A debate is on over the move to up the minimum advance limit for making statutory audit compulsory in a public sector bank branch.

All PSU bank branches having advances of over Rs.5 crore are now subject to statutory audit. The minimum advance limit is now sought to be increased to Rs.20 crore, it is learnt.

The increase in floor advance limit for a statutory branch audit is sought to be justified on two counts primarily. For one, since most of the branches are networked in the wake of PSBs adopting CBS (core banking system), the advances made even at branches are evaluated, monitored and captured in the central system. Two, the move is intended to reduce the cost of audit in an environment which is proving intensely competitive for banks. Informed sources aver that this move will push many a rural branch out of the statutory audit. This could put the branches under greater risk, they point out. “The due diligence and audit functions of an external agency cannot be wished away in warding off branch-level frauds,” sources point out. NPA (non-performing asset) statements often are generated through computers.

“However, these can be manipulated by altering the dates and data available. These can be found out only in an audit,” they argue.

Audit is for detection

Audit is for detection. Scam can take place in any branch. It does not differentiate between higher or lower turnover.

“In stock markets, problems took place in co-operative banks,” points out a top market consultant, who declined to be quoted. “If the issue is cost, the remedy lies in reducing the cost and not abolishing the audit per se,” he argues.

The move, it is pointed out, will also send out a wrong signal, and encourage lower-end turnover branches to go carefree on compliance. When there is an audit, at least books will be kept in order. If the idea is to replicate the Western model, why so many banks failed in the U.S.? Even a section of the banking community feels that a proper system audit should be in place before taking statutory audit off a branch.

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