Loan Documentation and Recovery

Loan Recovery

There is a separate Recovery Unit (RU) in each bank. This unit should directly manage accounts with continuous deterioration. Its primary responsibilities are to determine recovery strategy, pursue all options to maximize recovery, ensure adequate and timely loan loss provisioning, etc. The management of Non-Performing Loan (NPL) must be a dynamic process, and the associated strategy together with the adequacy of provisions should be reviewed regularly. All NPLs should be assigned to an account manager within the RU, who is responsible for coordinating and administering the action plan and should serve as the primary customer contact after the account is downgraded to substandard or worse. Account manager should review all documents meet the customer and prepare a Classified Loan Review Report (CLR).

Loan Documentation

Getting the approval for the loan proposal, copies of the proposal and sends one copy to RMU and the other to Credit Administration &Management (CAM) for documentation. Then, CAM issues sanction /offer letter to the customer. Customer should agree with the terms and conditions incorporated in the offer letter. Subsequently, RM completes the Loan Documentation Check List (LDCL) and forwards the acceptance to CAM. A typical CAM performs the activities relating to disbursement, custodian, monitoring and compliance. Main responsibilities of
CAM are: ensuring that all security documentations comply with the terms of approval and are enforceable, examining insurance coverage to ensure appropriate coverage  over assets pledged as collateral, and is properly assigned to the bank, disbursing loan only after all terms and conditions of approval have been met, and all security
documentations are in place; maintaining control overall security documentations and monitoring borrower’s compliance with covenants and agreed terms and conditions. After ensuring full compliance, CAM takes necessary steps for disbursement of the loan amount. After disbursement, regular follows-up the credit start. Through close
monitoring, the quality of early alert account may improve. In some cases of bad loans it is requires  classify the accounts and maintain required provisions.