CM TRAINING MANUALUpdated English

Collateral Management Training Manual

Designation content value content discolored shriveled brokers Organic Inorganic
on dry of oil % cracked
I basis 12
II 20 3 10 23 5 0.5 0.5
4 12 10 0.5 0.5
18

III 15 6 12 3 5 20 0.5 1.5

Grade designation of Cotton Seeds

Grade Foreign Damaged Immature, Weevilled Linters Moisture
Matter seeds Shriveled & seeds
dead seeds 4.0 10
I 1.0 1.0 0.5 6.0 10
II 3.0 2.0 2.0 1.0 10.0 10
III 5.0 4.0 4.0 1.5
6.0

Unit 4: CM – SOP

4.1 Location Inspection Process

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4.1 A Bank Inspection request process

i. In order to facilitate funding against stocks the Banks send an inspection
request to the CCG at [email protected] . The inspection request is
sent by the official mail id of the Bank.

ii. In some cases the local branches send the inspection request to the local
staff of NCML in which case the same is forwarded to CCG by the local staff.
The CC or the BDE can send the survey request on behalf of the bank
keeping the bank in loop.

4.2 B Survey Process:

iii. CCG forwards the Survey request to Concerned CSO who in turns forwards
the survey request to the Cluster controller (CC) and the nearest available
CM.

iv. The appointed CC / CM go to the location, inspect the godowns, get market
feedback about the borrower and report the same in prescribed format “
WAREHOUSE INSPECTION REPORT’’ (Annexure I) to CSO by mail.

v. TAT of providing survey report to CCG:
a. For new Location: 48 hours.
b. For existing Location: 12 hours.

4.3C Survey Submission and Approval Process.

• After Receiving the Survey, CCG cross checks it and forward it to the
concerned bank along with Charges. Charges decided by CCG is considered
as final.

• CCG has right to accept or reject the case on the basis of information
available in the warehouse inspection report.

• If Bank is satisfied with report and CM charges, it provides approval for
takeover of Location in writing or email to CCG..

• CCG forwards the bank approval to concerned CSO along with approved
Charges and approved manpower including both the CM and security
guards per location .

• To keep track of each and every survey related activity CCG updates its
Survey MIS (Annexure II)

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4.2 Godown Takeover

4.2a. CM appointment at the location:

After Bank confirmation/ approval the Cluster controller appoints a CM for the approved
godown. The details of the CM are sent to the CSO for record updation.

4.2 b. New location kit dispatch process:

Once CM is appointed for godown he must be provided with complete kit which includes:

• All registers (7 in 1) or Kisan Mitra Register& Depositor register (in case of pvt
licensed warehouses and cold storages only) , CDF, CWF etc..

• Stack cards
• Sample bags and sample seals
• Sample tray and Parkhi (Sieve).
• Torch.
• Locks.

The details of assets provided to CM will be maintained by CC (annexure III) who in turn will
update it to the CSO on a monthly basis.

4.2 c CM Training process:

1. The CC or buffer CM provides initial training / support to CM for a week or so till CM is
confident of handling the location independently.

2. Within a forth night of joining of the CM the CM has to be trained and certified by the
Master CM Trainer of the State.

4.2 d Lock and key process:

• After taking over of location, godowns should be locked with locks of NCML only, in
all the doors.

• Only 1 door is locked from outside. Rest of the doors are locked from inside.
• No nut bolts should be used for locking of doors as they are the important cause of

theft in godown either by labour or unidentified persons.
• Each lock must have a set of 3 keys out of which 1 set remains with CM and 2 sets in

area office.
• The CC should submit a monthly Lock and Key report to the CSO and the CSO should

validate the same with the keys available in the Area Office ( Annexure -4 Key
Register)

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4.2 e Security Guard Appointment Process:

• It is to be noted that Security guards should be appointed as per agreement only or
as per the agreed terms during finalization of the location and CM fees by CCG.

• CCG has to map the guard to the location and godowns in CM Pro.
• Security guard must have following qualities:
• He shall be in good health.
• He shall be literate.
• Shall have proper eye sight.
• He must be equipped with :

o Identity Card of security agency.
o Proper Uniform
o Stick, torch and whistle.

4.2 f Authorized Person verification Letter from Borrower

The CM needs to verify the authenticity of the authorized person of the Borrower or the
Borrower himself and should take the signatures on the subsequent documents such as
control agreements , CDF , CWF etc from the Borrower or his authorized person only
(Annexure 19).

