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Friday, March 26, 2010
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Monday, March 8, 2010
RBI special audits
In an interview with CNBC-TV18, G Padmanabhan, MD & CEO, Bank of Rajasthan, confirms that the RBI has ordered a special audit of the accounts of the bank.
Here is a verbatim transcript of the exclusive interview with G Padmanabhan on CNBC-TV18. Also watch the accompanying video.
Q: Could you clarify and confirm that the RBI has asked for a special audit?
RELATED NEWS
* RBI imposes monetary penalty on Bank of Rajasthan
RSS feed for news
Click here
A: That is true that RBI has asked for a special audit by Deloitte.
Q: Why would they have asked for this audit?
A: Obviously they had some concerns over what was being done and it is only in that context they have mandated a special audit.
Q: What are these concerns, is it to do with the lending policy and the fact that you don’t have credit committees in place for large loans?
A: It is only one of the items that have been referred to them, but there are a whole lot of other aspects. You may be aware that the bank was recently fined by RBI due to some corporate governance issues which happened between 2004 and 2007 and in the Q3 results the bank has shown a loss and made some disclosures. This particular audit mandated by RBI perhaps has taken holistic view of what has happened in the bank and going forward they want to be sure that everything is happening as it is expected to happen in a bank.
Q: What are the key concerns? Is it to do with inadequate provisioning as came up in the last quarter or is it a specific suggestion that your directors are playing a significant role and giving out large loans which are not going through credit committee as is the case with other banks?
A: The bank historically has not been having a credit committee at all.
Q: Why?
A: There is no system of having a credit committee in the bank which is required. All banks have credit committees or credit grids as they are called. But this bank has not been having those credit committees and this is one of the terms of reference mandated to Deloitte.
Q: There is a specific suggestion or apprehension that in your bank because of the absence of a credit committee large loan disbursements are taken in an ad hoc way by whims and fancies of the directors or the promoters?
A: That is not really true. I have taken over the current functions from November 20, last year, at least thereafter there is no evidence that the promoters have been going about according to their whims and fancies. But even otherwise certain delegation is necessary for the smooth running and for effective credit dispensation and credit delivery, these grids are necessary.
Q: So what is the procedure from now, you will have to open your books of accounts to Deloitte Haskins and Sells, and by when will they do their investigation and submit the report?
A; The process is already underway. We have requested them to give major findings to us before the end of March so that we may take any major findings from board before we finalize the accounting for the current year.
Here is a verbatim transcript of the exclusive interview with G Padmanabhan on CNBC-TV18. Also watch the accompanying video.
Q: Could you clarify and confirm that the RBI has asked for a special audit?
RELATED NEWS
* RBI imposes monetary penalty on Bank of Rajasthan
RSS feed for news
Click here
A: That is true that RBI has asked for a special audit by Deloitte.
Q: Why would they have asked for this audit?
A: Obviously they had some concerns over what was being done and it is only in that context they have mandated a special audit.
Q: What are these concerns, is it to do with the lending policy and the fact that you don’t have credit committees in place for large loans?
A: It is only one of the items that have been referred to them, but there are a whole lot of other aspects. You may be aware that the bank was recently fined by RBI due to some corporate governance issues which happened between 2004 and 2007 and in the Q3 results the bank has shown a loss and made some disclosures. This particular audit mandated by RBI perhaps has taken holistic view of what has happened in the bank and going forward they want to be sure that everything is happening as it is expected to happen in a bank.
Q: What are the key concerns? Is it to do with inadequate provisioning as came up in the last quarter or is it a specific suggestion that your directors are playing a significant role and giving out large loans which are not going through credit committee as is the case with other banks?
A: The bank historically has not been having a credit committee at all.
Q: Why?
A: There is no system of having a credit committee in the bank which is required. All banks have credit committees or credit grids as they are called. But this bank has not been having those credit committees and this is one of the terms of reference mandated to Deloitte.
Q: There is a specific suggestion or apprehension that in your bank because of the absence of a credit committee large loan disbursements are taken in an ad hoc way by whims and fancies of the directors or the promoters?
A: That is not really true. I have taken over the current functions from November 20, last year, at least thereafter there is no evidence that the promoters have been going about according to their whims and fancies. But even otherwise certain delegation is necessary for the smooth running and for effective credit dispensation and credit delivery, these grids are necessary.
Q: So what is the procedure from now, you will have to open your books of accounts to Deloitte Haskins and Sells, and by when will they do their investigation and submit the report?
A; The process is already underway. We have requested them to give major findings to us before the end of March so that we may take any major findings from board before we finalize the accounting for the current year.
