📘 eBook: How to Do Pre-Sanction Inspection of Borrower Entities

A Complete Conversational Guide for Bankers & Credit Professionals

This eBook is a comprehensive, practical, and field-oriented manual that teaches you exactly how to conduct a Pre-Sanction Inspection of borrowers across trading, manufacturing, and service sectors.

Designed as a conversational series between two bankers — Vinu (asking questions) and Manu (explaining concepts with clarity) — this book makes even the most complex inspection procedures simple, engaging, and easy to understand.

Whether you are a beginner banker or an experienced credit officer, this guide gives you the real-world thinking, red-flag identification techniques, and step-by-step procedures followed during on-site inspections.

✨ What This eBook Gives You

✔ A complete framework to conduct Pre-Sanction Inspections across all business types
✔ Practical checklists, verification techniques, and inspection templates
✔ How to detect frauds, manipulations, and red flags during physical inspection
✔ How to validate business existence, stock, machinery, manpower, licenses, and more
✔ Case studies that show how inspections directly impact credit decisions
✔ How to draft a professional inspection report with findings and recommendations
✔ Understand what lenders expect before approving CC, TL, OD, or combined facilities
✔ Conversational learning that mimics on-the-job training

👨‍🏫 Who Should Read This eBook?

This eBook is ideal for:

• Bank Credit Officers
• SME/Retail Lending Officers
• Branch Managers
• Credit Analysts
• Risk Officers
• Finance professionals looking to understand practical lending
• Students preparing for banking/credit-related exams
• Anyone wanting to master the due-diligence side of business lending

If your role involves loan recommendation, verification, assessment, or sanctioning, this book will be an indispensable reference.

🎯 What Knowledge You Gain After Finishing This eBook

By the end of this eBook, you will be able to:

🔹 Conduct end-to-end pre-sanction inspections with confidence
🔹 Understand the ground realities of trading, manufacturing, and service entities
🔹 Accurately verify stock, assets, manpower, licenses, sales, debtors, and suppliers
🔹 Identify fraud indicators that are commonly missed by inexperienced officers
🔹 Validate capacity utilisation, production cycle, and working capital needs
🔹 Prepare a full-fledged inspection report with observations and recommendations
🔹 Avoid lending mistakes that lead to NPAs
🔹 Improve loan appraisal quality, DP accuracy, and credit risk assessment
🔹 Become a more competent and reliable officer in your credit team

SECTION 1 – INTRODUCTION TO PRE-SANCTION INSPECTION

Chapter 1: Importance of Pre-Sanction Inspection

• Need for physical verification
• Objectives of inspection
• Typical frauds prevented

Chapter 2: Documents to Review Before Inspection

• KYC
• Financial statements
• GST returns
• Stock statements
• Bank statements
• Lease/ownership documents

Chapter 3: Pre-Sanction Inspection Checklist

• Business existence
• Infrastructure
• Employees
• Inventory
• Machinery/equipment
• Market reputation
• Photographs & location verification

SECTION 2 – PRE-SANCTION INSPECTION FOR TRADING ENTITIES

Chapter 4: Basics of Trading Entities

• Nature of trading operations
• Margins
• Working capital cycle
• Common risks

Chapter 5: Inspection Process for Trading Units

• Shop/warehouse verification
• Physical stock checking
• Register verification
• GST cross-check
• Supplier/customer verification

Chapter 6: Case Study – Trader Seeking Cash Credit

• Stock verification
• Debtors & creditors verification
• DP justification

SECTION 3 – PRE-SANCTION INSPECTION FOR MANUFACTURING ENTITIES

Chapter 7: Basics of Manufacturing Units

• Manufacturing cycle
• Input–output ratio
• Capacity utilisation
• Machinery dependence

Chapter 8: Inspection Process for Manufacturing Units

• Factory verification
• Raw material/WIP/finished goods checking
• Machinery inspection
• Power consumption check
• Manpower verification
• Compliance checks

Chapter 9: Case Study – Manufacturing Unit Seeking TL + CC

• Machinery installation verification
• Production capacity validation
• Raw material stock verification

SECTION 4 – PRE-SANCTION INSPECTION FOR SERVICE ENTITIES

Chapter 10: Basics of Service Entities

• Low inventory model
• Contract-driven operations
• Types of service units

Chapter 11: Inspection Process for Service Units

• Activity verification
• Asset verification
• License verification
• Manpower checks
• Revenue verification

Chapter 12: Case Study – Service Entity Seeking OD/TL

• Equipment verification
• Occupancy/footfall verification
• Digital transaction checks

SECTION 5 – RED FLAGS & FRAUD INDICATORS

Chapter 13: Red Flags in Trading Entities

• Fake stock
• Dummy suppliers
• Inflated debtors

Chapter 14: Red Flags in Manufacturing Entities

• Non-operational machinery
• Dummy workers
• Mismatch in production ratios

Chapter 15: Red Flags in Service Entities

• Fake customers
• Inflated sales
• Ghost employees

SECTION 6 – INSPECTION REPORT PREPARATION

Chapter 16: Drafting the Inspection Report

• Format
• Observations
• Photographs
• Compliance notes

Chapter 17: Officer’s Recommendation

• Justification of limits
• Conditions
• Approval/rejection basis

SECTION 7 – CONCLUSION

Chapter 18: Summary of Best Practices

• Key learnings
• Ethical responsibilities
• Documentation discipline