The Hindu Business Line : ICAI mounts pressure on Govt to scrap order on bank auditors

PRESSURE is mounting on the Finance Ministry to scrap its order permitting public sector banks boards to appoint statutory central auditors and branch auditors.

After expressing its reservations to the Reserve Bank of India on the new freedom to banks, the Institute of Chartered Accountants of India (ICAI) is set to hold discussions with top officials of the Banking Division of the Finance Ministry to seek a reversal of the order.

The RBI, meanwhile, is also understood to have assured the ICAI that it will take up the matter with the Ministry of Finance and convey the views of the auditing community to the Government.

"We hope to meet banking division officials early next month (February) to hold discussions on the order," the ICAI President, Mr Kamlesh S. Vikamsey, told Business Line.

He added that in case the ICAI is unable to convince the banking division officials, they will then try to take the issue to the Finance Minister, Mr P. Chidambaram.

The ICAI had criticised the Government's move stating that allowing bank boards to appoint statutory central auditors would not only go against the tenets of good governance but would permit banks to "hire and fire" auditors at will.

The apex body of chartered accountants wants the Government to revert to the earlier system where the RBI had the powers to appoint statutory auditors as well as branch auditors.

As part of its efforts to make PSU banks fully board-run entities, the Finance Ministry had recently given the option to them to directly appoint auditors from the panel available with the Comptroller and Auditor General (CAG) for statutory central auditors while the names for branch auditors would have to be obtained from the ICAI.

The bank boards, however, have to seek the RBI's prior approval before making the final appointment.

Prior to this, the CAG would empanel those eligible for becoming statutory central auditors and forward the list to the RBI, which would in turn appoint the auditors to the banks. For appointing branch auditors, the RBI used to obtain the panel from the ICAI.