Customer Identification and Risk Management System

Customer Identification and Risk Management System
Banking- a word which means to bank upon something for welfare and to progress in life. In banking if customers depend upon a bank to fulfill their financial needs, a bank has also to bank upon them for deploying its funds properly for growth. It means it is   two way traffic. A bank is taken as big support to everyone doing a financial activity, may it be a person, organization or for corporate world. Similarly for a bank, every single person, organization and any other area where financial business is transacted, is a blood line. The profitability and the failure of the functions of the bank depends upon the choosing the right person/organization by the bank for deploying its funds for growth of its net-worth.
For any bank a depositor as well as a loan seeker is a customer, and identifying these customers properly reflects on the balance sheet of any bank. Traditionally, there are many methods of recognizing a prospective customer to minimize risk and avoidance of bad debts thereby reducing the quantum of NPA,s. If for an individual customer the bank depends upon the old customer,s introductions, identity proof or residential proof etc, it needs much more in the cases of organizations where huge funds are at stake. This is the major area where from much of the NPA,s of the bank occur. Whereas huge deposits from these big organizations are always welcome by a bank, it has to be extra cautious in advancing them its funds. Apart from

financial obligations a bank has to discharge some social obligations too. It has to keep full track to any activities like money laundering, misuse of financial channel of the bank for terrorist activities and any other social evils.
Though old methods are not proving any failure as on date for the recognition of the customers and averting any risk rising there from, yet it will be conservative and regressive on the part of banks if they don’t adopt the contemporary methods of...