Financial Daily from THE HINDU group of publications
Thursday, May 16, 2002
Financial Daily from THE HINDU group of publications Thursday, May 16, 2002 |
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Money & Banking
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Public Sector Banks Stiffer norms likely for auditors of PSBs Rajalakshmi Menon
MUMBAI, May 15 THE norms for appointment of auditors for public sector banks are expected to be tightened. A working group appointed by the Reserve Bank of India is studying the existing practices, formulated about 20 years ago. The idea is to make the norms relevant in the current scenario. According to sources familiar with the developments, there are two issues which are being examined. These are eligibility criteria for auditors to be included in the RBI's approved list of auditors and the number of auditors to be appointed by a bank. Currently, there are around 400 auditors in the RBI's approved list for Central-level audit. If a bank's deposit exceeds Rs 10,000 crore, the bank will have to appoint six auditors. According to the working group, the previous criterion for appointment of auditors based only on the liabilities of banks must go and a more holistic picture based on assets and liabilities must be taken into account. The group is also examining the possibility of tightening the norms for auditors. For the past 20 years or so, the criteria for appointing auditors for banks had not been changed and it was felt that with various developments that had taken place over the period, the criteria for appointing auditors should also be changed. Currently, if a public sector bank crosses the threshold limit of Rs 10,000 crore in deposits, the bank will have to appoint six auditors. Officials said that of the 29 public sector banks, few fell below the limit of Rs 10,000 crore. So while a bank such as Bank of Baroda had six auditors, so will a bank of the size of State Bank of Travancore. The working group is exploring the possibility of appointing auditors based on the total balance sheet size of the bank i.e advances plus investments plus deposits. Bank officials said that the old method of appointing auditors was outdated and the working group would try and update the procedure for appointment of auditors to a particular bank. All banks have two sets of auditors — branch level auditors and central level auditors. The criteria for appointment of both these auditors will be changed. On an average, 400 auditors become eligible for appointment of Central level auditors, while around 180-186 auditors are selected. The group is also looking to prune the wide gap between auditors eligible and those selected, tightening selection procedures for the auditors. This will be based on the number of partners, number of chartered accountants in the firm etc Selected auditors to be appointed to banks are decided by the Comptroller and Auditor-General, the Government and the RBI. Auditors are appointed for a maximum period of four years and after this duration there is 1-2 year period of "cooling-off" when the auditor is taken off the list of eligible auditors.
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