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Bank audit

vidya nayak (job) (36 Points)

03 January 2012

Hey guys,

Want to know while conducting bank audit:

1) which are the areas where penal interest should be charged?

2) What is MSOD & whether penal int is charged for the same?

3)where areas to looked into while checking advances?

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Deepak Gupta (CA Student) (15922 Points)
Replied 03 January 2012

Originally posted by : vidya nayak

Hey guys,

Want to know while conducting bank audit:

1) which are the areas where penal interest should be charged?

With effect from October 10, 2000, banks have been given the freedom to formulate a transparent policy for charging penal interest with the approval of their Board of Directors. However, in the case of loans to borrowers under priority sector, no penal interest should be charged for loans up to Rs.25,000.

Penal interest may be levied for reasons such as default in repayment, Non/late submission of stock statements, Quarterly Information Statement, Monthly Select Operational Data (MSOD), Audited Balance sheet, Overdue Installments and Overdrawn accounts, for violation of other terms and conditions, non-submission of financial statements, etc.

However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to service the debt and genuine difficulties of customers. The compliance of the same should be checked in detail by the auditors.

2) What is MSOD & whether penal int is charged for the same?

MSOD stands for Monthly Statement of Select Operational Data. It is a return/statement submitted to the bank for post sanction supervision, control and monitoring of credit. Banks may charge penal rate of interest for delay in submission of MSOD.

3)where areas to looked into while checking advances?

AUDIT OF ADVANCES FUNDED & NON-FUNDED (File Attached)