In your interest.
Online Personal Finance Magazine
No beating about the bush.
The RBI has ordered a special audit of Bank of Rajasthan's accounts, suspecting violation of operational norms by the lender, including transparency in lending
The Reserve Bank of India (RBI) has ordered a special audit of private sector lender Bank of Rajasthan (BoR)'s accounts, suspecting violation of operational norms by the lender, including transparency in lending, reports PTI. The apex bank has appointed Deloitte Haskins and Sells to conduct the special audit.
Deloitte is expected to submit the report by the end of this month, which would enable the bank to take corrective measures, primarily the setting up of a credit committee.
Confirming this, Bank of Rajasthan's managing director and chief executive, G Padmanabhan, said, "We have requested the auditing firm to wind up the process by end-March, based on which we can take steps if it is on financial aspects, prior to finalising our Q4 results."
Amongst the issues being probed by the audit team include provisioning for non-performing assets and super-annuation benefits, accounting integrity issues and credit dispensation, Mr Padmanabhan told PTI.
The RBI is apparently not happy with the way BoR offered loans to its corporate clients, which presently forms a significant chunk of the lender's loan-book.
"The Bank traditionally did not have a credit committee, which might have come up as a concern with the central bank. I was in the process of setting up the committee when this order came," Mr Padmanabhan said.
The bank aims to set up the credit committee—the body that decides credit dispensation issues in banks—"as early as possible," Mr Padmanabhan said.
"What is happening is that all other banks have credit committees while we did not have one. These things have to be addressed now," he said.
Last month, the RBI imposed a fine of Rs25 lakh on BoR, charging it with violation of a host of norms including irregularities in transactions and misrepresentation of documents. The Bank has since paid the penalty.
Penalising the lender, the RBI said that the Bank had failed to adhere to norms pertaining to anti-money laundering, Know Your Customer (KYC) and irregularities in the conduct of accounts of a corporate group.
Besides, the apex bank said that BoR has also failed to provide some documents on the grounds that those documents were not available.
However, the ongoing issue will not affect the long-term business prospects of the Bank and it has duly addressed the concerns amongst its customers following the RBI's action, Mr Padmanabhan said.
"I don't think that there are any significant issues (with clients). I'm not saying that there are no issues at all. But these can be tackled. Specific instances, which have come to us, are being addressed," Mr Padmanabhan said.
The Bank started operations in 1943. It has a network of 463 branches across the country and over 20 lakh customers.
For the quarter ended December 2009, the net profit of the bank declined to Rs44.70 crore as against Rs49.20 crore in the year-ago period while its total revenues dropped to Rs373.70 crore from Rs419.80 crore.