Letters: Punitive action needed

Head of bank and audit committee of the board should be made accountable to violations

The editorial, “Misreporting of NPAs” (May 30), points to the deteriorating sanctity and reliability of auditing by chartered accountants. Such malpractice and accounting frauds with utter disregard to regulations are spoiling financial discipline at a time when the economy is poised for growth and development. 

Despite stringent measures of the banking regulator to deal with the present bad assets crisis, that some banks, especially those in the private sector, are hiding their non-performing assets is unpardonable. The veracity of various internal and external audits seems questionable. Investors’ confidence in these banks is shaken. 

Injecting credit and/or hiding the actual financial position of banks in order to prevent big ticket loans from slipping away should be treated as deliberate actions; they go against the interest of stakeholders. 

Inspections, internal and external audit and vigilance systems need to be rejigged and strengthened to ensure timely compliance with regulations. The head of the bank and the audit committee of the board should be made accountable to violations. Divergence in classification of assets later detected by the banking regulator must be made public to investors.

On-site and off-site supervision of banks by the Reserve Bank of India is ineffective in controlling the activities of lenders, particularly in the case of private sector banks. Seriousness in recognising the stresses in assets and initiating actions without lag are getting compromised to protect the interest of the borrower at the cost of the exchequer. The government and the banking regulator should pursue punitive action against those responsible for misreporting NPAs.
 

V S K Pillai   Changanacherry

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