PC banks cited for poor monitoring of credit policy

An audit of the National People’s Cooperative Bank (NPCB) has unearthed a plethora of irregularities which has resulted in the intervention of the agriculture minister.

In the wake of this development, The Gleaner understands that heads could roll at the PC Bank.

The Agricultural Credit Board (ACB), the regulatory body for the PC banks, conducted the audit of the lending institution which provides loans to micro, small and medium-scale enterprises, including farmers.

The audit revealed three loans approved and disbursed to one client from members’ deposits totalling $180 million which, as at May 31, this year, reflected significant arrears.

According to the audit, of which The Gleaner obtained a copy, the loans, categorised as “high-risk levels” were granted for the purpose of constructing 24 town houses.

The auditors carried out a site visit and found that 12 of the units were completed of which two had been sold.

The current sale price per unit is approximately $12.5 million and the sale of the remaining units at the current price would be insufficient to liquidate the loan.

According to the audit, there was no evidence at the time of the review that recent valuation of the property was available.

One of three loans in the sum of $79.6 million had principal arrears of $17.7 million and interest arrears amounting to $25.5 million.

The second loan with a principal balance of $42.5 million showed a $6.7 million arrears and interest arrears of a little more than $3 million.

The third loan, with a principal balance of $56.3 million had principal arrears of $10.4 million and interest arrears of $6.3 million.

It was highlighted that there was a lack of proper analysis of loan prior to approval.

Additionally, the audit found that there was a lack of adequate monitoring and poor enforcement of the bank’s credit policy.

For example, the auditors explained that at the expiration of the final date given in the third collection notice for liquidation of the loan, the branch of the PC bank should begin to initiate the respective legal action under the terms of the loan agreement.

“This action is mandatory unless there is authorisation for a postponement issued by the general manager.”