ICAI proposes branch-level audit for private sector banks

ICAI proposes branch-level audit for private sector banks

New Delhi: Private sector banks will have to get their branch accounts audited by an RBI-approved panel along the lines of PSU lenders if a proposal of accounting regulator ICAI goes through.

“We have proposed that every private sector bank branch should be audited only by the auditors approved by the RBI. It will bring in efficiency as computer data does not always give a true picture and human intervention is necessary to check fraud," Institute of Chartered Accountants of India (ICAI) President G Ramaswamy said.

Currently, the statutory auditors of private sector banks conduct branch audits, but it is not mandatory. However, their PSU peers need to conduct independent audits at the branch level by an RBI-approved panel of auditors.

“The appointment of branch auditor should be left with the RBI and not with the bank board," Ramaswamy said.

He said non-performing assets (NPAs) are an area of concern for banks and such audits would help to detect it at the branch level.

“Since a lot of restructuring is taking place in banks, it is necessary to conduct audits at the branch level independently," he said.

The RBI is understood to have contemplated doing away with the branch audit system for banks that have opted for core banking solutions. He said deliberations are being held within the banking division of the finance ministry and in the RBI to replace branch audits with a centralized audit system at such banks.