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?


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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.