4.3Control Agreement:

Control agreement is the agreement executed between the warehouse owner or the
warehouse lessee who might or might not be the borrower with the collateral manager
providing the legal custody and access of the warehouse to the collateral manager. There is
no lease amount with regard to this type of agreement hence this is not referred to as a
lease or sub lease agreement and is called the control agreement.

Types of Control agreements:

I. Lease agreement (Annexure IV): This agreement is executed when the
borrower / client is the owner himself of the godown.

II. Sub –lease agreement (Annexure V) : When Borrower / client is using third
party’s warehouse for commodity storage.

III. Tri-partite agreement (Annexure VI): When lock n key control of godown is
not with NCML and funding involves the liability of all the 3 links: BANK, NCML
AND BORROWER. Normally Tri-partite agreement is done in cases of Pvt.
Licensed warehouses and licensed cold storages.

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IV. Service Provider Agreement (Annexure 23): When lock n key control of the
godown/cold storage is not with NCML and the Bank does not want to enter
into a tripartite agreement in such cases under special considerations only the
service provider agreement can be signed with the warehouse owner and
thereby facilitate funding

4.3 b. Time and process of execution:

• As per policy Control Agreement should be executed before generation of CAR .
• It needs to be executed on Stamp paper of value Rs.100 and in prescribed format

only.
• The information of execution of the control agreement with the borrower should be

shared with the CSO by the CC and the CM.

4.3 c. Tracking Of Control agreements:

• Original copy of agreement should be sent to area office for record keeping.
• One photocopy of the same should be available in godown
• If control agreement is going to expire it should be renewed / prepared fresh 15 days

prior to expiry.
• Cluster Controller has to send details of agreements on monthly basis in Agreement

tracker module(Annexure VII) to CSO of his state who in turn will compile the details
of his area and forward it to CCG on monthly basis.

4.4Commodity Deposit Process:

Since the quality and quantity of commodity constitutes the major risk involved in CM
assignment, it is the most important process which requires proper Planning and
Observation.

4.4A Planning before arrival / unloading of commodity:

1. Assessment of storage Capacity:

Accurate estimation of capacity of a godown is an important factor to avoid both over
loading and under loading. The Godown capacity is calculated as per the formula:

{Length of Godown (in Ft.) X Width of the Godown (in Ft.)} = Total MT
6

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2. Stack Planning:

• Stacks should be laid out in such a manner that a gap of 2 to 2.5 ft is there in between
stacks and walls for ventilation and operational purpose.

• Stack Numbering: The stack numbering should be done in sequence and should be
displayed in the registers and the stack cards. (For eg : A1, A2, etc).

3. Dunnage:
• It protects the commodity from dampness, allows ventilation and assists with
fumigation. It should be on a level; otherwise stack may be unstable and unsafe.
Before deposition of commodities it must be ensured that proper dunnage is being
used. If it is not there it should be informed to bank immediately through mail. The
CAR for such deposits should not be generated until and unless the banks approves
of the same.
• Approved Types of Dunnage:
o Wooden crates / pallets and
o LDPE sheets.

4.4 b Deposit Supervision:

• Check the consignment before unloading it from Vehicle. If wet or damaged bags are
seen report it to senior authorities before accepting the commodity. Keep such bags
or consignment separately.

• If in a particular lot, the commodity is of High moisture content, it should be
segregated or should be distributed among different stacks of same bag size.

• Usually as per standard process, no two commodities or varieties should be
deposited in same stack but in case two different commodities or varieties are to be
stored in same stack, it should be clearly demarcated by using NCML tapes.

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4.4 c Stack building

1. Stack should be built on dunnage. A neat solid stacking ensures proper preservation and
counting. A great care is necessary to build good stacks.

a. All bags in stack should be of uniform size and weight to avoid possible risk of
its becoming unstable.

b. The stack height should be limited to provide a working head space of about 3
to 4 feet.

c. In case the quality of the bags is poor the same should be mentioned in the
CDF and therefore the CAR.

4.4 d Sampling and Quality analysis Process

Sampling Process
• Both in case of Low value commodities and HIGH VALUE commodities
(Format -26), sampling should be done by CM as per the defined process in
Quality Analysis manual (Annexure – 01).
• One sample should be drawn per lot. The lot size is detailed in the (Format –
27).
• In case of fresh deposits CM should take sample from every alternate bag at
the time of stacking.
• In case of pre-stacked commodity 20% of the stack should be de stacked and
20% bags from the complete stack should be included for sampling.
• The drawn sample should be thoroughly mixed and divided into 2 parts of
approximately 500 g. each.
• One sample is used for analysis of quality parameters.
• For second sample, all details of the sample are written on Sample Tag
(Format No -42), sealed and is to be stored as a control sample in the godown.

