Letter to BS: RBI's move to hold meetings with banks' auditors is welcome

This refers to “RBI puts auditors of banks on notice” (March 14). The decision of the Reserve Bank of India (RBI) to hold structured quarterly meetings with the auditors of banks is welcome. These meetings will not only enable the supervisory authorities to indirectly oversee the work of the external auditors but give the latter an opportunity to discuss the lending practices of banks, implementation of asset classification norms, provisioning, non-performing assets, suspicious transactions, frauds etc. The auditors meet the audit committees of the banks when their quarterly results are declared. They do share their concerns about the aforesaid issues but I can say with my experience as a director on the board of a public sector bank that quite often the members of these committees tend to either ignore them or little follow up is done. 

The structured quarterly meetings with the supervisory authorities in the central bank will enable the latter to pick up the danger signals/look at issues of concern in a timely manner. I feel the entire auditing processes especially the internal audit — concurrent, revenue etc — needs to be streamlined. The internal audit departments need to be properly staffed with good officers and audit reports put up to the audit committees and boards of banks need to be carefully looked at and areas of concern timely addressed. Strong internal audit systems and processes provide a powerful tool to the board, external auditors and regulators to sight the areas of concern and provide timely remedies. Banks that give a short shift to their auditing systems always pay a heavy price for it.

Arun Pasricha     New Delhi

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