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by Rakesh Waghela

16.6 Physical verification protocols (deep)

Physical verification (Field FI) is, alongside reference checks, the single most powerful diligence tool for borrowers without strong document trails. It is also where most diligence fraud actually fails — staging a fake premises convincingly is hard; staging it across surprise visits is harder.

This page is the operational depth beyond 6.16. Industry-specific checklists, photo standards, observation discipline.

When physical verification is mandatory

Section titled “When physical verification is mandatory”
ScenarioField FI required?
Thin-file borrower (any ticket)Yes
First loan to any borrower at ticket >= ₹25 lakhYes
Manufacturing borrower regardless of ticketYes
Anchor-introduced borrower without anchor’s formal channel-financeYes
Repeat borrower with first loan disbursedOptional (periodic)
Repeat borrower triggering EWSYes (re-verification)
Renewal of revolving lineYes annually
Standard A-grade with strong GST + Tally + bureauOptional

Pre-visit preparation

Section titled “Pre-visit preparation”

The agent should know before going:

  • Borrower entity name, business type, NIC code.
  • Primary address; alternate addresses if any.
  • Owner / promoter name + photo (from KYC).
  • Top suppliers / customers from GST data (3 – 5 names).
  • Specific concerns the analyst wants verified (e.g., “borrower claims 25 employees; verify”).
  • Any prior FI history (for renewals).

The platform’s field-agent app surfaces this context.

Surprise vs scheduled visits

Section titled “Surprise vs scheduled visits”
  • Surprise visit preferred for first-time verification — borrower may stage premises if forewarned.
  • Scheduled visit acceptable for periodic re-verification of active borrowers (advance notice with 24 – 48 hours lead).
  • Repeat visit on suspicion — surprise again.

Manufacturing borrowers — checklist

Section titled “Manufacturing borrowers — checklist”

Premises observation

Section titled “Premises observation”
  • Building exterior — photograph; estimate vintage of structure.
  • Signage — read out; estimate age.
  • Adjacent businesses — note for context (industrial area / mixed-use / residential).
  • Vehicle / truck parking — proxy for logistics activity.
  • Compound / gate condition.

Production floor

Section titled “Production floor”
  • Equipment / machinery photographs — mandatory for manufacturing FI. Wide shot + close-up of major machinery.
  • Production line activity — workers visible operating; stock-in-progress visible.
  • Inventory — raw material area, WIP area, finished goods area — separate photos.
  • Stock register — if maintained (in many SMEs, handwritten); photograph current page.

Utilities and operational signals

Section titled “Utilities and operational signals”
  • Electricity meter — current reading photographed.
  • Generator — if present, capacity and condition.
  • Compressed air / steam infrastructure if relevant.
  • Power-cut tolerance — does business have backup?

Compliance evidence

Section titled “Compliance evidence”
  • PCB consent displayed (required for most manufacturing).
  • Factories Act licence displayed.
  • Fire NOC displayed.
  • GSTIN displayed.
  • Other industry-specific licences.

Photograph each displayed licence; capture expiry date.

Workforce

Section titled “Workforce”
  • Number of workers observed — count or estimate.
  • Worker dress / safety equipment — proxy for compliance.
  • PF / ESI displays (if displayed).

Owner / promoter

Section titled “Owner / promoter”
  • Owner present? Photographed with the production floor in background.
  • Owner’s familiarity with operations (asked technical questions).
  • Owner’s claimed years of operation; reconciled with apparent equipment age and vintage signals.

Operational depth questions

Section titled “Operational depth questions”
  • Top 3 products / services.
  • Top 3 customers.
  • Top 3 suppliers.
  • Monthly production volume.
  • Capacity utilisation %.
  • Power consumption pattern (peak vs lean).
  • Inventory cycle (raw material days, WIP days, finished goods days).
  • Receivable cycle.
  • Payable cycle.

Agent records these answers verbatim. Cross-checked later against GST / bank / Tally.

