Handouts - Presentation Slides

Branch Monitoring Tool
Area Managers Training Program

16-18 May 2012
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Market-led
solutions
for financial
services
Market-led
solutions
for financial
services
A word of thanks to those contributed
We are thankful to the entire core group for the contribution

they made as we progressed to develop the tool. We are truly
grateful to Ms. Amy, Ms. Lyn, Ms. Stella, Ms. Jo, Ms.
Gemma, Mr. Steve, Mr. Vic, Ms. Sandra and Ms. May and
all Sector Managers who participated in our discussions for
their thoughtful reviews and inputs to the tool.
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Market-led solutions for financial services
Session plan
1. Introductions
2. Overview of branch monitoring tool
3. Branch monitoring programme
4. Steps of monitoring
5. Monitoring visit planning
6. Branch monitoring tool structure
7. Tool description
8. Tool guidelines
9. Hands-on experience of the tool
10. Practical tips for branch monitoring
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Session 1: Introduction
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Session objectives
Get to know all participants and their roles

Expectations from the training
Discuss session plan
Introduce the major themes of this training
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Exercise 1.1 Wild Weird Wacky
1. On a piece of paper, write the weirdest, wackiest, zaniest

thing that you have done.
2. Find the pax with the same number as yours (lower left
portion of your paper) and
3. Tell your:
Name and work assignment
Expectations from the workshop
Share your wackiest thing that youve done
4. Introduce your partner to the group and relate the above

information that s/he shared to you.
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That was fun.....lets look at the workshop objectives
Exposure to branch monitoring tool using

Motivation for the toolkit
Analytical frameworks and tools for branch monitoring
Practical tips and examples
Experiential learning techniques including exercises
Field experiences sharing
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TRAINING ARRANGEMENTS
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Session 2: Overview of Branch

Monitoring
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Call out
What is Branch
Monitoring? What all
should be covered under
branch monitoring? How
often do you do it?
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Motivations for branch monitoring tool
To bring in structure and system to the existing monitoring

process
To use Loan Portfolio Assessment concepts and mechanics
to enhance the scope of branch monitoring tool
To lead AMs to play more proactive role of supervision
and monitoring coupled with coaching and mentoring
To reduce operational risks and cases of
defaults/delinquency
To have 100% standardized process compliance and policy
adherence throughout the institution
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Objectives of branch monitoring tool (1)

Branch monitoring tool lends structure and system to the
monitoring
The key objectives of branch monitoring tool are:
Empower AMs to objectively and independently assess the
branches compliance to established policies and processes
Area wise report consolidation of the Operational Indicators
Recommend corrective and preventive actions to the branches
where the visits were conducted
Check the action taken report for the recommendations made for
the previous visits
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Objectives of branch monitoring tool (2)

Recommend to the management, need for revision of policies and
processes
Train or coach the staff members of the branch at the end of the
visit on specific issues
Provide feedbacks to branch staff
Compare branches performance across the area
Keep tab on variables that can potentially affect the credit and
operational risks
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Call out
Is Audit and Branch

Monitoring the same?
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How is it different from Audit?

Audit
- Conducted by independent
department
- Reports to the Board
- Is a fact finding mission
- Highlights both operational

and fiscal anomalies
Branch Monitoring
- Conducted by operations
department itself
- Reports to the senior
management staff of operations
department
- Is a assessment cum
improvement mission
- Highlights mostly operational
anomalies
- Action taken can be fast
tracked
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Call out
How about accounting and
branch monitoring?
Why do they check the same
documents that we do for
monitoring?
Why duplication of work?
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How is it different from Accounting?
Accounting
Assessment of fiscal
anomalies, reconciliation of
cash
It is part of accounting
procedure as the coverage is
100%
No-field level verification
based on documents only
Post-facto establishment of
accountability of erring
employees
Transaction based approach
Branch Monitoring
Assessment of mostly
operational anomalies and
development of corrective
action plan
For accounting examination, a
properly drafted document
does not negates the
probability of ghost loans
Field level verification
Correctional approach
Process and policies based
approach
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Session 3: Branch Monitoring

