Make Banks Board Bureau or RBI selector of bank auditors: ICAI to govt

Currently, banks appoint their own central audit teams

The Institute of Chartered Accountants of India (ICAI) has asked the government to put in place a more transparent process in selecting auditors in banks, saying its demand is particularly relevant in the context of high probability of frauds in the lending institutions in the aftermath of demonetisation.

ICAI president Devaraja Reddy told Business Standard that he has written to corporate affairs minister Arun Jaitley that the Reserve Bank of India or the bank board bureau should be appointing auditors for banks. At present, banks appoint their central audit teams.

He added that this should be done in order to ensure more objectivity and transparency in the selection process.

The ICAI is of the opinion that in the demonetisation context, this will be even more relevant. The chartered accountants' institute had also suggested that the Banks Board Bureau should frame norms for appointing the central statutory auditors.

Till a few years back, a committee, which included officials from the Finance Ministry, the Reserve Bank of India, Comptroller and Auditor General of India, India Banks' Association, used to appoint the auditors. That system was put in place on the recommendations of a panel headed by former financial services secretary D K Mittal.

Reddy has been critical about audits in banks at other occasions as well. He has stressed that lack of quality audits and norms to select quality audit teams is one of the reasons behind mounting NPAs.

While taking charge as the president of the Institute of Chartered Accountants, Reddy had mentioned that the quality of auditing in banks has come down and NPAs could be lesser by 30 to 40% if there is transparency.