RBI Audits | Bank of Rajasthan | RBI has asked for special audits | RBI audits for Bank of Rajasthan
The Reserve Bank of India (RBI) has ordered a special audit of the accounts of Bank of Rajasthan (BoR) following investigations into
irregular dealings by the private sector bank.
The regulator has appointed Deloitte Haskins & Sells to audit the bank’s lending policy among other things while the parent accounting and consulting firm Deloitte Touche Tohmatsu has been hired to audit the information security system of the bank.
Special audits are rare and directed by RBI only under exceptional circumstances.
A week ago, BoR made news after RBI imposed a Rs 25-lakh fine on the bank following a string of violations. RBI pulled up the bank following violations in property transactions, anti-money laundering norms, irregularities in the conduct of accounts of a corporate group and failure to provide certain documents sought by RBI.
The bank’s poor corporate governance standards have prompted RBI to conduct special audit. One of the concerns is the presence of S K Tayal, a relative of promoter PK Tayal, on the bank’s credit committee and board of directors.
BoR, unlike other commercial banks, which have various credit committees depending on loan size, has a single committee for approving loans. In most banks the local office may have the power to sanction loans up to Rs 25 crore, while loans of Rs 25-50 crore are approved by the credit committee at the head office and loans above Rs 50 crore go to management committee.
In BoR, the RBI, according to sources in the central bank, fears that the directors play a significant role in the entire credit delivery mechanism.
Deloitte Heskins & Sells has been asked to carry out an audit of the “internal delegation of sanctioning powers followed by the bank.”
Last year, the central bank appointed G Padmanabhan, a former State Bank of India official, as the MD and CEO of BoR after it sensed certain irregularities in the bank. When contacted by ET, Mr Padmanabhan confirmed that RBI has mandated a special audit after BoR made certain disclosures while announcing its third quarter financial results. The disclosures relate to inadequate provisioning for bad loans and superannuation benefits, and the dispute over the rent the bank should pay for the Mumbai property where the BoR head office is located.
Deloitte Heskins & Sell’s will review whether the bank has made adequate provisioning for bad loans and whether it has followed all asset classification norms laid down by RBI. The other area that the auditors will review is the superannuation benefits given to a section of the bank’s employees.
While 90% of the bank’s 4,000 employees receive salary in line with the bi-partite agreement signed between the Indian Banks Association and the member banks, around 10% employees in the mid to senior level have a different salary and pension structure. The bank has not fully provided for the superannuation benefits of these 10% employees. click for more
irregular dealings by the private sector bank.
The regulator has appointed Deloitte Haskins & Sells to audit the bank’s lending policy among other things while the parent accounting and consulting firm Deloitte Touche Tohmatsu has been hired to audit the information security system of the bank.
Special audits are rare and directed by RBI only under exceptional circumstances.
A week ago, BoR made news after RBI imposed a Rs 25-lakh fine on the bank following a string of violations. RBI pulled up the bank following violations in property transactions, anti-money laundering norms, irregularities in the conduct of accounts of a corporate group and failure to provide certain documents sought by RBI.
The bank’s poor corporate governance standards have prompted RBI to conduct special audit. One of the concerns is the presence of S K Tayal, a relative of promoter PK Tayal, on the bank’s credit committee and board of directors.
BoR, unlike other commercial banks, which have various credit committees depending on loan size, has a single committee for approving loans. In most banks the local office may have the power to sanction loans up to Rs 25 crore, while loans of Rs 25-50 crore are approved by the credit committee at the head office and loans above Rs 50 crore go to management committee.
In BoR, the RBI, according to sources in the central bank, fears that the directors play a significant role in the entire credit delivery mechanism.
Deloitte Heskins & Sells has been asked to carry out an audit of the “internal delegation of sanctioning powers followed by the bank.”
Last year, the central bank appointed G Padmanabhan, a former State Bank of India official, as the MD and CEO of BoR after it sensed certain irregularities in the bank. When contacted by ET, Mr Padmanabhan confirmed that RBI has mandated a special audit after BoR made certain disclosures while announcing its third quarter financial results. The disclosures relate to inadequate provisioning for bad loans and superannuation benefits, and the dispute over the rent the bank should pay for the Mumbai property where the BoR head office is located.
Deloitte Heskins & Sell’s will review whether the bank has made adequate provisioning for bad loans and whether it has followed all asset classification norms laid down by RBI. The other area that the auditors will review is the superannuation benefits given to a section of the bank’s employees.
While 90% of the bank’s 4,000 employees receive salary in line with the bi-partite agreement signed between the Indian Banks Association and the member banks, around 10% employees in the mid to senior level have a different salary and pension structure. The bank has not fully provided for the superannuation benefits of these 10% employees. click for more
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