Programme
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Call out
Why should we make the

branch monitoring an
integral part of the
operations?
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Introduction to Branch Monitoring Programme
One of the key focus area of the Area Managers is to

assess adherence and compliance to the operations
process and policies; risks identification and mitigation
planning
Branch Monitoring programme envisions systematic
review of the operations and controls in place in each of
the branches as well as would ascertain the level of
standardization with respect to the policies and processes
organisation wide
Branch Monitoring programme will continually improve
the effectiveness of institutional compliance to processes
and policies through periodic assessments.
Periodic assessments ensure that policies effectiveness is
also reviewed for continuance suitability
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Branch Monitoring Programme (1)
Branch Monitoring programme is a systematic process of

assessing to see if the processes are being followed
according to the policy guidelines as as stated in the
operational manual and whether it meets the specified
requirements
Branch Monitoring programme helps to enable the staff
members improve the compliance to policies and
processes and thus enable the organisation to achieve
better quality portfolio, reduce operational and credit risk
and achieve its mission
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Branch Monitoring Programme (2)
Any business process is a collection of related and

structured activities that produce a service to meet the
needs of a client. Each and every step of a process is
critical as non-adherence/non-compliance to any of the
processes might enhance the risks and thus causes lost
revenue
Branch Monitoring considers processes to be strategic
assets of an organization that must be understood,
managed, and improved to deliver best services to the
clients
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Objectives of Branch Monitoring Programme (1)
Adherence to policies: An organization must be able to

promote operational efficiency and encourage adherence to
established policies
Adherence to processes: An organization must be able to
encourage and motivate staff members to agree and adhere
to the processes strictly as bypassing processes might
enhance the operational risks
Safeguarding of assets: Physical and non-physical assets
(such as client documents), and financial records are
vulnerable to loss, misuse or damage if care is not taken to
protect them through reliable and safe back-up procedures,
clear assignment of duties, and controlled operating
environments
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Objectives of Branch Monitoring Programme (2)
Prevention and detection of fraud and error: A strong

Branch Monitoring programme should be able to prevent
and detect fraud, error and other irregularities
Improvement of customer service
Availability of branch and staff performance report
Analysis of performance data
Sustainability: An organization must be able to operate in a
financially self-sufficient manner to effectively sustain the
delivery of its products and services to the clients
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Risks Mitigated
Branch Monitoring Programme focuses on 4 key operational risks
assessment and mitigation planning. These are:
RISK
EXPLANATION
Credit Risk
Inability to collect loans disbursed
Fraud Risk
Incidence of intentional deception for personal gain or irregular

means
Execution, Delivery and

Process Management
Risk
Non-compliance/non-adherence to policies, processes, systems,

criteria and other terms and conditions
Error Risk
Occurrence of unintentional errors that create unreliable

information and reports, or loss of assets
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Exercise 3.1: Examples of Non-Compliance
1. In Groups identify and discuss some examples of noncompliance of operational policies and procedures and the
associated risks.
2. Each group will present the summary of their discussion in the
plenary.
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Session 4: Steps of Branch Monitoring

Programme
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Exercise 4.1: 7 Steps of Branch Monitoring

From your experiences, in groups of 5 each, rearrange the following in its
logical order. Be prepared to present your logic.
15 minutes
Step 1
Verify branch
administration
and monitoring
processes
Step 3
Step 2
Verify loan
processes and
adherence to
policies
Collect branch data in

preparation of the visit
Step 4
Step 5
Step 6
Trace Loans from

Branch Office to
Borrower and vice
versa
Cross-verify with
client folders,
accounting
records and
loan ledgers
Report back to the

senior
management team
Step 7
Develop action
plan for
corrective action
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7 Steps of Branch Monitoring
Step 1
Step 2
Step 3
Collect branch
data in
preparation of
the visit
Trace Loans from

Branch Office to
Borrower and
vice versa
Cross-verify with loan

documents and
accounting records
Step 4
Step 5
Verify loan processes

and adherence to
policies
Verify branch
administration
and monitoring
processes
Step 6
Step 7
Develop action
plan for corrective
action
Report back to
the senior
management
team
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Step 1 : Collect branch data in preparation of visit
Before actual visit of the branch, gather all the operational

indicators of the branch
Based on the operational indicators decide on the focus of
the monitoring visit
Record the branch data in the tools appropriate sections
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Step 2: Trace Loans: Branch to Borrower and vice versa (1)
Select number of borrowers as stipulated in the guidelines for

sampling from the Branch office records at random
Selection of borrowers/loans should be done such that there is
enough of a sample in the following areas:
Outstanding loans
o
o
o
o
o
Clients with No Payments in Arrears

