Transcript Slide 1

Audit of Cooperative Banks
Presentation by:
K.V.Lakum,
Director
National Institute of Cooperative
Management, Gandhinagar, Gujarat
Scope and Principles of Cooperative Audit
• Cooperatives are user-owned enterprises
(unlike joint stock companies which are
investor owned) working on commercial
principles to ensure proper flow of economic
resources to its members and for their general
well being. UCBs are the lower tier of the
cooperative structure with direct access to its
members and connecting them to the higher
tiers of the structure.
• Being democratic institutions, cooperative
societies need to empower its members with
powerful tools to ensure that the
management of these institutions is truly
democratic and professional.
• Audit and Audit Report are example of such
tools.
• Failure to get the books of account audited
and to publish the annual report in time is an
indication of poor health and ineffective
management of the cooperative.
• Historically, the responsibility for audit of these
institutions is cast on the Registrar of Cooperative
Societies (RCS) who is also the regulator and the
administrator of Coop. Banks.
• However in some states, the role has been
bifurcated with Audit of Coop. Banks (along with
other cooperatives) having been shifted to a
separate Directorate without disturbing the basic
hierarchical reporting structure.
• This bifurcation to some extent has ensured
professional independence of auditors in those
states where the Directorate of Audit is
independent of the RCS.
Audit in Banks.
• Audit is a systematic examination of books of
accounts with relevant supporting documents
such as vouchers, bills, receipts and other
documents to ascertain and/or to verify the
financial operations.
• To report whether the balance sheet of Coop.
Banks has been properly drawn up so as to
give a true and fair view of the state of affairs
of the Bank and whether the profit and loss
account for the period under audit gives fair
view of the profit or loss of the Bank.
Audit in Cooperative Banks.
• Audit in Coop. Banks is a more comprehensive
inquiry into the general affairs and
management of the Bank, its governance in
accordance
with
applicable
statutory
obligations and its byelaws and rules.
• To verify its financial record keeping, propriety
of transactions and adherence to basic
internal controls and procedures.
• It is therefore a financial and an administrative
audit.
 According to the Maclagan Committee cooperative
audit extends beyond the bare requirements of the
Societies Act and should embrace an enquiry into all
the circumstances which determine the general
position of the Bank.
 It would, for instance be the duty of the auditor to
notice any instances in which the Act, rules or byelaws
have been infringed upon, to verify the cash balance
and certify the correctness of the accounts to ascertain
that loans are made fairly for proper periods and
objectives and on adequate security, to examine
repayments in order to check book adjustments and
improper extension.
 Further generally see that the Bank is working on
sound lines and that the committee, the officers and
the ordinary members understand their duties and
responsibilities
Special features of Coop. Banks audit
 The auditors of Coop. Banks, besides being well
versed with core techniques of audit, are
expected to have a fairly reasonable knowledge
of subject of the cooperation and the accounting
system and controls followed in Coop. Banks.
 Particularly in those Coop. Banks which owing to
their small size would not be able to implement a
regime of internal control systems and
procedures due to which several of them may be
vulnerable for several business risks and frauds.
Some of the special features relevant to the
audit of Coop. Banks are:
 the auditor of Coop. Banks should be familiar with the
relevant provisions of the Cooperative Societies Act,
1912 (the Central Act) as well as the respective State
Acts which are modelled on the basis of the Central
Act;
 every Coop. Banks should have framed its byelaws and
registered the same with the RCS; further no
amendment to the byelaws will be valid until the same
has been registered by the registrar;
 in respect of any debt due from a member, Coop.
Banks shall have a charge on his/her share or interest
in the capital of the Coop. Banks, his/her share of
deposits and on dividends, bonus or profits due to him
from the Coop. Banks;
• Coop. Banks are required to create statutory
reserves as prescribed by the Societies Act
including transferring a prescribed percentage of
profits to a reserve fund;
• under the provisions of the Acts, as amended in
terms of recommendations of Vaidhyanathan
Committee, MoUs are executed between the
Central, State Government and NABARD.
• The Registrar upon suitable recommendation by
the Management of Coop. Banks can get the audit
conducted by the departmental auditors or by
persons/firms having stipulated qualifications.
