Q. Cash Margin on BG, if not taken in stressed account then possible situation before the statutory Auditor

Question

Brief facts about the case :
1) Consortium Account with exposure over 500 crore
2) Member bank exposure is around 3.5%
3) Account is in stress
4) LC with member bank got devolved  in FY 20-21
5) BG with member bank got invoked in FY 21-22
6) Invoked amount paid out of CC which exceeds 90 days norms and the account classified as NPA in September.21
7) Borrower repaid the overdue in full and the account was upgraded in September 21 itself.
8) Account was renewed with increase in Margins for NFB facility....No fresh BG to be issued
9) BG amounting to 7 crore was extended on 31.12.21, the cash margin on BG, as per review note was 25%.
10) 10% margin originally available, hence 15% was only to be taken amounting to 1.05 crore
11) The same was not taken, inspite of the fact that branch has written to the borrower for deposit of margin in November 21 itself.
12) Outstanding in CC remain full upto sanctioned limit with poor turnover / transactions (only interest is serviced)
13) Had the margin been realized by debit to CC on 31.12.21, the account would have gone NPA itself.
14) Can the account be downgraded !!

Any other issue which needs to be looked and commented upon.

Regards,

Answer 1

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