Inspection Department (ID)

1. Organisation of Department

The Inspection Department is headed by a Chief General Manager. Besides, at present there are 01 General Manager, 5 Deputy General Managers, 10 Asstt. General Managers, 4 Managers and 01 Asst. Manager in addition to 8 staff members in Development Assistant cadre in the Department.

The 30 Regional Offices and 5 Training Establishments which are inspected by the Department are the main operating units functioning as per the policies and procedures laid down by Head Office. To carry on the activities effectively and in an efficient manner, certain human and material resources are placed at the disposal of these units. During the course of inspection, an attempt is being made to ascertain the deployment / utilisation of these resources vis-a-vis the overall performance.

2. Objectives

The major objectives of the Inspection Department are as under :

1. To provide quick and direct feed-back to the Management on performance of the Regional offices (ROs), Training Establishments (TEs) and Head Office Departments (HODs) by carrying out a critical appraisal of the working and performance of the constituent units in all aspects covering their business operations, planning, development and regulatory functions, human resources management / development and house keeping etc.
   
   

2. To examine the efficacy of the existing systems and procedures laid down and adherence thereto by the constituent units and to provide feed-back and early warning signals for bringing about policy changes so as to pave the way for more effective systems and procedures.
   
   

3. To comment on Management Audit aspects like the role of the ROs/TEs/HODs in furtherance of corporate mission and goals, image and relation building in the region, decision making process within the RO, tapping new business opportunities / avenues, taking new initiatives, etc.
   
   

4. To carry out critical analysis of staff deployment in ROs/TEs/HODs.

5. To provide secretarial support to the two sub-committees constituted by the Board of Directors of NABARD viz., the ACB and RMCB for the smooth and effective discharge of their designated function.

3. Scope

The Inspection Department carries out the Management and Performance Appraisal (inspection) of Regional Offices, Sub-Offices, Regional Training Centres and Training Establishments.

4. Periodicity

The Management and Performance Appraisal (inspection) is carried out once in a year for ROs accounting for 80% business of the Bank and the remaining ROs and Training Establishments (TEs) are inspected once in two years. The periodicity, however, may be changed at the discretion of the Chairman.

5. Methodology

i. The annual programme of Inspection commencing from April each year is prepared by inspection wing of the Department in December of preceding year. The annual programme becomes effective after its approval by Chairman or ED incharge.

ii. The ROs / TEs may be intimated about the probable date of inspection at least one month in advance. However, if it becomes necessary or otherwise, the inspection may be conducted even without intimation. The PIO/IO may devise suitable statements for collection of information etc., if he so desires.

iii. Distribution of work amongst team members may be decided by PIO based on the circumstances in RO taking into account areas needing detailed scrutiny, etc.

6. Functions

The main function of the ID is to critically examine and appraise the working and performance of the ROs/ TEs / HODs vis-à-vis their objectives / goals and their expected role. The functional role of ID, however, remains dynamic in tune with the environmental changes and emerging organisational needs. Various areas covered by the internal inspection are:

a) Business

The inspection covers the business departments like Investment Credit Department, Production Credit Department, State Projects Department, etc. Apart from evaluating their business performance, various operational issues relating to these departments are also critically examined and commented upon in the Inspection Report.

b) Institutional Development and Supervision

With a view to evaluating the efficacy of the various developmental strategies formulated at the corporate level and operationalised at the unit level, the aspects relating to the development of the client institutions viz. Co-operative Banks both under short term and long term and RRBs are covered in the internal inspection. In addition, the supervisory role of the Bank in inspecting the Co-operative Banks / RRBs is also reviewed.

c) Developmental and Promotional

Aspects relating to Development Policy Department (Farm and Non-Farm), Micro Credit Innovations Department (MCID), development planning, monitoring and evaluation functions etc. are reviewed by the Inspection Team to garner validated feed back on the field level performance of the various promotional initiatives taken up by these departments.

d) Human Resource Management Department

The Inspection Team examines the need for capacity building of the staff, the utilisation of manpower, assessment of management effectiveness, the level of discipline, etc.

e) Housekeeping, Finance and Accounting

The efficacy of the existing systems and the impregnability of the controls, checks and balances are reviewed during the Inspection and suggestions for more effective systems and procedures are made by the Inspection Team.

f) Coverage

At present there are 30 ROs and 5 TEs of NABARD, which are subjected to internal inspection as per the periodicity decided from time to time. In addition to conducting the inspection of ROs, ID also conducts inspection of HO Departments, according to the periodicity decided. In addition to conducting inspections, the ID also monitors very closely the work of the concurrent audit undertaken by NABARD staff in the Regional Units and by the External Auditors in a few Departments of HO.

