Audit of Banks
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 May 2011
Your firm has been appointed as Central Statutory Auditors of a Nationalised Bank. The Bank follows financial year as accounting year. State your views on the following issues which were
brought to your notice by your Audit Manager:
(a) In computing the aggregate of funded and non-funded exposure of a constituent for purpose of assigning risk weight in regard to capital adequacy, the bank "Netted off' the credit balance of Rs. 10 lakhs in their Current Account against the total exposure of Rs.1crore.
Pls provide answer with conclusion for above question.
brought to your notice by your Audit Manager:
(a) In computing the aggregate of funded and non-funded exposure of a constituent for purpose of assigning risk weight in regard to capital adequacy, the bank "Netted off' the credit balance of Rs. 10 lakhs in their Current Account against the total exposure of Rs.1crore.
Pls provide answer with conclusion for above question.
Saurabh Saxena
(Expert)
18 May 2011
it cannot be netted-off because risk exposure under different criterios are different, therefore,it cannot be netted off. Rs10 lakh is in current a/c while total exposure includes non-funded exposure too(which includes even notional principal for deriviative trading)
Therefore, netting off not permissible
Therefore, netting off not permissible
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