This document discusses the importance of credit monitoring and outlines the key aspects that should be monitored. It defines credit monitoring as tracking the performance of financing facilities from disbursement to repayment. Effective post-sanction monitoring is essential to evaluate asset performance and health over the loan tenure. Key areas that should be monitored include internal and external factors that could impact repayment, utilization of loans, account conduct, financial covenants, and security coverage. Timely identification of issues through monitoring can help prevent delinquency and write-offs.

1. MONITORING
CONTINUOUS
OBSERVATION PROCESS.

2. CREDIT MONITORING
Credit Monitoring denotes,
tracking performance of financing facilities
from disbursement till adjustment.
Prudent lending practices dictates that track of all loans is maintained on
real time basis and not to wake up only when a crisis hits. For this purpose
post sanction / disbursement monitoring mechanism is essential for
evaluation of finance during its currency, including monitoring of the
internal and external factors to ensure that the assets are healthy and
performing during its entire tenure.

3. ESSENTIALS
To monitor the internal and external factors, which
could have adverse effects on the advance.
To take timely actions to keep the asset healthy
and performing during currency of finance.

4. RATIONALE
The utilization of loans is followed up, as
it detrimentally affects the financial
position of borrower and repayment of
our loan).

5. Need for Monitoring
With passage of time the performance of
loan may start to deteriorate and eventual to
default.
Conduct of account is reflection of borrower’s
business and credit worthiness (willingness to pay
/integrity), hence any changes in the conduct of the
account exhibiting deviation from the expected level
of activity and expectations visualized at the time of
credit initiation / approval is a lead to default.

6. POSSIBLE REASONS OF SLOW MOVING FACILITY
 Slow performance of the business due to emerging changes, a
business is exposed to various risks. [market, political and
operational].
 Due to erratic external factors (other than economic) such as
changes in management/ death of sponsor etc.
 Improper structuring of the financing facilities.
 Non completion of documentation formalities.
 Non adherence of the covenants built in the sanction.
 Loss in value of Security.
 Diversion of loan.
 Any Others factors which may affect adversely the performance of
business.
The above and other such factors eventually impact the repayment of account.
However timely identification of trouble spots and taking immediate action to
mitigate these emerging risks can help to avoid delinquent or, in worst case, write
off accounts.

7. MONITORING
 Forced Advance.
 Excess over limits
 Overdue Principal/Mark-up
 Expired Limit.
 Security coverage (shortage / shortfalls).
 Non-compliance of SBP regulations/ Bank’s
policies /procedure
 Non/delayed retirement of Import documents
 Non/delayed realization of Export proceeds.
CORE AREAS

8. MONITORING
 Non-compliance of financial covenants and terms &
conditions of approval.
 Delay in submission of financial statements
 Deterioration of financial health of borrower’s
business.
 Any adverse revelation about the borrower’s
business
 Conduct of Account (Turnover, operation etc.)
 Expired Insurance
 Delayed/Non submission of Stock and Debtors
Reports.
CORE AREAS - 2 -

9. MONITORING
Overall Portfolio Management:
 Maintaining data of Bank’s exposure and analysis through MIS reports.
 Analysis of entire portfolio and its periodic reporting to the management
particularly focusing on the followings:
- Compliance to SBP Prudential Regulations / Bank’s Policies.
- Concentration of Exposure in various economic sectors
[SME/COMMERCIAL/CORPORATE].
- Per party exposure,
- Per industry,
- Clean exposure and
- Exposure by type of securities.

10. MONITORING
PREPARED BY
ABDUL RAUF DANKA
danka02@hotmail.com