Quarterly Review Meeting

Greetings and welcome to our comprehensive presentation on the

Concurrent Audit Quarterly Review Meeting of Ujjivan Small Finance
Bank. We are pleased to have you join us as we delve into the key
observations and insights derived from our recent audit activities. This
presentation aims to provide a detailed overview of our findings,
highlight areas of improvement, and outline actionable steps to enhance
our operational processes.
• Agenda
1.Status update on Concurrent Audit
2. Key Findings and Observations
3.Open issues status and reason for pendency
4.Specific areas where guidance is required
5.Challenges faced and action taken to overcome such challenges
6.Industry best practices that may be adopted at Ujjivan Small Finance Bank
7.Any change in focus points required based on the latest RBI guidelines or internal
processes of the Bank.
Status update on Concurrent Audit
 Key Observations
Some major observations during the audit:
a) CPV was not conducted where the customer's communication address and permanent address were different. (HHD iexceed)
b) Aadhaar masking was not done on scanned copies of the Aadhaar card in CRM (HHD iexceed), Br.Net and LOS.
c) Account level restrictions were not placed in Finacle where the customer was an Ujjivan staff.
d) Cibil report considered was older than 30 days from the login date and the revised Cibil report was not attached with the
physical file or LOS system in cases of Housing loans.
e) Neither PAN Card nor form 49A was obtained at the time of account opening. However, customer's gross annual income was
more than Rs. 2,50,000.
f) The loan card was not signed by the borrower and co-borrower in case of Individual Loans.
g) Multiple CIF created for the same customer in BR.Net.
h.) Dormant activation SR was not raised in CRM Next and CRF along with KYC documents were also not obtained, while
account status was inactive in Finacle.
i) Mismatch in customers details uploaded in CRM, Finacle , BR. Net with the AOF.
j) Frequent instances of CRL breach were observed.
Open issues status and reason for pendency

Open Issues (INSERT OPEN ISSUE STATUS TABLEas per latest tracker)
Currently, there are 51 open issues pending resolution.
Reasons for Pendency: Includes delayed responses, complexity of issues, and resource constraints.

Remediation Actions
Actions Taken: Implemented corrective measures like
regular discussion with the concerned person,
regular follow-ups on emails, and escalating the issues on a timely basis.
Specific areas where guidance is required

Need clarification on given FPV points

V-KYC
1.A5: Whether Customer’s Address is matching with Aadhaar card image captured.( Adhar

Deposits & Operations

2.A22: For NRE / NRO Account: verify whether CRF declaration is obtained.
2.A46: Check whether:
- Foreign remittances credited to Small Accounts without completing normal KYC formalities.
- Small accounts is for a period of more than 12 months. The Small Account could be extended by another 12 months if the person
provides proof of having applied for an Officially Valid Document.
- Account opening date is not > 24 months
2.A49: Check the transactions in dormant accounts, which have been reactivated, for six months and report if
any exception / unusual transaction is noted.
2.A50: Check whether any pre-mature closure of non-callable deposits during the review period. If yes, whether
the process followed for the same along with necessary approvals.- Check MIS data
2.A57: Check whether lien is uplifted from customer's account post transaction processing.
3.A23: Whether Loans are classified with proper PSL classification
3.A24: Whether the Udayam Registration certificate is uploaded for MSME loans under PSL classification
3.A25: Whether Regional credit teams checked 10% of KYC and documentation for STP cases after post-
disbursement verification on a monthly basis.
3.A26: Whether Regional credit teams circulated KYC error report to House visit person and supervisors on a
weekly basis.

Individual Loans
4.A26: Whether FCU check performed by Vigilance team for following cases
-All Open Market Cases.
-Trigger based FCU for GL to IL and repeat IL cases ( Effective from 5th February 2019)
-Credit can escalate if document is found to be suspicious.
-Cases referred by CO in case of any doubts related to FCU.
-Exceptional cases, as instructed by Vigilance or Regional Credit Manager and above.
4.A35: Whether Loans are mapped under proper PSL classification
4.A36: Whether Udayam Registration certificate is uploaded for MSME loans under PSL classification
Clearing
5.A3: Day 2: Outward clearing returns is reconciled with HDFC CTS E-Net statement
5.A9: Whether total number of cheques and amount as per PXFL file are matching with HDFC Bank
statement
5.A10: Whether Inward clearing returns are reconciled with HDFC CTS E-Net statement
5.A11: Whether RPU official reported to HDFC Bank Ltd through portal on the status of Inward returns,
before the cut off timings.