Field disposition

Section titled “Field disposition”
  • Business is real and active / questionable / suspect / fake.
  • Production volume consistent with claimed turnover / not.
  • Workforce consistent with claimed size / not.
  • Equipment vintage consistent with claimed business age / not.

Retail / kirana / shop borrowers — checklist

Section titled “Retail / kirana / shop borrowers — checklist”

Premises observation

Section titled “Premises observation”
  • Shop front + signage — photographed.
  • Signage vintage (paint condition, wear).
  • Shop interior — wide shot.
  • Stock visible (variety, quantity, freshness).
  • Display / merchandising condition.

Customer footfall

Section titled “Customer footfall”
  • During visit, count customers observed (over a defined window).
  • Note time-of-day for context.
  • Sound / activity level.

Cash / payment infrastructure

Section titled “Cash / payment infrastructure”
  • Cash drawer / counter visible.
  • POS terminal — photographed (PSP / brand).
  • UPI QR code — photographed.
  • Card readers.

Compliance

Section titled “Compliance”
  • GSTIN displayed (mandatory for registered businesses).
  • Shops & Establishment licence (state-specific) displayed.
  • Industry licences (Drug, FSSAI, liquor, etc.) where applicable.

Owner / staff

Section titled “Owner / staff”
  • Owner / counter staff present.
  • Owner’s claimed operation vintage.
  • Familiarity with stock and pricing (asked).
  • Employees observed.

Adjacent business confirmation

Section titled “Adjacent business confirmation”
  • Adjacent shop owner asked: “How long has this shop been here?” — independent confirmation.

Field disposition

Section titled “Field disposition”
  • Shop is real and operating.
  • Stock + activity level consistent with claimed turnover.
  • Vintage estimate.

Restaurant / hospitality / cloud kitchen — checklist

Section titled “Restaurant / hospitality / cloud kitchen — checklist”

Premises

Section titled “Premises”
  • Restaurant front + signage.
  • Interior (dining area / kitchen if accessible).
  • Menu (photographed).
  • Capacity (number of seats).
  • Hygiene observable.

Operational

Section titled “Operational”
  • During-meal visit preferred — see customer footfall.
  • Staff count observed.
  • Tables occupied %.
  • Kitchen activity.

Compliance

Section titled “Compliance”
  • FSSAI licence displayed prominently — mandatory.
  • Shops & Establishment.
  • Health licence from municipality.
  • Fire NOC.
  • Liquor licence if applicable.

Owner

Section titled “Owner”
  • Owner / manager present; familiarity with operations.
  • Claimed daily covers / monthly revenue; reconciled.

Cloud kitchen specifics

Section titled “Cloud kitchen specifics”
  • Delivery-only operation — no dining area.
  • Aggregator partnerships (Swiggy / Zomato) — confirmed.
  • Order pickup activity observed during visit.

Services / IT SME — checklist

Section titled “Services / IT SME — checklist”

Premises

Section titled “Premises”
  • Office / workspace photographed.
  • Workstations (number visible) → employee count proxy.
  • Owner’s room / cabin.

Operational

Section titled “Operational”
  • Employees observed working.
  • Project boards / whiteboards (proxy for active work).
  • Client logos if displayed (potential verification).

Compliance

Section titled “Compliance”
  • Shops & Establishment for offices.
  • Industry-specific certifications if applicable (ISO, CMMI for IT).
  • SEZ / STPI registration if applicable.

Owner

Section titled “Owner”
  • Familiarity with technical / domain matters.
  • Claimed services / specialisations; verified against client logos / portfolio.

Limitations

Section titled “Limitations”

Services SMEs often have minimal physical evidence of business activity; field FI is less informative for pure services than for goods-based businesses. Heavier reliance on reference checks for services.

Clinic / diagnostic centre — checklist

Section titled “Clinic / diagnostic centre — checklist”

Premises

Section titled “Premises”
  • Clinic exterior + signage.
  • Reception area + waiting area photographed.
  • Patient footfall (if observable).

Equipment

Section titled “Equipment”
  • Diagnostic equipment (ultrasound, X-ray, lab equipment) photographed.
  • Equipment condition + apparent vintage.