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Quality analysis Process
• Analysis of samples of low value commodities is done by the CM at the location as
per the process prescribed in the quality analysis manual. (Annexure-01)
• Samples of high value commodities are sent to empanelled lab for analysis.

Quantity Estimation Process:
• In case of pre stacked commodities, silos, bulk storage and tank the quantity estimation is
done as per the procedure described in (Annexure -02)
•
In case of pre-stacked commodity 20% of the stack should be de stacked and 20%
bags from the complete stack should be included for sampling.

4.4 e Weighment of Bags

1. In godown it must be ensured that before deposition of stock an electronic or
manual weighbridge should be available to weigh the quantity of bags.

2. CM should weigh at least 15% of the bags from each stack on random basis and
should note down the details in weighment tally sheet (Format - 28).

3. After it, average weight per bag per stack is calculated. This average weight is
used to arrive at the total weight of the bags stored in the warehouse.

4. Total weight of bags or bag size can be calculated from weighbridge slip,
provided the CM randomly checks weighing of vehicle at the weighbridge.

5. In case of pre stacked commodities, the quantity estimation should be done
as per SOP 009.

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4.4 f Commodity deposit form (CDF) Preparation

1. The CDF should be maintained in Borrowers godowns only and not in Pvt
Licensed warehouse and cold storages.

2. After weighment of bags and sampling process is completed the Commodity
Deposit Form (CDF) (Format – 13) is filled for record keeping. It captures all
the details of commodity deposited in a particular godown. Total number of
bags deposited commodity wise variety wise and borrower wise are captured
in this form.

3. The CM should mention whether the stocks deposited are to be funded or not
by marking tick on the CDF on the appropriate column.

4. The CDF is prepared in duplicate form and needs to be duly signed by
depositor or his authorized agent.

5. The CM should forward only the CDF which needs to be funded/ lien marked
for CAR generation. The CDF for unfunded stocks should be separately
maintained at the godown and not forwarded to the CSO for CAR generation.

6. In case the borrower wants to convert the unfunded CDF to funded CDF i.e. if
the borrower desires to take funding against the earlier deposited unfunded
stocks, the CM needs to generate a CWF for the unfunded stock and generate
a fresh CDF with marking tick on the funded column and lien marking the
stocks in favour of the funding bank.

7. The first copy is Faxed to CSO on the same day for generating the CAR. In case
the CM is not able to fax the CDF, the CC will need to send a mail with the CDF
details in CDF format itself (soft copy) to CSO.

8. In case lab test is required for quality verification, the duly filled Lower portion
of CDF (for Lab test purpose) is to be removed and to be put along with
sample in sample bag.

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9. The second copy will be given to the depositor as deposit acknowledgement.

10. The first copy should be available with CM for audit at any point of time by
IVG, CC and AM.

11. On the Basis of this CDF detail CSO will generate CAR No. in CM-PRO.

12. Register to be updated after filling CDF: Godown Stock Register.

13. Pledge board has to be placed on the godown in favour of the funding bank.
The Pledge board should be clearly visible from a distance and should be
placed at a height where in no one can remove it easily.

4.4 g Insurance details
1. Insurance is taken against the risk of Burglary, theft, flood and Fire and various other

perils by the borrower as per agreement with the lending banks. The standard Fire
policy covers most of the risks and a separate Burglary policy also needs to be taken.

2. The Burglary policy needs to be equal to or less than the risk cover of the Fire policy

but not less than 20% of the Fire Policy cover.

3. For most of the banks Insurance details are provided in each CAR. The banks for

which the insurance details are not mentioned in the CAR are ICICI, Axis and HDFC.
These banks take the insurance policy directly and we are not responsible for
tracking the adequacy and validity.

4. For Insurance Policy documents following things needs to be noted by the CSO and

CC:

1. Both Cover Note and Policy should be Faxed or e-mailed (scan) to CSO of
both the Fire Policy and Burglary policies. In some cases there can be a
combined policy which needs to be verified.

2. Validity of Policy should be checked. Whether it is going to expire in next 2-
3 months or period is sufficient.

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3. Amount of Policy: The Total value of CDF (funded and unfunded together)
should not exceed the total value of insurance policy.

4. Address: Cross check whether the address mentioned in the policy is same
as where stocks are deposited.

5. Lien Marking: It should be lien marked in favour of the bank that is going
to fund the Storage receipts.

6. If any of the above 5 points are not up to the mark in insurance policy it
should be brought to the notice of bank by CM or CC or CSO through
written document or E-mail to CCG.