Housing Loans

6.A67: Whether Loan Utilization Check (LUC) done and kept on record for verification. Check whether -
a. LUC verified by the Technical officer.
b. Latest property snap and Ujjivan officers visit details to be captured in the record.
c . 100% funded self-construction, Improvement and Composite loans to be verified under LUC within
60 days/2 months from the final disbursal.
d. The same is currently being maintained by HO credit in Excel as there no system functionality.
Purchase - Check if the disbursement has happened to seller/builder/3rd parties account.
Self-Construction and Improvement - Check if the disbursement has happened towards the customer’s
account
LUC shall be obtained within 60 days of the last tranche disbursement or 18 months from the first
disbursement date (whichever is earlier)
LUC is applicable for all self-construction and home improvement loans only.
Tranche wise disbursement MIS
6.A68: Whether threshold for Loan/Disbursement DD cancellation (75 days only for builder Purchase/Resale
cases & 45 days for all other cases) is adhered. MIS for Disbursement DD cancellation
6.A71: Whether customer request received for loan foreclosure. MIS for Loan Foreclosure

MSE Loans
7.A79: Whether necessary documents available to classify the loan under PSL classification
7.A80: Whether Loans are classified with proper PSL classification
7.A81: Whether Excess drawings observed in Loan accounts
Vehicle Loans

8.A22: Whether pre-payment penalty 2% pa of principal outstanding plus taxes levied for pre-closure of loan on
or before 12 months
8.A23: Whether pre-payment penalty 1% pa of principal outstanding plus taxes levied for pre-closure of loan
after 12 months.
MIS For preclosure of Loans
Miscellaneous
12.A2: Whether Customer complaint resolved withing defined TAT

Cash
14.A9: Whether excess cash remitted to nearby Bank or CMS/link branches (Point to be transferred under
branch visit)
Challenges faced and action taken to
overcome such challenges

1. Non availability of laptop. - Specially at Jaipur asset centre, we don’t get enough space as well as we get
access to desktop for a limited time. However, this issue will be resolved now.
2. Non availability of data /information for audit purpose on a timely manner even after regular followup:
a) Forex transactions
b) Group Loan
c) Individual Loan
d) Vehicle Loan
3. In some days LOS software and doesn’t work properly.
Industry best practices that may be
adopted at Ujjivan Small Finance Bank
1. FPV 2.A58 - Check whether repatriation of funds from NRO account is within limit of USD 1 million per financial year..- In such NRO
accounts, summary sheet of accumulated funds transferred from NRO accounts till date should be attached so that we can check the available
limit.
2. In MSME loans, formal documemts including GST Returns should be checked to understand the detailed record of entity’s sales and purchases.
3. For granting loans where income assessment is done on the basis of presumptive taxation u/s 44AD/44ADA, CA certified ITR and computation/
26AS should be considered along with UDAI number.
4. Each file must include a page number and an index for systematic organization, facilitating the tracking of missing pages. Additionally, a clear
demarcation between original and xerox copies is essential, with both categories featuring page numbers and an index.
5. Any granted waivers to the borrower, such as interest waivers, must be explicitly outlined in the sanction letter for transparent documentation.
However we have to depend on mail approvals for various deviations.
• In the case of MSME loans, the purpose of the loan is inadequately specified, with only a generic mention of mixed purposes evident in the
provided documents. Enhancing the clarity of the loan purpose is imperative.
1. To fortify the verification process, it is recommended to engage a third party for the meticulous examination of Income Tax Return, GST Return, and other business compliances
directly from the respective portals. This external verification is crucial in maintaining a robust and unbiased assessment of the borrower's financial compliance.
• Pages of original documents found to be torn should be promptly restored, particularly given the extended loan tenure exceeding 10 years. This measure ensures the completeness and
integrity of the documentation.
•
1. Various Exception reports regarding loans and deposits eg CIF Id changed in FD, Accounts where interest table code is changed etc are not accessable through our user id.
Any change in focus points required based on
the latest RBI guidelines or internal processes
of the Bank.
• 1) We suggest that few FPV points should be categorised in such a manner based on their nature that to be reported
on quarterly basis instead of monthly basis:
• A) Transactions which are to be checked from back date (Older than 6 months)
• B)
• 2.) Vehicle loan: 8.A18 Whether CPV conducted as per below mentioned:
• • CPV residence - By Vehicle Finance RO/external agency for all salaried customers , Reference check with Neighbour
• • CPV Business place – By external agency for self-employed , reference check with Neighbour
• • No CPV for Fast Track process
• • PD to be done by LO at the time of Detailed Data Entry for existing program

• CPV is waived for few category of customer as mentioned in Two-wheeler product program.
• Validity of Contact point verification report will be 30 Days 120 Days from Date of generation.
• 3) Deposits & Operations 2.A22: For NRE / NRO Account: verify whether CRF declaration is obtained.