AGENCY FOR SPECIALIZED MONITORING (ASM) A TOOL FOR MONITORING OF BIG BORRWAL ACCOUNTS

Introduction: The Govt. of India has introduced several governance reforms, in order to keep a watch on fraudulent activities and to prevent diversion of funds, has introduced the Agencies for specialized monitoring mechanism, under the ASM banks will now appoint specialized monitoring agencies to closely track the activities of the borrower including purchases, invoices, actual production vis-à-vis projection, high value transaction, payments, cash inflow and cash outflow. The move to appoint an external agency to monitor loans comes in the backdrop of banks reporting a 72 per cent year-on-year jump in frauds at Rs. 41,168 crore in FY2018, against Rs. 23,934 crore in FY2017 and cases of fraud at banks and financial institutions increased 28% in volume terms during financial year 2020 as per RBI's annual report.

- Chander Pandey

According to the RBI, frauds have emerged as the most serious concern in the management of operational risk, with 90 per cent of them located in the credit portfolio of banks. Most of PSBs have deployed IT based Early Warning Signals leveraging third party data, which have enabled early, time-bound action in stressed accounts. Monitoring has also been strengthened by developing agencies for specialized monitoring.

Credit monitoring is one of the vital activities in banking industry particularly in present scenario. Banks lend money for purpose of earning interest fee, common etc. which are generated mainly productive use of money collected from depositor. Thus, it is important on part of banks to develop a mechanism to track the performance of the business for which it has been lend the money and ensure proper end use of funds and bank needs to maintain a watch on the happening inside as well as outside of the entity which has borrowed money.

A prudent banker must be able to ascertain the stress in any of its asset well in advance so that timely corrective steps are taken and banks interest is safeguarded. It is observed that, stress assets of Indian banks in general and public sector banks in particular has increased manifold in recent years. Some of the common activity that a bank needs to monitor may be broadly categorized like ensuring compliance of terms and condition along with legal enforceability of documents. In this connection banks have started appointing external agencies for continuous monitoring of loans account of Rs.250.00 crore and above. Lead bank in a consortium of bank will select any particular agency and give the assignment to it for monitoring of account.