The Institute of Chartered Accountants of India has taken up cudgels
with the Reserve Bank of India after the banking regulator relaxed
norms and spared bank branches with less than Rs 5 crore business from
RBI move has huge ramifications for accounting and audit firms in India
and adversely affects their business. “Almost 35-40% of CA firms,
especially the smaller ones, will be hit by the RBI directive,” said
the ICAI president Sunil H Talati.
Consider this: there are as
many as 70,000 bank branches in India. Of this, less than 2,000
branches account for two-thirds of the total business. And as many as
35,000-40,000 branches have a business of less than Rs 5 crore, which
would mean a hit of nearly Rs 400 crore to CA professionals,
considering that the average cost for audit per such brand was around
“It leaves the banking system open to malpractices
and frauds. This is a dangerous situation,” Talati said. He rued the
RBI did not even consult the institute, which regulates the audit
function in India. While the ICAI has already written to the banking
regulator about its arbitrary decision and its adverse fallout on the
banking industry, he said the matter was also being discussed at the
institute’s ongoing central council meeting.
The RBI had
recently informed public sector banks that branches with advances of up
to Rs 5 crore and more need not be audited as against the earlier
threshold of Rs 1 crore. “Branch audits ensure that there is a check on
interest expenditure, a control over cash, cheque books, etc,” Talati
He said it would be “improper” if the audit exemption was
carried forward. “The concept is incorrect as in many branches, the
advances are less but deposits are substantially more. What control and
audit would you have in such situations,” he questioned.
relaxation has, however, been welcomed by bankers, who said it would
lead to faster finalisation of accounts and help in controlling costs.
“It is a welcome step and will help banks finalise their accounts
within a reasonable time-frame,” United Bank of India CMD P K Gupta
He added that it would increase the efficiency of the banking system.