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'PNB's $1.8 bn fraud is failure of various audits, RBI inspection'

IANS  |  Chennai 

The $1.8 billion at the government-owned (PNB) shows the failure of various kinds of audits in the bank, including the RBI's inspection, said a

According to him, the of has to carry out a deep investigation, forensic of the accounts involved in the alleged and also make it compulsory for the banks to carry out forensic

"Every is a lesson for those who want to take it as a lesson.

"Broadly the kinds of audits or inspections that are carried out in Indian banks are statutory (carried out by auditors appointed by banks), concurrent (carried out by outside auditors at the branches), internal (carried out by staff) and the inspection by RBI," P. S. Prabhakar, in Rajagopal and Badrinarayanan, a chartered accountancy firm, told IANS.

He said the is mainly a or an where transactions are checked at random.

"The internal is done by staff. Then there is also inspection by RBI officials. It is strange how the fraudulent transactions that have been carried out since 2011 were not detected," Prabhakar said.

Normally large value transactions should be checked and SWIFT system transactions should be carefully checked, he added.

According to the PNB, the alleged was carried out by two staffers by not entering the transactions in the bank's core banking solution but in SWIFT signalling another bank's overseas branch that the transaction is valid.

Prabhakar said a Letter of Credit should normally be given only against receipt of security but it is not done in banks.

"The PNB case is just one and one branch.

It is not known how many more banks and branches are involved in such transactions," Prabhakar said.

According to him, the RBI has to carry out a forensic of the books of the parties involved in the alleged in PNB and trace the money or the property bought with that money.

He said risk-based information security should be done in banks by professionals with specialised knowledge of

"The costs for the banks will be far less compared to their losses due to frauds," Prabhakar said.

at chartered accountancy firm GSV Associates, told IANS: "The alleged in PNB is a failure of auditors --internal and statutory -- and also of the regulator."

"The sad part is that everybody involved in such frauds in know that nothing would happen to them," Venkatesh added.

"It is a failure of PNB's internal checks and controls. I don't know why the officials are given the discretion to enter the data in one system and not in the main system (core banking solution)," Rakesh Nangia, Managing Partner, told IANS.

According to Prabhakar, bankers should scrutinise carefully the gems, jewellery and before extending any facility to them.

(Venkatachari Jagannathan can be contacted at v.jagannathan@ians.in)

--IANS

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 15 2018. 12:30 IST
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