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PNB opts for status quo on statutory auditors

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Other PSBs may follow suit, let RBI make appointment

MR S. C. GUPTA
MR S. C. GUPTA

Sarbajeet K. Sen

`We feel that if RBI appoints statutory auditors, it would ensure better transparency and higher level of corporate governance'.

New Delhi, March 17

In the first clear indication that public sector banks might not be comfortable with the idea of appointing statutory central auditors (SCAs) on their own, Punjab National Bank (PNB) has decided to forego the autonomy granted by the government recently.

PNB has, in fact, written to the Reserve Bank of India stating that it would prefer the continuation of the previous system where the central bank appointed the SCAs.

"Our board of directors discussed the matter and we have decided that it would be better if RBI itself appoints the SCAs. We have already communicated our decision to the RBI," Chairman and Managing Director, PNB, Mr S.C. Gupta told

Business Line

.

Indications are that several other public sector banks also plan to send similar letters to the RBI. In line with the plans to grant greater autonomy to public sector banks, the government had in December allowed their boards the freedom to appoint SCAs and branch auditors.

The move was intended to create a level-paying field between private and public sector banks.

However, the government had also said that if the banks were uncomfortable with the new situation they could request the RBI to make the appointments as before.

Mr Gupta said that PNB felt that the system where RBI appointed the auditors was more desirable.

"We feel that if RBI appoints statutory auditors it would ensure better transparency and higher level of corporate governance. Independent auditors should come and see the accounts for themselves," Mr Gupta said.

Top PSU bankers had earlier voiced apprehensions that the power to appoint SCAs might leave them open for criticism at a later date. As government-owned entities they ran a higher risk of encountering criticism, they felt.

The new autonomy granted to PSU banks had also come for severe criticism from the Institute of Chartered Accountants of India.

The ICAI, which was the first to raise its voice against the decision, had pointed out to the Finance Ministry that such a move was against the principle of good governance that required either the regulator or the shareholders (and not the Board of Directors) to appoint SCAs and branch auditors.

(This article was published in the Business Line print edition dated March 18, 2006)
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