Clients with Payments in Arrears
New Clients (who have recently received the loan amount)
Loans Received within one month of the pre-termination
Clients with Multiple Loans
Closed loans
o
o
o
Drop out clients

Idle Clients
Pre-terminated loans
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Step 2: Trace Loans: Branch to Borrower and vice versa (2)
Visit these centers/clients and verify the loans status from

the Branch Office records to the borrowers own passbooks
If differences exist in the loan outstanding for a client
across various levels of analysis, then all concerned
transactions need to be reviewed and reconciled
Verify the client level processes such as projection
meeting, CCT, CGT, GRT, center meetings are properly
conducted by the responsible staff
Collect field level data from the clients such as dates of
meetings, payments, amount paid, OR/PR numbers etc and
verify it back with the branch records
If differences exist, review what might have caused the
differences and record findings
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Step 3 - Cross-Verification With Accounting and Other Records
Using the field-level data collected in step 2, trace the

transactions from the accounting records and loan
document
Reconcile all the cash and bank transactions with
cash/bank statements and receipts/vouchers at branch level
Record all anomalies in the findings of the relevant section

of branch monitoring tool
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Exercise 4.2 Verification of Steps 1, 2 and 3

In Groups
Write down what all aspects to check for Steps 1, 2 and 3
Assess the importance of each of aspects identified step using the 3point scale given below
Most important
Important
Not important
Provide reasons for the level of importance accorded to the item

Format for the exercise
Aspect of
Verification
Means of
Verification
Importance
Reasons for Level

of Importance
30 minutes for the discussion
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Step 4: Verify loan processes and adherence to policies
Verify from randomly selected client and PER folders any

anomalies that exist in
o
o
o
o
o
o
o
Loan Application form, terms of loans repayment

Authorization and approval
Loan contract and PN
Loan administration and documentation processes
Chattel, REM and collateral
Guarantee
Loan records and documents
Record anomalies in the appropriate sections in the branch

monitoring tool
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Exercise 4.3 Verification of Steps 4

In Groups
Write down what all aspects to check for Step 4
o
o
o
o
o
o
o
Loan Application form, terms of loans repayment

Authorization and approval
Loan contract and PN
Loan administration and documentation processes
Chattel, REM and collateral
Guarantee
Loan records and documents
Assess the importance of each of aspects identified step using the 3point scale given below
Most important
Important
Not important
Provide reasons for the level of importance accorded to the item

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Step 5: Verify branch administration and monitoring processes
Verify from ocular observation, discussion with clients,

branch staff and branch manager
o Branch administration
o Branch monitoring process
Record anomalies in the appropriate sections in the branch

monitoring tool
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Exercise 5.1 Verification of Steps 5
In Groups
Write down what all aspects to check for Step 5
o Branch administration
o Branch monitoring process
Assess the importance of each of aspects identified step

using the 3-point scale given below
Most important
Important
Not important
Provide reasons for the level of importance accorded to the

item
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Step 6: Develop action plan for corrective action
Schedule an exit interview with the branch manager

Discuss the deviation and anomalies observed during the
branch monitoring
In discussion with the branch manager develop key
agreements and action plan for corrective action for each
observation
Record the action plan in the report for senior management
team
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Step 7: Report back to the senior management team
At the end of the branch monitoring, using the recordings

of all observations, summarize findings
Prioritize the findings according to the situation and its
impact on the portfolio quality
Record the action plan based on key agreements with the
branch manager
Finalize the report and send it to the senior management
team
TIP: You may use Taglish for reporting back as well
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Session 5:
Monitoring Visit Planning
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Sampling strategy and plan

It is recommended that area managers during their monitoring visits select
the sample size based on the following matrix
Group Loans min. 2 centres, min. 20 clients

Individual Loans min. 6 clients (from TMP, HSLP and Maunlad)
Agricultural Loans min. 2 groups, min. 10 clients
The sample of clients should have adequate representation from the
following categories:
Outstanding loans
o
o
o
o
o
Clients with No Payments in Arrears