The audit of Coop. Banks shall include the
following:
• examination of overdue debts, if any;
• verification of cash balance;
• verification of securities;
• valuation of assets and liabilities;
• prudent management of the affairs of the
Coop. Banks;
• examination of audit schedules and returns
furnished to auditor along with books of
accounts;
• issue of an audit certificate.
The statements that need to be furnished to the
auditors along with books of accounts are:
• membership and share capital of Coop. Banks;
cash balances; investments and other securities;
• schedule of individual ledger balances with
opening and closing balances duly reconciled;
• details of loans and advances along with
demand, collection and balances statements;
cont..
• statement of interest accrued and overdue on
loans and advances;
• statement of interest accrued and overdue on
borrowings and deposits;
• statement of investments with confirmations
furnished by entities with whom those
investments are made;
• estimated bad and doubtful debts including
the provisions for non performing loans and
advances as well as investments
Urban Co-Operative Bank
Audit Report Format
C.R.A.R. (CAPITAL RISK ASSETS RATIO)
a)Whether the bank has correctly calculated the CRAR as per
the guidelines of the R.B.I. from time to time.
 Whether the bank has obtained the minimum standards as
prescribed by the R.B.I.
 Auditor has to verify the above particulars and to give his
opinion.
NET WORTH: (Statement-1)
 Calculate the increase or decrease in the net
worth with reference to Paid Up Share Capital
and Free Reserves and compare the same with
last year - in statement attached herewith.
N.P.A. (Non Performing Assets)
 Verify the N.P.A. Classification done by the bank
 whether the same have been classified as per the
guidelines of R.B.I. ?
 Submit your report on the discrepancies found
on such verification. (Statement-1)
 INFORMATION ON INCREASE/DECREASE
N.P.A.
 N.P.A. amount at the beginning of the year
IN
 Classified as N.P.A. during the year
 Recovery during the year in old N.P.A. A/cs.
 N.P.A. Upgraded during the year which were in
N.P.A. category last year
 N.P.A. written off during the year
 N.P.A. regularised during the year on account of
Re-Schedulement Scheme
 N.P.A. at the end of the year
•In the cases of settlement with the debtor,
whether bank was having security of properties?
Note down the cases where R.B.I. guidelines for
settlement of dues have not been followed.
•Whether bank has shown Interest not realised in
NPA by way of contra entries in Balance Sheet.
•Whether proper adjustment entry (Havala) have
been passed for unrealised interest by debit to
Interest Receivable A/c. and credit to overdue
Interest Reserved A/c. Verify the Havala entry.
• Whether repayment schedule is being
prepared for regular recovery of over due term
advances ?
• Whether duties have been cast on any officer
of the bank to supervise regular recovery ?
• Whether periodical report is being submitted
to the Board of Directors for un-recovered
accounts?
• Whether adequate provision in P&L A/c. has
been made for Bad and Doubtful advances ?
• If provision is inadequate - give your
comments with amount.
◦ OVERDUE RECOVERY ACTIONS
 Whether Bank has constituted a Committee to
take actions for overdues?
 Whether a meeting is arranged with such Debtors
periodically ?
 If yes, No. of meetings held during the year ?
 No. of such Debtors and Amount Nos. Amount
 Whether Bank has regularly submitted a
Statement u/s. 115(f) for recovery of overdues ?
 Verify its correctness and instances of violation if
any.
◦ Submit the information in Statement-3
regarding actions taken for recovery of
overdue, showing the amount and No. of
cases.
Recovery Information U/S. 159
(Submit in Statement format)
 Recovery Information under the
Securitisation Act
(Submit in Statement format)
• ONE TIME SETTLEMENT (OTS) AND DEPOSIT
SET-OFF SCHEME AS PER R.B.I. GUIDELINES

INVESTMENTS
 Whether Valuation of Investments has been done
as per R.B.I. Guidelines at the end of the year. If
no report the discrepancy in valuation.
 Investments Policy - made or not?
 Obtain the details of S.L.R. and Non SLR
investments made during the year, If investments
are made in Non "SLR" - Verify versions for the
same. Income of violation of R.B.I. Guidelines
report on the same.
 Whether S.L.R. and C.R.R. have been maintained
adequately during the year ? Report cases of
violation.
