Thursday, March 30, 2017

Security Verification

The young Assistant Manager was eager to acquire the knowledge and skills required to make him an efficient bank manager and leader. His first posting as an officer was in a big metropolitan branch. He was one among the nearly hundred staff members in the branch as computerization was not heard in those days. He did not have any opportunity to work in loans department. His promotion as assistant manager and posting to a medium sized rural branch was personally inconvenient to him. But he was encouraged by the chances coming his way to learn many new things. He proceeded to the new place of posting with lot of hope and expectations.

The young man was welcome by his branch manager and given charge of the loans department. The well experienced branch manager started grooming the assistant in right earnest, to shoulder his responsibilities. He was first initiated into processing of loan applications, scrutinize information provided by the applicants, assess loan eligibility and sanction process. Analyzing and accepting securities offered by the prospective borrowers followed soon. Obtaining documents for sanctioned loans and method of disbursing the loan amounts was the next step. The young assistant manager was now confident of handling small and medium sized loan requests on his own and place the cases before branch manager with his recommendations.

The branch's annual inspection was due any day now and the branch manager was preparing the young assistant to face his first inspection confidently. All aspects of a branch's working were checked and verified by these inspectors and the process went on for two to three weeks. Inspection days were difficult for branch functionaries as they had to manage attending to inspectors in addition to the regular bank work. Attitude and working methods of the inspectors was also a cause of concern for branch managers. Some inspectors were indeed difficult to work with, while some others were more understanding and co-operative. 

Inspectors were deputed by the bank's Inspection Division at Head Office to various branches for annual inspections. Their programing was a secret affair and known only to Inspection Division and the concerned inspectors. This was required to keep the surprise element intact during audit and inspections. Inspectors usually arrived at the branch on a day of their choosing, an hour before opening of the branches in the morning. The branch would be opened under their supervision and all physical securities starting from cash would be checked first to prevent any manipulations. The inspectors would then proceed to verify the other areas of branch functioning. One of the important components of such inspection was visiting the borrower's place for physical verification as well as checking the records of the party. The places comprised shop, factory, godown, house or any such business place or location where securities charged to the bank were kept. Branch Manager or a representative of the branch would usually accompany the inspector on such visits. Inspection was a time bound activity and was expected to be completed in a specified number of days linked to the size and business level of the branches.

An inspector arrived at this branch one morning and started his work. After introducing the assistant manager to the inspector and exchange of pleasantries, branch manager called the assistant manager aside and advised him to assist the inspector during the inspection period. "This inspector and I are from the same batch and we have worked together earlier. It is no secret that we do not like each other. But he is a professional and does not mix personal things with official work. Same is the case with me. I will have limited interaction with him. You will be my representative during inspection. Remember that he is an expert inspector and highly respected for his skills. You can learn a lot from him in the next two three weeks", said the branch manager. The assistant manager did not understand this background initially, but slowly learnt the truth in those words with each passing day of inspection work.

Field visits and verification of securities started in the third week. As the branch had many villages surrounding its location, many agriculture and allied advances were to be inspected. The inspector and the assistant manager proceeded to one of the villages one morning. They went to a borrower's place (Borrower A) a little before noon for checking sheep and goats given as security for bank loan. There were no sheep or goat in the yard. Inspector noted his observation on his rough sheets. After checking some pump set and tractor loan accounts, they went to another borrower's place (Borrower B) around 3 PM for checking sheep and goats. The number of sheep and goats available in the yard were matching the number given in the records. Inspector made some noting again in his note sheets.

An inspector was required to give his observations to the branch manager for rectification of deficiencies or give his comments each day, before incorporating them in his final report. On the next day of the visit to above villages, inspector gave the list of observations on the findings of the previous day's visits. When the assistant manager saw the report he was surprised to find that inspector had erred in his noting. He had recorded that security was intact in Borrower A's place whereas it was noted as missing in Borrower B's place!  He immediately ran to the inspector and pointed out the discrepancy. 

The inspector smiled at the young assistant manager. "We went to the two borrowers on either side of noon. Where do you expect the sheep and goats to be at that time?" The assistant manager could not give a definite answer. The inspector explained further. "At the time of day when we visited the two places, sheep and goat are not expected to be at home. They have to be out on the hill side grazing and return only by sunset time.  In borrower A's place there were no sheep or goat, but there was enough evidence to show that the animals were kept there overnight. The wetness of the yard where the animals were kept and the pungent smell of sheep and goat in the yard clearly showed that he has the animals with him. In borrower B's place there was no such evidence. The land was dry and the air was fresh. Having realized that inspectors have come to the village, he managed to bring the animals from some other farmer's place and show it to us. I have also made enquiries locally from other farmers during the visit, when you were away checking directions to the next village. My observation as recorded in the sheets is correct", he said.

When the assistant manager shared this with the branch manager, he got further insight into various aspects of security verification. "You have to be watchful during field visits. One should not be carried away by what he sees during the visit. What is seen is to be linked to the type of business, local practices, details in the records and above all commonsense. Conclusions drawn based merely on what is visible at the time of the visit may often be erroneous. But that does not mean that you have to ignore what you see physically. Each of these should get due consideration and one should come to a proper judgement after careful analysis of the circumstances obtaining at the time of the visit", concluded the branch manager.

The young man had never thought of all these things. There is a lot more in security verification than a mere visit to a place, he learnt that day.


  1. beautifully written as usual. By the way you have been quiet for sometime now. i was wondering whether anything was amiss. glad to see your post.

  2. This reminds me of the famous novel Final diagnoses where a most wicket docctor(pathologist) functioning so nicely in his proffession

  3. Good lesson for all of us-not to go by what's visible externally.

    1. I would agree with you 100%. UR..........

  4. A good lesson to budding officers. It was reminiscent of our active service days in banks. We learnt something about banking due to such experiences and interaction with seniors.Well narrated.

  5. Nice Lesson for me as i am a new officer, thank you sir.

  6. Again a beautiful story with learning points for budding officers like us...loved to read ur stories after a long time sir...

  7. Well written blog at the right time as audits are happenning now...i can learn so many things from your writings sir...keep up the good work sir...

  8. Amazing article. Nice blend of learning with story. Simple but insightful. Hats of to your writing sir.

  9. sir I am a bmsb student. These are much useful when we go and work in the brach. I hope You keep on post like these useful things.