Compliance

Section titled “Compliance”
  • Clinical Establishments Act registration.
  • PCPNDT registration for diagnostic centres.
  • Biomedical Waste authorisation.
  • Doctor / paramedic qualifications displayed.

Owner / staff

Section titled “Owner / staff”
  • Doctor / qualified staff present.
  • Patient register (handwritten or digital) — sampled.

Logistics / transport — checklist

Section titled “Logistics / transport — checklist”

Premises

Section titled “Premises”
  • Office + parking yard observed.
  • Number of vehicles parked (fleet size proxy).
  • Loading / unloading activity.

Vehicles

Section titled “Vehicles”
  • Vehicle photographs with registration plates.
  • Fleet age estimated.
  • Branded / non-branded vehicles.

Compliance

Section titled “Compliance”
  • Vehicle permits + RCs sampled.
  • Driver licences for drivers present.
  • PUC certificates.

Photo capture standards

Section titled “Photo capture standards”
  • Wide shot of premises exterior with signage visible.
  • Interior wide shot showing operations.
  • Equipment / stock close-ups as appropriate.
  • Owner photo with the premises (specific location identifiable in background).
  • Licence displays — each one separately.
  • Adjacent business photo for context.

Minimum 8 – 12 photos per visit, with embedded geo-tag and timestamp. Photos with missing geo-tag or EXIF are rejected.

Geo-tag and timing

Section titled “Geo-tag and timing”
  • Geo-tag at arrival — exact coordinates.
  • Geo-tag at departure — confirms agent stayed for the duration.
  • Time-of-day — recorded with photos.
  • Distance from address — if agent’s geo-tag is > 500m from claimed address, flag for review.

Independent neighbour verification

Section titled “Independent neighbour verification”

For surprise visits, the most powerful single check is to ask an adjacent business owner:

  • “How long has this business been operating from this premises?”
  • “Who is the owner?”
  • “Is it active regularly?”

The adjacent business owner has no reason to coordinate with the borrower; their answer is independent.

Visit reporting + reviewer disposition

Section titled “Visit reporting + reviewer disposition”
  • Field agent submits report on app.
  • Review queue at HQ: photos + form + geo-tag + agent’s disposition all visible.
  • Reviewer (separate person) dispositions: accept / re-visit / reject.
  • Agent performance tracked.

Common patterns to watch

Section titled “Common patterns to watch”

Staged premises

Section titled “Staged premises”

Borrower coordinates with neighbour to claim adjacent shop as own. Mitigation: independent neighbour ask.

Owner-on-call

Section titled “Owner-on-call”

Borrower not at premises at visit; “available on call” only. Re-schedule with mandatory owner-present requirement.

Photo gaming

Section titled “Photo gaming”

Borrower’s premises is wrapped with stock just before agent visit. Returning visit (surprise, different week) sees less stock. Pattern over multiple visits informs.

Address discrepancy

Section titled “Address discrepancy”

Field agent’s geo-tag inconsistent with claimed address. May be borrower error or fraud. Investigate.

Agent collusion

Section titled “Agent collusion”

Agent passes through too easily; never raises concerns. QA on agent’s approval / decline ratio + sampled photo / visit-form review.

Frequency for active borrowers

Section titled “Frequency for active borrowers”
  • First visit: at application (mandatory for trigger scenarios).
  • Periodic for active: annual minimum; quarterly if material-ticket revolving line.
  • On EWS: surprise re-visit.
  • Pre-renewal: visit if > 6 months since last visit.

What the platform must enforce

Section titled “What the platform must enforce”
  • Field-agent app cannot submit without all mandatory photos + geo-tag.
  • Geo-tag inconsistency > 500m from address triggers review.
  • Agent’s training status checked at visit.
  • Sampled QA review of visits.
  • Disposition workflow with reviewer separate from agent.

Cost

Section titled “Cost”
  • Per visit: ₹400 – ₹1,000 (own agent network); ₹500 – ₹1,500 (outsourced).
  • Material ticket loans absorb cost easily.
  • Thin-file segments price for it.
Section titled “Related”