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Question

As per loan review framework of RBI, loan review of low value accounts are usually carried out __________

A before sanction of loan Correct Answer Incorrect Answer
B within one year of sanction Correct Answer Incorrect Answer
C within 3 months of sanction Correct Answer Incorrect Answer
D within six months of sanction Correct Answer Incorrect Answer
E not required to be reviewed Correct Answer Incorrect Answer

Solution

As per the Loan review mechanism given by RBI, banks credit audit or loan review should include review of the sanction process and status of post sanction processes/ procedures (not just restricted to large accounts The frequency of review should vary depending on the magnitude of risk (say, for the high risk accounts - 3 months, for the average risk accounts- 6 months , for the low risk accounts- 1 year). The review would include:

  • Feedback on general regulatory compliance.
  • Examine adequacy of policies, procedures and practices.
  • Review the Credit Risk Assessment methodology.
  • Examine reporting system and exceptions thereof.
  • Recommend corrective action for credit administration and credit skills of staff.
  • Forecast likely happenings in the near future

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