RBI appoints Deloitte Haskins to probe BoR books

The Reserve Bank has ordered a special audit of the accounts of private sector lender Bank of Rajasthan (BoR) for allegedly violating the operational norms, including transparency in the lending process.

The apex bank has appointed Deloitte Haskins & Sells to conduct the special audit.

Deloitte is expected to submit the report by the end of the month, which would enable the bank to take corrective measures, primarily setting up of a credit committee.

Meanwhile, BoR said in a filing with the BSE today, the RBI has also appointed Deloitte & Touche Consulting India to do a special I.S. Audit of its books.

Confirming the development, Bank of Rajasthan MD and CEO G Padmanabhan said, "we have requested the auditing firm to wind up the process by end-March, based on which we can take necessary steps if it is on financial aspects, prior to finalising our Q4 results."

Amongst the issues being probed by the audit team include provisioning for non-performing assets and super-annuation benefits, accounting integrity issues and credit dispensation, Padmanabhan told PTI here today.

The RBI is apparently not happy with the way BoR offered loans to its corporate clients, which, at present forms a significant chunk of its loan book.

"The bank traditionally did not have a credit committee, which might have come up as a concern for RBI. I was in the process of setting up it when this order came in," Padmanabhan said.

Stating that he is ready to set up the credit committee-- the body that decides credit dispensation issues in banks-- at the earliest, Bank of Rajasthan's managing director Padmanabhan said: "what is happening is that all other banks have credit committees while we did not have one. These things have to be addressed now."

Last month, RBI had fined BoR Rs 25 lakh,for violating of a host of norms including irregularities in transactions and misrepresentation of documents.BoR has since paid the penalty.

Penalising the lender, the RBI had said BoR failed to adhere to the norms pertaining to anti-money laundering, know your customer and irregularities in the conduct of accounts of a corporate group. RBI had also said BoR failed to provide some documents on the ground that they were not available.

However, the ongoing issue will not affect the long-term business prospects of the bank and it has duly addressed the concerns amongst its key customers following RBI's action, Padmanabhan claimed.

"I don't think that there are any significant issues (with our clients). I'm not saying there are no issues at all. But these can be tackled. Specific instances, which have come to us, are being addressed," Padmanabhan said.

Set up back in 1943, Bank of Rajasthan has a network of 463 branches and over 20 lakh customers. For the December quarter, its net profit declined to Rs 44.7 crore as against Rs 49.21 crore in the year-ago period while its total income dropped to Rs 373.7 crore from Rs 419.8 crore.