RBI recommendations should be followed in appointments
Author : DNA Money Correspondent
The Institute of Chartered Accountants of India has demanded that the appointment
of auditors in the public sector and private sector banks should be made on the
basis of recommendations made by the Reserve Bank of India (RBI) and board of directors
of the respective bank should not be given the authority for the appointment.
"The auditors may differ with the bank management on various issues, especially
in case of identification and classification of non performing assets. So, appointment
on the basis of RBI's recommendations holds significance to ensure autonomy of the
bank auditors," said Mahesh Sarda, central council member of ICAI.
Till three years ago, RBI used to appoint branch auditors, based on a panel of firms
submitted by the ICAI. But, since then, the procedure has been liberalised and bank's
board has been authorised to select auditors independently.
On the issue of extending the deadline given to four members of PricewaterhouseCoopers
India to respond to the show-cause notices issued in relation with the Satyam fraud
case, he said that since they were under arrest, there was no option other than
to extend the deadline. ICAI has extended the deadline twice. He further said that
the RBI circulars on bad loan recognition and provisioning could distort bank balance
sheets as on March 31 this year. It will not give a clear picture of NPAs (non-performing
assets). The recent RBI circulars on 'prudential guidelines on restructuring of
advances by banks' could have adverse impact and show bad loans as "standard assets"
for at least a period of 210 days.
It should be noted that in the wake of the spillover effects of the global downturn
affecting the Indian economy, the RBI had sought to provide some breathing space
to financially stressed borrowers by relaxing the asset classification norms for
accounts that were being restructured.
ICAI pitches for independent appointment of bank auditors
Last updated: 26 March 2009
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