4.4 h Commodity Arrival Report (CAR ) generation / Pledge Creation

1. On the basis of CDF & Quality Analysis Certificate from the Lab (in case of
high value commodities), CSO enters the details in CM-PRO.

2. CM-Pro will generate ‘Commodity Arrival Report’ (CAR). Each CAR number
is unique and it captures all the important details as required by Bank.

3. The CAR will have a unique reference number and it will also contain the
reference numbers of CDF concerned.

4. The system generated CAR report (Format – 29) is printed on a letter head
by CCG, a uniquely numbered hologram provided by CO is affixed, signed
and sent to the Bank concerned.

5. A copy of CAR details is also sent to CM concerned.

6. Godown Stock Register (Format- 8) and Pledge Register (Format – 9) are
to be updated on the basis of CAR provided to CM.

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4.5. Daily Activity Process

It includes day to day activities of CM supervisor once commodity is deposited and pledged
by the bank and consists of following activities:
1. Attendance Marking:

• The CM has to report to the location every working day latest by 9:30 Am and
should report over phone to the CC.

• The CC in turn, after confirmation, should mark the attendance of the CM in
HR-Pro latest by 10:30 AM.

2. Stack card updation:
• A stack card (Format-15) is a tally card depicting details of the stacks from the
time it is built up to the time it is released.
• It should be tagged on the front side of the stack at a height convenient for
recording inspection notes.
• It should be kept in transparent polythene cover to prevent any damage by
moisture or insects.

3. Proper aeration on daily basis:
• The stocks should be aerated on a daily basis by opening the doors of the
godown for a specified period. Aeration should be avoided during a rainy day.

4. Inspection of the godown:
• CM should inspect the godown and commodities every day so that prompt
action can be taken if any issue is there.

5. Godown cleaning:
• The store should be kept clean and tidy both inside and outside because clean
and tidy warehouse help in control of pests and make working condition
better.
• Godown cleaning is to be done by Borrower only and if it is not done by
borrower inform the same to bank and CC through mail.

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6. Pest Control Process:
During inspection of godown use sight, hearing aid and smell to search for insects
and rodents. Following points to be noted in Pest control activity:
• If infestation has just started or Insects visible are few in number Spray is done.
• If even after Spraying, infestation is not controlled, Fumigation is done.
• In fumigation either complete godown is fumigated or particular stacks are being
fumigated.
• If complete godown is fumigated it should be kept closed for minimum 6 days for
better effect.
• If particular Stack(s) is fumigated, the covers should not be removed before 6
days.
• If borrower is not using any method to prevent visible infestation inform CC, AM
and CCG so that bank can be informed accordingly.

7. Daily activity Register: The CM needs to update the daily activity register (in 7 in 1)
register and the timely updation will be considered as his presence at the location

8. Weekly Transaction Report: It captures all the transactions details like Deposition or
Pledge or Pledge release or Withdrawal that has happened during the Week. Needs
to be provided by CC on every Friday evening in CM Pro in CDF & CWF Module.

9. Monthly Transaction Report (Format – 30): The CCs have to submit the stock
statement of his location in the prescribed format on every 25th of the month. The
statement has to be consolidated by the AM and by the RM at their respective levels
and submit to the Head latest by 27th of every month.

10. Issue / deviation reporting process:
• Issues & deviations if any like theft, burglary, fire, infestation, un-tidy
godown, damage to godown infrastructure, fallen stack, Live wiring,
unethical withdrawal or pressure by borrower should be reported first to CC

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by phone & Area manager & CCG in writing (email or Fax). Wait for further
instructions from them for future course of action.

4.6 Security Monitoring Process

• Security guards are appointed to guard the warehouse/ godowns during day
& night to avoid the risk of theft. It is to be noted that security guards are
appointed only as per agreement with bank and if extra guards are required it
should be through proper approval from CCG only.

• Surprise Night patrolling by CM/CC/AM should be conducted frequently to
check the functioning of security guards during duty hours. If found absent
mark it in register of security guard so that payment can be deducted from
Security agency.

• Security Attendance (Format – 31): It should be marked on daily basis in
security register by CM only and not by security guard. Security guard
reporting time and relieving time should be entered in visitor register and
initialed by CM every Day.

• The security attendance sheet should be prepared in duplicate form and the
original sheet should be send to CSO with CM expense claim every month.
The second copy to be available at godown for audit purpose. CSO after
entering the details in security module in CM-PRO will forward the bill to CCG
for payment of security charges.

