Credit Policy
In respect of loan policy, the auditor is expected to give his observations on –
Existence of Loan Policy – specifying the prudential exposure norms, industry-wise exposures, regular updation of the policy, system of monitoring and adherence thereto.
Each bank has its own policy for sanctioning, disbursing, supervising and renewing loans. The policy usually includes the terms and conditions for granting loans, limits upto which loans may be disbursed to individual clients, industry wise exposure, i.e., different exposure limits for different industries, etc. The policy should specifically include the prudential norms given by theRBI. The auditor should report whether the policy is in existence and the same is regularly updated depending on the guidelines issued by the RBI. The Master Circular on “Loans and Advances – Statutory and other Restrictions”, DBR.No.Dir.BC.10/13.03.00/2015-16 dated July 1, 2015, provides a framework of the rules / regulations / instructions issued to Banks on statutory and other restrictions on loans and advances. The Master Directions on “Lending to Micro, Small & Medium Enterprises (MSME) Sector” FIDD.MSME & NFS.3/06.02.31/2016-17 dated July 21, 2016, contains guidelines / instructions / directives issued by the RBI to banks in regard to matters relating to lending to Micro, Small & Medium Enterprises sector. The auditor should also enquire whether there is any system followed by the bank for regularly monitoring the policy laid down by the bank.