Clients with Payments in Arrears
New Clients (who have recently received the loan amount)
Loans Received within one month of the pre-termination
Clients with Multiple Loans
Closed loans
o
o
o
Drop out clients

Idle Clients
Pre-terminated loans
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Sampling tips
For the sample clients, each record should be traced from branch
office to the clients passbooks/records or vice-versa and the records
must be matched and verified. The above table only includes the
minimum sample size requirement for the monitoring purpose. If
time permits, AM must increase the sample size.
There may be cases where the same client has obtained more than
one loan. In this case, all records pertaining to different loan
products for the same client should be verified.
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Session 6:
Structure
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Schematic Diagram
During Visit
Pre-Visit
About the branch
Branch Profile
Products and
administration assessment
Post Visit
Reports
Group Loans Monitoring Checklist
Report 1: Branch Profile
Individual Loans Monitoring

Checklist
Report 2: Group Loans

Monitoring
Agricultural Loans Monitoring

Checklist
Report 3: Individual
Loans Monitoring
Branch administration and

monitoring Checklist
Report 4: Agriculture
Loans Monitoring
Area Average
Input sheets
Output Sheet
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7 Steps of Branch Monitoring

Step 1
Pre-Visit
Collect branch data
in preparation of the
visit
Step 2
Step 3
Step 4
Step 5
Trace Loans from

Branch Office to
Borrower and
vice versa
Cross-verify
with loan
documents and
accounting
records
Verify loan
processes and
adherence to
policies
Verify branch
administration
and monitoring
processes
Step 6
Develop action
plan for
corrective action
During
Visit
Step 7
Report back to
the senior
management
team
Post Visit
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Structure of the tool

Operational data gathering for all the branches to profile the

branches
Group loan
portfolio
assessment
Client Selection
Centre formation
Loan application and
documentation
Loan evaluation and
approval
Loan disbursement
LUC
Repayment/Centre
Meetings
Delinquency Management
Individual loan
portfolio
assessment
Client Selection
documentation
CIBI
Loan evaluation and approval
Loan disbursement
Post Loan Documentation
(Applicable in MAUNLAD)
Loan Utilization Check
Loan Supervision/Monitoring Visit
Loan Repayment/Collection
Agricultural
loan portfolio
assessment
Client Selection
Centre formation
documentation
Loan evaluation and
approval
Loan disbursement
LUC
Repayment/Centre
Meetings
Branch monitoring
and administration
review
Branch monitoring
Branch administration
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Structure of the tool (contd)

Branch Profile
entry
Area Averages
Entry
Branch
Operational
Dashboard
Group Loans Review

(Branch and
clients/centres Visits)
Individual Loans
Review (Branch and
clients visits)
Agriculture Loans
Review (Branch and
clients/group Visits)
Group Loans
findings
Individual
Loans findings
Agriculture
Loans findings
Group Loans
review report
Individual
Loans review
report
Agriculture
Loans review
report
Administration and
Monitoring review report
BRANCH
MONITORING
REPORT
Branch Administration and

Monitoring Review
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Session 7: Tool Description
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Let us go through each sheet of the branch monitoring tool.

This tool is an excel based automated tool to report and
analyse findings and prepare recommendations.
Please spend half an hour to browse through the sheets of
this tool so that you get accustom to it.
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Session 8: Tool Guidelines
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Branch Monitoring Tool Guidelines
Please go through the tool guidelines to understand the

nity gritties which should be kept in mind while filling the
tool
You will use the tool in next exercise.
Electronic Handout: Tool guidelines

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Session 9:
Hands on Experience of the Tool
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Exercise 9.1
Please start verifying the client folders brought by you and

start recording your findings in the tool
This is an individual exercise.
The exercise needs to be completed for all the products as
well as for the branch administration and monitoring.
All the sheets including the branch profile must be filled
by the participants
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Session 9:
Practical Tips for Branch
Monitoring
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Practical Tips (1)

Tip 1: Make sure to collect the branchs operational highlights before
the visit. This will save time and help you fill the branch input sheet
before the visit
It would help you to compare the branch-related figures with the area
figures as well as the overall TSPI average data (get your other branches
data as well to calculate average area figures)
You can have a preliminary overview of branch growth rate and portfolio
performance
Considering key indicators such as PAR>30, number of active clients,
product wise performance etc. could help you think of critical issues that
require special attention during monitoring
Tip 2: Monitoring visits can be surprised as well as planned

