Quarterly Review For Banks Likely

The Reserve Bank of India (RBI) is planning to make quarterly review of accounts mandatory for listed public sector banks. This is in keeping with the Securities and Exchange Board of India (Sebi) norm requiring listed companies to review accounts every quarter.

A quarterly review of accounts is intended to provide timely feedback to shareholders on the financial position of the banks, covering advances, provisions for non-performing assets (NPAs), investments, income and expenditure.

The thrust will be on verification of income and expenditure rather than on balance sheet items. The central bank is also planning to ask banks to have their six-month results audited, in line with the norms for companies. Banks have only their yearly results audited.

All public sector banks now submit half-yearly reviews or reports to the RBI within 60 days of the close of the half year.

Further, in compliance with Clause 41 of the listing agreement, these reviews and reports are submitted by the banks to the stock exchanges where their shares are listed.

The half-yearly review of accounts was introduced from the half-year ended September 30, 2001. For the half-yearly review of NPAs, at least 50 per cent of the advances of a bank is covered.

During the review, statutory central auditors have to examine whether norms on income recognition, asset classification and provisioning issued by the RBI from time to time have been followed.

Public sector banks have to make full provision for NPAs for the six months ending September 30 every year. Moreover, at the time of ascertaining the total NPAs, banks have to keep in view their total number at the end of the previous financial year, the change in the status of any account during the half year for which the review is undertaken and new accounts which have become NPAs.

Barring a handful of nationalised banks like Uco Bank, United Bank of India, Indian Bank, Central Bank of India and Bank of Maharashtra, all banks are listed. The State Bank of India and some of its seven associate banks are also listed.

Public sector banks with large networks will have to overhaul their infotech infrastructure to comply with the new directive.