A circular has been issued to all scheduled commercial banks, advising them to conduct a thorough internal audit and place the report before audit committee of the board of the respective banks and to forward the summary of findings to RBI. This guidelines issued by RBI seems to be totally ridiculous and self defeating exercise.
I would like to mention here that as per existing guidelines every bank is duty bound to conduct internal audit of every branch periodically. Many types of audits are carried out depending upon the nature and volume of business taking place in a branch. Internal auditing system is already in force in very PSU bank.
In addition to it, each bank use to carry out concurrent audit of big branches where volume of business is huge . There is a practice of Statutory audit in every bank in which RBI nominated tam of Chartered Accountant conduct audit of specified branches periodically. In addition to all, every branch is subjected to revenue audit of almost all branches to stop leakage of income.
In such position , circular issued by RBI again to advise all banks to carry out internal audit of their branches and submit a report to RBI to rule out fraudulent remittance of foreign exchange in future appears to be a simple formal and casual taken by RBI to save itself from charges of omission and negligence.
Banks which have been committing fraudulent remittances through their branches for years and decades despite all guidelines not to do so in light of KYC guidelines and Anti-Money laundering Act will never say that their other branches are involved in such evil work or will not commit such mistake in future. It is just like police asking thieves to inspect the act of stealing and submit the report to ensure that in future act of stealing will not take place.
In fact it is total failure of RBI in ensuring compliance of its rules and guidelines . It is the duty of RBI to inspect every branch from time to time as it used to do a few decades ago. RBI has failed to ensure health of assets in PSU banks and totally failed to stop losses caused to bank due to frauds and malpractices.
It has been observed that quite often the internal inspection machinery in banks has failed to highlight and pinpoint the existence of gross and serious irregularities such as improper credit appraisal, disbursement without observing the terms of sanction, failure to exercise proper post-disbursement supervision, even suppression of information relating to unauthorised excess drawals allowed, kite flying in bills and cheques, etc. or bring to light frauds. In addition to it , it is also a fact that even if auditors try to write such lapses in their reports, they have to face the consequences in form of verbal firing or torturous transfers or rejection in promotion processes.
It is ground reality of all auditors and vigilance officials that officers who are supposed to expose the irregularities and punish the culprit are engaged in saving the culprit or forced to save the culprit. This is why cases of fraud , bad lending , irregularities in operation and other evil activities are continuously increasing.
The internal inspection reports rarely make any adverse comments on the failure of officials of Controlling/Head Offices. In fact internal auditors do not submit information related to serious irregularities in their audit report in fear of action from Chief of Audit Committees . The failure of the internal inspection machinery is not attributable only to the incompetence of the internal inspection personnel the casual manner in which the work is carried out and lack of follow up of the inspection but also to pressure from higher level officials not to write about high value bad assets or about frauds detected during the period of inspection. Entire management try to hide irregularities as long as possible to save their colleagues. This is also a fact that personnel who cannot otherwise be deployed in other sensitive/critical areas more often staff the inspection/audit department.
RBI has been silent spectators of all evil practices .They have stopped their work of surveillance either at their own or under pressure from Central Government or in greed of quick promotion or in greed of some gifts from some other corners. Similarly entire team of top officials in every bank try to put carpet on malady instead of cleaning it. But , whatsoever may be the reason behind recurring instances of scams , it is always poor taxpayer and poor depositors who have to suffer the consequences of mismanagement or non management of malicious management of banking .
Country have witnessed several scams taken place in public banks in the past . We have seen how reputed team of auditors gave certificate of best accounting practices to Satyam Computers and we know how big corporate cause huge loss to banks by submitting fabricated and manipulated financial statements to these banks.
It is disheartening to note that neither RBI nor management of Public sector banks have taken any serious note of any loss, any fraud, any scam or any loss in bad assets. Bankers are habituated to write off bad loans to clean balance sheet giving excuse of economic recession or global recession in all the cases of default. In fact bankers have never tried to detect evil role of human being who play lead role in creation of bad assets or fraud or in scam related to Foreign exchange remittance .
A few years ago , similar type of cash scam was exposed in other banks . But RBI never acted seriously against erring officials to send the clear message down the line that officers indulged in malpractices will not be spared.
Bank of Baroda scam: RBI tells banks to conduct internal audit-Business Standard-31.01.2016
Central bank wants to put an end to fraudulent foreign exchange transactions
http://www.business-standard.com/article/pti-stories/bob-forex-scam-rbi-tells-all-banks-to-conduct-internal-audit-116013100149_1.html
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