Tip 3: Review the entire branch monitoring tool before the actual
visit for your own preparation
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Practical Tips (2)

Tip 4: Remember the qualities of good area manager
Asks questions tactfully and respectfully, encouraging the branch staff to

open up
Can track multiple assessment points simultaneously while examining
portfolio related documents
Be courteous and respectful
Does not go on a fault finding mission
Is responsible for its branch
Tip 5: Always start with the branch manager

Tip 6: Must have clear understanding of operational policies and
procedures (for all products). This is a must requirement as you have
to assess the compliance level of the branches
Tip 7: Determine which documents to track and where to find them
Tip 8: Get acquainted with different loan-related documents and
reports
Tip 9: Meticulously note the details of every finding
Tip 10: Move quickly from one issue to another
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Practical Tips (3)

Tip 11: Examine gaps identified as well as the issues around it
Tip 12: Draw away intrusive staff members during sensitive
discussions
Tip 13: Select sample based on your judgment. Do not get influence
by anyone
Tip 14: Never let emotions or excitement show as anger or rude
behavior
Tip 15: Constantly review the monitoring tool to ensure that you do
not skip anything
Tip 16: Ensure that you note down the instances during the field
visits accurately
Tip 17: Accurately calculate the total number of observations and
deviations
Tip 18: Do not forget to give priority level to the observations
Tip 19: Summarize the findings to the branch manager at the end of
each visit and suggest him/her the possible strategies to correct the
irregularities-Act as a mentor to branch staff
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Practical Tips (4)

Tip 20: Flag off policy level issues which require immediate
attention of the top management
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Branch Monitoring Tool

Area Managers Training Program

A word of thanks to those contributed

We are thankful to the entire core group for the contribution

Get to know all participants and their roles

Exercise 1.1 Wild Weird Wacky

1. On a piece of paper, write the weirdest, wackiest, zaniest

4. Introduce your partner to the group and relate the above

That was fun.....lets look at the workshop objectives

Exposure to branch monitoring tool using

Session 2: Overview of Branch

Motivations for branch monitoring tool

To bring in structure and system to the existing monitoring

Objectives of branch monitoring tool (1)

Objectives of branch monitoring tool (2)

Is Audit and Branch

How is it different from Audit?

- Is a fact finding mission

- Highlights both operational

Why duplication of work?

How is it different from Accounting?

Session 3: Branch Monitoring

Why should we make the

Introduction to Branch Monitoring Programme

One of the key focus area of the Area Managers is to

Branch Monitoring Programme (1)

Branch Monitoring programme is a systematic process of

Branch Monitoring Programme (2)

Any business process is a collection of related and

Objectives of Branch Monitoring Programme (1)

Adherence to policies: An organization must be able to

Objectives of Branch Monitoring Programme (2)

Prevention and detection of fraud and error: A strong

Inability to collect loans disbursed

Incidence of intentional deception for personal gain or irregular

Execution, Delivery and

Non-compliance/non-adherence to policies, processes, systems,

Occurrence of unintentional errors that create unreliable

Exercise 3.1: Examples of Non-Compliance

Session 4: Steps of Branch Monitoring

Exercise 4.1: 7 Steps of Branch Monitoring

Collect branch data in

Trace Loans from

Report back to the

7 Steps of Branch Monitoring

Trace Loans from

Cross-verify with loan

Verify loan processes

Step 1 : Collect branch data in preparation of visit

Before actual visit of the branch, gather all the operational

Step 2: Trace Loans: Branch to Borrower and vice versa (1)

Select number of borrowers as stipulated in the guidelines for

Clients with No Payments in Arrears

Drop out clients

Step 2: Trace Loans: Branch to Borrower and vice versa (2)

Visit these centers/clients and verify the loans status from

Step 3 - Cross-Verification With Accounting and Other Records

Using the field-level data collected in step 2, trace the

Record all anomalies in the findings of the relevant section

Exercise 4.2 Verification of Steps 1, 2 and 3

Provide reasons for the level of importance accorded to the item

Reasons for Level

30 minutes for the discussion