Purpose of post sanction inspection by bankers

The banker’s responsibility does not end up with the sanctioning of the loan after Pre sanction procedures. When you borrow loans from financial institutions, it comes up with certain rules and regulations. The banks should verify the end use of the loan. For this, post-sanction inspection should be conducted by banks for the following purposes:

Post Sanction Inspection
Purpose of Post Sanction Inspection:

1. The main purpose of Post Sanction Inspection by banks is to verify the actual use of the loan to see whether it has been used for the purpose for which it was originally sanctioned.

2. During post sanction inspection, the bankers verify whether the borrower is stipulating to all the terms and conditions of the loan agreement.

3. Bankers also look for the progress in the project and whether it correlates with the estimates and if there is any variation, the reasons for the same should also be notified.

4. The existence and maintenance of the security. The value of the security should be ascertained at periodic intervals. Any adverse changes be carefully noted and steps taken to secure the advances.

5. Post sanction inspections by banks are conducted to verify inventory – From the balance sheet and also the stock registers, the banker should verify the level of inventory and also the financial position of the unit.

6. If there is any default in the repayment of loan by the borrower, reasons for the same should be ascertained and steps to rectify the same should also be initiated.

7. Care should be taken to ensure that all stocks and properties of the borrower are insured fully and insurance premium is paid regularly.

8. During the post sanction inspection process, the production and sales records are compared with the stock level and inventory level.

9. Collection from debtors and payment to creditors should also be verified to ensure smooth working of the unit. If the banker notices any deviation during the post sanction inspection, he may nominate a person of his confidence on the board of directors of the borrowing concern to rectify matters.

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