7. Powers & Duties of Officers & Employees

The Inspection Team may comprise one GM / DGM (i.e. PIO), 2 AGMs and 1 Manager/ Assistant Manager. The CGM / ED, ID may join the team towards the end of the Inspection at Regional Office to review the findings and discuss the findings with the Officer-in-Charge of the RO/TE.

i. The officers in Department have been vested with powers to inspect ROs and HO Departments

ii. To issue inspection report to respective internal entities.

iii. Follow-up with the entities for compliance on Inspection Report.

iv. Present important findings / observations of inspection report to Management Committee and the Audit Committee of the Board.

v. Submit information regarding institutions making defaults in repayment and steps taken by the respective units to recover default.

vi. Coordinating Risk Management Function

vii. Overall monitoring of Outstanding entries in Sundry creditors & Sundry Advances.

viii.Issue instructions pertaining to all the above items to entities under control.

8. Procedure followed in the decision making process, including channels of supervision and accountability

The Management Committee, Audit Committee of the Board and the Risk Management Committee of the Board guide the Department. Hierarchial decision making process is in vogue with required flexibility.

i. Periodicity has been fixed for inspection of the ROs and HO depts.

ii. Inspection reports are forwarded to RO and HO Depts., immediately on completion of Inspection.

iii. First Compliance reports are to be received within 30 days from the date of completion of Inspection and closure of inspection report in 90 days.

iv. Monitoring returns in respect of defaults to NABARD by constituents are placed before higher management at fortnightly interval and presented to Risk Management Committee (RMCB) at regular interval.

5. Quarterly monitoring of Outstanding entries in nominal accounts and presenting the position to EDs Committee/Audit Committee of the Board.

6. Quarterly monitoring of Concurrent Audit and presenting information to ACB.
   
   
   

9. Norms set for the discharge of functions of the Department

The Executive Director and the Chief General Manager decide the norms for the day-to-day functioning of the Department. Certain functions like conduct of inspections, getting compliance on the inspection findings, risk management in the Bank and risk forecasting functions are decided by the Management Committee, Audit Committee of the Board and the Risk Management Committee of the Board.

a) Norms for inspection

The inspections are conducted as per the policy laid down in this regard. The ROs accounting for 80% business of the Bank are inspected annually and the remaining ROs and Training Establishments (TEs) are inspected once in two years. At Head Office level, out of 26 Head Office Departments (HOD ), 08, HODs are inspected on regular basis and rest of the HODs are inspected once in two years.

For inspection and drafting of the report, the number of working days generally are allocated as under :

b) Drafting and Submission of Inspection Reports and other documents by PIO

1. Draft Inspection Report is prepared and discussed in the Wrap-up meeting with CGM-In-Charge of the RO by CGM, ID at the end of the inspection programme.

2. A Flash Report on major observations (in the prescribed format) for submission to ED/ Chairman for their information and subsequent discussion in the Management Committee to be submitted within 1 or 2 days on return to headquarters.
   
   

3. In case the inspection team comes across any serious irregularity, financial irregularity or complaint, the PIO should submit a Special Note to ED/Chairman within 1 or 2 days on return to headquarters.
   
   

4. While drafting inspection report, the observations are to be arranged in respect of each department in such a sequence that the persisting observations from the preceding inspection report should be followed by the current observations.

5. First file should contain draft inspection report duly cross referenced with Record of Findings alongwith a draft of the DO letter for forwarding the inspection report.
   
