Bank stautory audit 2011-12

RBI may soon do away with branch audits; to save public sector banks hundreds of crores, reports CNBC-18's Gopika Gopakumar quoting sources.

Most PSU banks have two kinds of auditors, statutory central auditors and statutory branch auditors. Statutory central auditors for most banks are around 6 but when it comes to branch auditors the number runs into thousands. For instance SBI has around 3625 branch auditors. Punjab National Bank has 1300 branch auditors. All this compared to private sector banks which have only one statutory central auditor.

Also when you compare the auditor fees public sector banks- SBI for instance pay as much as Rs 124 crore as auditor fees compared to Rs 2 crore which ICICI pays to it's auditors. So that's the reason why RBI is looking to bring down the number of branch auditors for public sector banks.

Currently branches with advances of more than Rs 3 crore and above comes under branch auditors but the RBI is looking to increase their number to Rs 20 crore advances and above.

Now even the RBI governor in December last year had mentioned that the relevance of branch audits had significantly declined but that's largely because after the implementation of core banking system the relevance has actually declined and there is no need for branch auditors but for statutory central auditors.

So, that's the reason why RBI is looking to reduce the cost for public sector banks but the final numbers on branch auditors for this fiscal has not been decided yet.

Its my person view that Indian Banking Industry is enjoying more credibility than in other countries due to its strong norms. All are aware , how Indian Banking industry was standing with pride when world banking and especially EU and US banks were dieing. Among other things, i feel , the audit at branch level plays a crucial role in this regards. There are certain matters like reduction in limits from existing level, putting the customer in watch list by the branch, some accounts which are not seen as NPA by the system but may be considered as sub-standard by taking other points into consideration like "early warning signal", etc are some of the areas where the personal touch of auditor would only help and system would not be able to take such things to notice.

There are other intangible benefits to Indian economy due to bank branch audit which should never be discontinued. The cost as mentioned in the artilce as above of Rs 125 cr, is very negligible compared to the operation and scale at which these branches are working. Coming to private banks- taking the example of GTB ( which later on merged with Oritential bank of commerce ) , who suffered ? In fact, goverment has suffered as it has to merge a private sector bank into a public sector bank - which is noting but paying of the losses by a public sector bank of a private sector. Perhaps , audit would have saved from this situation....

Even a step further - pl discontinue the audit for 2 years at branch levels and then see the results.. The matter would be crystal clear.

The above are my personal view pl...

-CA Tejas Chokshi. M.com, FCA

Partner - Tejas Chokshi & Associates,

Chartered Accountants,

A-301, Titanium Square, Nr Thaltej Cross Road,

SG Road, Ahmedabad - 380 054.

LandLine : 079-30070206 / 30070205

e:tejas @ tejaschokshi.com