 Who take decisions for investment
 Authority for making decisions for investments.
Whether bank is holding any Unapproved investment as per R.B.I.
Guidelines - if so give details of such
Investments.
Verify the cases - where Pre-Sanction of
Registrar is necessary u/s. 71 of CoOperative Societies Act, whether the
same have been obtained or not.
Give details of Order No. & Date where
approval is granted.
Comments on Un-approved investments.
 Whether the provisions of Section 115(f)(g) of Co-Operative
Act and Section 18 & 24 of Banking Regulations Act and
Section 71 of Co-Operative Act, have been duly observed by
the bank.
 Submit a special report to the Registrar in respect of any
violation.
 Whether the Investment made by the Bank are giving regular
return or not - if not, comment on the same. (i.e. productive
or non productive)
 Whether investments are made out of Surplus Funds or from
Current Fund.
 Whether provision for probable diminution/depreciation in
Investments have been made in the Risk Fund?
 Whether adequate provision have been made for N.P.A.
Investments? verify the same.
INVESTMENTS IN GOVERNMENT SECURITIES
 Whether classification of Government Securities have
been done according to R.B.I. Guidelines or not ?
Valuation of Securities have been reviewed every
month as per guidelines or not?
 Profit or Loss arise on sale of securities have been
property booked or not?
 Whether adequate provision have been made for
Investment Depreciation Reserve and for Investment
Fluctuation Reserve or not?
 Whether Bank has observed R.B.I. Guidelines for
Purchase & Sale of Government Securities ?
 Cases of violation may be reported.
 Whether SGL / CSGL A/cs. opened ? In which Bank?
 Cont….
Cont……….
 Whether the Statement of these A/cs. are tallied with the
bank's transaction on day to day basis ?
 Any discrepancy in transaction or balance should be
reported.
 Whether investments are in custody of the bank ? Verify
the same and report on discrepancy - if any.
 If Securities were purchased thro' Single Broker over 5% of
the total turn over of securities, report on the same.
 Whether Brokerage is paid to the broker - if so broker wise
amount thereof. Interest regularly received on securities or
not, as per terms of security
 Whether same have been properly valued at the end of the
year as per R.B.I. guidelines.
 Verify the transactions of purchase & sale during the year and submit the information
 it statement (Statement No.7)
•
•
•
•
•
ADMINISTRATION
Whether election of directors has been held as
per by-laws of the Bank ?
Give list of Directors and date of 1st meeting.
Whether any member of the Board possess any
disqualification u/s. 115C or Rule 32 of the CoOperative Act ?
Whether Powers & Duties of the Board have
been fixed as per Rule 33 & 34 ?
Whether by-laws includes Provision for
appointment & duties of Committee –
Sub-Committee ?
 Whether Board Proceedings include information
about Agendas, co rum, Presents Signature etc.
and same have been regularly written and signed ?
Go thro' the same and give your comments.
 Whether the duties of Officers, Sub-Officers and
employees of the Bank have been specified in bylaws of the Bank ?
 Whether the same are clearly distinguished by
Board's Resolution.
 Whether responsibilities of Officers / Employees
have been fixed ?
 Wherever sureties are required - same have been
obtained ?
• Whether works have been carried out as per
administrative instructions and delegation of
powers ?
• Whether supervision is regular ? Comments on
discrepancy.
• Whether Internal Control System is there?
• Whether Service Regulation for appointment
and services of employees have been made ?
• Discussion with employees about legal
questions, advices and review of work is done
periodically by the Board.
IMPORTANT POINTS ABOUT CHAPTER 10(B)
of GSC ACT
 At the time of appointment as Director, whether details
about family members and associated Firms /
Companies are obtained and it is on record of the Bank?
 Whether list has been prepared of Company & Firm in
which Board members are interested with Name,
Address of Directors etc.
 Obtain a copy of such list.
 On the date of Nomination, whether deposit of
Rs.20,000/- obtained ? Detail Statement of deposit
account, Type of deposit, balance amount and maturity
date, to be obtained.
 Cont…..
• Cont…..
• Whether Board members have taken loan
from any other Co-Operative Banks, CoOperative Societies etc. ? Out of above
whether any account is overdue - if so
obtained details thereof.