   

6. Second file should contain the Special Notes on the following aspects :
   
   

1. Complaint, grievances, etc. 2. Important issues to be referred to various HO Departments. 3. Critical evaluation of CAC in the prescribed formats alongwith required certificate in duplicate at the end. 4. Outstanding issues/persisting issues in respect of last compliance report. 5. Suggestions for improvement in various aspects of inspection - guidelines, composition of team, duration, periodicity, drafting period, etc. 6. Two floppies containing entire ROF and IR separately.

c) Submission of Compliance

On receipt of the inspection report, ROs / TEs should initiate necessary action for rectification of defects and implementation of suggestions pointed out/made therein and furnish their consolidated compliance to HO within a period of 45 days and in case of HO Departments within a period of 30 days from the date of receipt of the report. Delay, if any, in this regard is viewed seriously by HO.

d) Maintenance of Records

All the records in the Department are duly catalogued and indexed. The reports pertaining to the inspections of HO Departments and ROs are available both in hard copy as well as in soft form.

e) Procedures followed in decision making process

The decisions taken regarding conducting the number of inspections, duration, mandays required, etc. are taken at the Management level. The findings of the inspections are discussed in the Management Committee Meeting and the Audit Committee of the Board. The functions of the Department are accountable at the Management Committee level as well as the Audit Committee of the Board level.

9. Rules, Regulations, Instruction Manuals and Records for discharge of functions

The Inspection Department issues circulars from time to time to the HO Departments and ROs on various issues pertaining to inspections, risk management in the Bank, concurrent audit to be conducted by external auditors, etc. The officers concerned are supplied with these instructions for discharging their functions.

10. Statement of categories of documents

The Inspection Department has entered into an Agreement with M/s.Shah and Gupta and Company, Chartered Accountant for conducting concurrent audit of five HO Departments viz.., GAD, FD, AD, ICD (Co-Financing) and Premises Department. The Agreement contains the areas which are to be audited by the external auditors, remuneration to be paid, periodicity of the audit, etc. The Agreement is kept in the Department.

11. Arrangement for consultation with public

The functions of the Inspection Department pertain to the inspection of NABARD's HO Departments and ROs and its functions do not directly involve public and therefore, we do not have any arrangement for consultation with or representation of the members of the public in regard to formulation of the Department's policy or implementation thereof.

12. Access to Committees / Board's Meetings to the public

The Department acts as the Secretariate for two Committees viz., Audit Committee of the Board [ACB] and the Risk Management Committee of the Board [RMCB]. The Audit Committee of the Board has been constituted by the Board of Directors of NABARD comprising six members from the Board including Managing Director of NABARD. CGM, Inspection Department is the Secretary, ACB. The Risk Management Committee of the Board is headed by Chairman, NABARD. These Committees include select members of the Board from the RBI, Government of India, State Government, etc. and NABARD. The agenda and minutes of these meetings are confidential and they are not accessible to the public.

a) Audit Committee of the Board (ACB)

With a view to providing direction as also overseeing the operations of the total audit functions, a Sub-Committee of the Board viz. Audit Committee of the Board (ACB) was constituted in June 2001. The CGM of ID is the convenor of the ACB. Main functions of the Audit Committee are as under:

(i) To oversee the operationalisation and quality control of internal audit and inspection within the institution and to follow-up on the statutory / external audit and inspections by the RBI.

(ii) To review the internal inspection / audit function in the institution - the system, its quality and effectiveness with focus on the follow-up on frauds and major areas of concern in housekeeping.

(iii) To follow-up on all the issues raised in the Statutory Auditor’s report and interact, if required, with the external auditors before the finalisation of the annual financial accounts and report.

(iv) To follow-up all the issues / concerns raised in the inspection reports of the RBI.

(v) Any other related issue.


b) Risk Management Committee of the Board (RMCB)

The Board of Directors of NABARD had approved the setting up of a separate Board level Sub-committee, comprising the members of the Audit Committee as also Chairman of the Bank, for guiding Risk Management in NABARD. Accordingly, the Risk Management Committee of the Board was constituted in March 2005. The CGM of ID is the convenor of the Committee. The review of all perceived risks is periodically put up to the Risk Management Committee by the ID which critically evaluates the same and provides operational and policy guidance to the Bank to pave the way for an effective risk management so as to safeguard the interest of the Organisation.

i. Functions of the RMCB

The Risk Management Committee has been assigned the task of guiding the Risk Management Policy of NABARD. It will devise the policy and strategy for Integrated Risk Management containing various risk exposures of the Bank (credit risk, market risk, operational risk, etc.).

The Committee oversees the functioning of Credit Risk Management, Asset Liability Management Committee and other risk management committees of the Bank.

ii. Default monitoring

In addition to the above, Inspection Department handles the work of monitoring of defaults by the client institutions and guides in follow up action for recovery of default.

13. Details of information in electronic form

The findings of the inspections conducted in respect of HO Departments and ROs are available in electronic form. However, it is not meant for the public and this information is only used for internal purpose within the Bank.

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