Due Diligence Report For Banks

The process that is to be initiated before any acquisition, any partnership regarding business, investments or any bank loan for the purpose of research and analysis is called Due Diligence. It is carried out in order to establish the value of the subject matter of the due diligence or to find out if there are any major issues in it. Then such findings are to be abridged in a report that is known as a due diligence report.

In recent years many executives of banks around the globe have acknowledged the value of ensuring proper KYC measures are in place to know their customers. Due diligence is an effective facet of these controls in respect of existing and potential customers. The process of proper Due Diligence prevents banks from becoming subject to legal, functioning or reputational risks.

Why is due diligence report necessary for Banks?

The grounds on which the banks inspect, from a legal viewpoint, the records of a borrowing company and evaluate its conduct as a corporate entity. Some of the ways in which due diligence is carried out by the banks as an efficient tool:

• To corroborate and verify the record in relation to the directors of the company and scrutinize their relationship with the company’s promoters.
• Evaluate and authenticate any lending of the company whether existing or previous.
• To ascertain whether the status of the company and its director have been defaulting in the past or current times.
• To discern whether the corporate entity has complied with the provisions of the Companies Act, 2013 or not.
• By carrying out due diligence banks can also ascertain whether compliance with certain statutory and procedural specifications has been made by the company or not.
• It also helps in acquiring an insight into the company’s overseas borrowings and foreign exchange exposure.

The due diligence report also enables the bank to verify whether the assets of the company are insured or not.

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