• Particulars of Statement 1 to 7 to be sent to
Registrar periodically.
• No. of cases liable to be suit filed cases during
audit period.
• Actual No. of cases - suit filed.
RESERVES & APPROPRIATION OUT OF PROFIT
• Whether Reserves & Funds shown in Balance
Sheet created out of bank's profit ? If otherwise,
then give details.
• Whether profit is appropriated to various funds
as per by-laws of the Bank ?
• Verify appropriation of profit during audit period.
• Whether dividend is declared, as per provisions
of Co-Operative Societies Act ?
• Whether calculation of dividend is correct ?
• Whether dividend is paid properly ? What action
is taken for Unclaimed dividend beyond 3 years ?
• Whether Provision of Education Cess is as per
Co-Operative Societies Act, in proportion to
dividend ? Whether this Education Cess is sent
to District Co-Operative Union or State CoOperative Union ?
• Whether as per provisions of Co-Operative
Societies Act, bank has provided 15% of profit to
Bad & doubtful Reserve ?
• Whether during the year any amount is debited
to any of the Reserve Funds ? If so, then verify
nature of debits and its reasonability.
BORROWINGS
• Whether the Bank has observed the provisions of
Section 14(a) of Banking Regulations Act? Amount
placed in Fixed Deposit with District Bank for S.L.R.
purpose, and if any facility / borrowing is obtained
against such deposit,
• Whether the same have been deducted while
calculating the S.L.R. or not? Eligible liquid assets
for S.L.R. have been properly calculated or not?
Confirm the same.
• Whether bank has obtained any borrowings ? If
yes any then verify its necessity.
• Whether borrowing is utilised within its sanctioned
limit?
• Whether proper planning is made to repay the
debt in time. from whom ?
• Give in detail
• (i)Name of Institution, (ii) Amount of
outstanding, (iii) Sanction date, (iv) Security
offered, (v) period of debt, (vi) Sanction Limit.
• From whom debt is taken : Scrutinise
borrowings taken by bank, whether it is in
accordance with provision of by-laws ?
• Whether amount is used as per requirement ?
INCOME
• Verify Vouchers for Interest, Commission,
Brokerage, Locker Rent & Other income with
Day Book and Supplimentary. Report on
discrepancy if any.
• Accrued interest income is correctly worked
out or not ? Whether provision is made for
the same ? Whether J.V. is passed of interest
income due but not received before profit is
worked out at the end of year ?
• Give your comment on correctness of income
credited in P&L A/c.
EXPENSES
• Verify the genuineness of Interest paid,
Commission,
Brokerage,
Rent,
Taxes,
Electricity, Telephone Expenses, Directors‘
Sitting Fees, Travelling Expenses Legal
Expenses and Other Expenses. Whether the
same are as per norms ? If there is any
objectionable or excessive expenses, give your
comments for the same. Whether T.D.S.has
been made in applicable cases or not?
• Verify and report - if necessary.
•
•
•
•
CASH & BANK RECONCILIATION CASH
RECONCILIATION WITH OTHER BANK
BALANCE WITH BRANCHES OF THE BANK
TYPE OF DEPOSIT / DETAILS OF RATE OF
INTEREST FIXED
– Whether Trust Deposits are accepted ?
– Whether sanction is obtained of competent
authority and deposit taken during that period ?
Give details.
– Compare interest rate of loan against deposit ?
Whether efforts are made to reduce high rate
deposit ?
• DICGC PREMIUM
• Whether Premium is paid regularly to DICGC and
is calculated correctly? Whether renewed in time
? Tally Statement. Whether Annual return under
Sec. 115(chh)(kh) is sent regularly ?
• Obtain details of premium paid during audit
period, amount of premium & total deposit on
which premium is paid. Duration of deposit
insurance and details of deposits be tallied with
Balance Sheet or with ledger accounts of the
Bank.
ADVANCES
 Whether advances are within the overall exposure
norms prescribed by the R.B.I. ?
 Whether Rules for sanctioning various of Loans have
been approved ? Since when it is in force ?
 Whether rules / procedures are updated with change
and amendment ?
