Centralisation and location of original loan documents at Loan Processing Centres
Of late, there is an increasing propensity in banks to process the loans and advances, including appraisal, sanction, documentation, initial disbursements, etc., at Loan Processing Centres/Offices (by whatever name called) and to execute and physically hold all the documents at such locations, that may not be in very close proximity to the branch, where the borrowal accounts are maintained/serviced. The Branch places reliance only on the Sanction letters, on the presumption that all the required legal and documentation formalities are correct and complete at the centralized location.
In the absence of the original documents (or even authenticated copies thereof) on an updated basis, the auditor would need to request the management for the files identified for examination by him. The branch auditor must be satisfied on the authenticity and terms of the sanction (in case the sanction letters are only computer generated but not authenticated), the completeness of the records, duly updated, for all accounts where the sanction was so conveyed; and further whether the number of accounts and amounts recorded at such centres tally with the corresponding data at the branch. It needs to be confirmed as to whether there are any cheques held by such centres that remain unbanked affecting the borrowal account balance. Reference must also be made to any adverse observations in the related monitoring/supervisory report on the documentation aspects at the centralized location.