RBI permits banks to hire ex-officials for internal audit

With banks facing shortage of experienced staff for internal audits, the Reserve Bank of India (RBI) on Thursday allowed them to hire their retired officials for up to three years for assistance in conducting “Risk Based Supervision (RBS)”.

“Keeping in view the change in demographic profile of the staff in banks on account of retirement leading to shortage of staff to conduct internal audit, which is an important component of RBS, it has been decided to permit banks to engage the services of its retired officials for assisting in internal audit...,” the central bank said.

RBI has also prescribed certain conditions for such hirings in the notification.

Each bank, it said, should formulate, with the approval of their Board of Directors, a policy to engage the services of its retired personnel for a maximum tenure not exceeding three years in the areas where it does not have enough expertise.

“The policy should inter alia include the terms of engagement, review of performance, termination of services...,” it said.

Further, banks need to ensure that the retired personnel so engaged work under the close supervision of the management of the bank and the final sign-off of the audit reports would be the responsibility of the serving bank officials.

“In order to avoid conflict of interest, the retired personnel so engaged may not be assigned branches/sections, where they had worked while in active service with the bank,” RBI added.