry date and credit expiry date.
  • Notepad : There is a tab for notepad, which allows us to add additional information pertaining to the customer or credit. Once a notepad entry is entered and saved it cannot be modified or deleted. It permanently remains in CMS.

Benefits of Credit Monitoring System

Business Benefits
Monitoring of the borrower accounts on an ongoing basis will facilitate foreseeing the problems and taking corrective measures to meet the adverse impact. Effective credit monitoring will ensure proper usage of loan funds and reduce the loan losses which will in turn maximize the returns to the Banks.



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