• In case of roaming security guard, the guard has to start his duty by reporting
at hub godown and has to handover the duty to evening guard at the Hub
godown only. This Handover and takeover should happen at Hub godown
and should be recorded in Visitor register

• In case a roaming security guard is there he has to cover godowns in every 4
hours and mark his signature on Beat sheet (Format –32), every time he visits
the godown.

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4.7Revalidation Process

• Each CAR is generated with a particular validity period and final expiry date (FED) of
commodity mentioned therein. Revalidation is the process in which the validity of
CAR is extended for a further period, but not more than the FED, on the basis of its
quality status of commodity at the relevant time.

• Before revalidation of CAR, quality analysis of commodity shall be ascertained by CC.
On the basis of the said quality analysis, the validity period shall be extended for
further period.

• The revalidation data should be submitted to the CSO by concerned CC in the
revalidation report format. (Format – 33)

• The data shall be updated in CM-PRO by CSO.
• CSO shall generate a revalidation letter (Format – 34) in a prescribed format through

CM-PRO and shall send to the concerned branch.

4.8 Release Process

• Unless there is a written and authorized communication from the bank to release the
pledge, this pledge shall not be released in CM-Pro system.

• All release orders which are marked to NCML field staff, by bank, are to be sent to
CCG through email to [email protected] and only after the confirmation from
release team of CCG should the stocks be permitted for withdrawal from Godown.

• Prior to releasing the stock, CM should ensure with the CSO about the confirmation
of RO from CCG.

• A copy of RO shall be sent to CM on email and thereafter CM shall keep it in records
the copy of the RO for audit purpose.

• Documents to be updated after getting Release order Copy are:
o Pledge register
o Stack Cards

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4.9 Withdrawal of commodity from godown

If Borrower withdraws commodity from godown after proper release order, the
CM shall enter the details in CWF. This CWF is prepared in duplicate form which is
to be signed by borrower or authorized person of borrower.

First Copy shall be available with CM for audit at any point of time.
Second copy will be given to Borrower as Withdrawal
acknowledgement.
Documents to be updated after CWF is filled:
Godown Stack Plan
Godown stock register. (Format- 8)

4.10 Godown closing:

• When bank Releases all the Pledged stock in a particular godown and NCML

removes its manpower deployed at godown, the godown is considered to be

closed.

• CM has to deposit all the documents, lock & keys and other assets to the CC & get

an acknowledgement. CC Will need to send a mail of the same to CSO with all the

details.

• CCG shall update the godown closing date in system.

• Free CM alert will be forwarded by CCG to Area manager to put him on LWP

4.11 Deviational situations:

a) Pre-stacked commodity –

It is prohibited to accept pre stacked commodities and all CAR/ CAR should be
generated for stocks which are being deposited in front of the CM. Howw ever in
cases where the commodities are pre stacked then the case has to be reorted to the
CC? CSO and only CCG will decide as to whether to accept the location or not. In case
CCG decides to take up the location then it is mandatory for 40% restacking is done by
the borrower in presence of the CC and in presence of AM for assets more than 2 Cr
value. On confirmation that the re stacking has been doen and that the quantity and
quality are satisfactory from the CC or Area Manager only then the CAR for such
cases is generated.

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b) Open plinth funding –

Open plinth cases should be taken only upon inspection and confirmation of the
following aspects

• Plinth height
• CAR validity before monsoon.
• Surrounding boundary wall
• Security concerns
• Covering of the stacks
• Control and Countability

c) Private licensed warehouse / cold storage without lock & Key –

• The cases should be accepted only on signing of the Tri partite agreement.
• In case where the Bank is not willing to sign the tri partite agreement and still the

cases need to be taken up then the following steps need to be undertaken.
• The Service provider agreement needs to be signed with the warehouse owner
• There should be multiple borrowers and multiple banks funding in that location
• We should be the sole collateral manager for the location
• The warehouse owner should not be the depositor or borrower
• The reputation and the financial stability of the warehouse owner should be

ascertained.
• The case proposal should be submitted by the Area Manager and only upon approval

from the Head – CM should the case be taken up.

d) Processing Plants or units -:

• The following points should be ascertained before taking up such locations
• The storage of the commodity should be in a exclusive storage space
• The lock and key of the storage space should be with NCML
• The reputation and financial capability of the borrower should be ascertained from

the market
• The borrower should also be an existing CC client of the Bank.
• The photographs of the location should be submitted along with the proposal by the

Area Manager to the Head and only upon approval should such cases be taken up.

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Title: Collateral Management

Subject: Operations Manual

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