 Whether overall limit is prescribed for individual /
group advances ? How much ? If their limits are
exceeded, whether informed to board ? Comment on
violation if any. with reference to norms fixed by R.B.I..
 Whether Priority Sector Advance & Weaker Sector
Advance are within limit of 40% & 25% respectively ?
Whether these advances are classified as per norms ?
Obtain detail statement.
Cont………
 Cont……..
 All details in application for advances have been duly filledup?
 Adequate documents have been attached with the
application according to nature of advances or not?
 Whether appraisal report of Loan Officer/Manager is
attached with the application and M.D. has given his
opinion or not?
 Whether a certificate from the Manager regarding
adequacy of documents is obtained or not?
 Reference of Resolution, sanctioning the advances is given
on the application or not? Prior scrutiny of proposal for
advances is being done or not?
 After disbursement, whether supervision is made for
utilisation of advances for the purposes for which advance
is sanctioned, Submit your report on the cases - where
above procedure is non followed.
 Cont…..
 Cont…..
 The overall limit of advances of the bank have been
calculated as per R.B.I. Norms – while sanctioning advances
for working capital.
 Whether withdrawals beyond sanctioned limit are there ? If
yes, whether reported to competent officer ? Whether Board
is informed of the same ?
 Whether sanctioned is obtained for the same? If sanctioned
limit is increased frequently verify the reasons & securities.
Whether working capital is renewed regularly - if there is
increase in limit then verify its genuineness & security.
 Whether account is regular or not and interest is paid
regularly.
 Prepare a list where O.D. is sanctioned by officer and get
clarification for allowing OD?
 If there is violation of R.B.I. Guidelines, determine the
responsibility and submit your report.
 Prepare Quarterly Statement of O.D. outstanding.
 Cont….
 Cont….
 Whether Cheque purchase facility is being granted by the
Bank?
 Whether withdrawals have been granted against uncleared Cheque/ Instrument?
 If yes, report on the same.
 Is there any accounts in which no regular transaction since
long time, except withdrawal and deposit of substantial
amount ? Whether separate Register is kept for these
account ? Is there any instances of debit balance in Current
Accounts ?
 If debit balance then whether informed to C.E.O. or
authorised officer ?
 Whether provision of Share linkage with loan (% of Share
to be taken) is observed ? Give instances of breaches.
 Cont….
 Cont……
 Whether resolution for Interest Rate, Margin,
Moratorium period etc. of Loan passed ? Whether
updated as and when required ? Whether Credit
facilities released by the branch without execution of all
necessary documents and without verification?
 If such cases - report on the same.
 Creditworthiness Register is maintained ?
 Whether Loan Application is properly appraised by G.M.
/ Manager ? Sanctioned limit / Renewal Register is
maintained or not ? Whether a Register for Overdue
Borrower and Register for Creditworthiness of
Guarantors are maintained ?
 Take overall review of the same.
 Cont….
• Cont…
• Whether Loan Documents are properly
executed on adequate Stamp Paper ?
• Whether it is duly filled up ?
• Borrower signature is obtained ?
• Whether adequate securities are there against
advances ?
• If property is taken as security, Verify its title
clearance certificte.
• Verify Equitable mortgage document with
Register. If loan disbursed without adequate
documentation - Give report.
• LOANS GIVEN DURING AUDIT PERIOD
– Documentation
– As per Registrar Office, Directive No.
SKK/01/K.Liquidation/ 1643/03 dated 15/10/03
Under Section 160(1),
whether all documents are executed as per
provision?
– Auditor has to report on the same. Whether
Resolution is passed for Completion of documents
before 2nd meeting. Whether Manager has given a
Certificate for completion of all borrowers
documents as at the end of the year 31/03/20___.
– Report on incomplete documents.(Certificate from
Manager to be attached with report)
LOANS TO DIRECTORS - THEIR RELATIVES AND TO
THEIR ASSOCIATE CONCERNS:
 In cases, where advances were given to ExDirectors or to their relatives or to concerns in
which they are interested,
 Whether recoveries are made regularly- If not
report on actions taken against such borrowers.
 Whether advances given to Directors and their
relatives during Audit period are properly reported
to R.B.I. & Registrar of Co-Operatives. If R.B.I.
guidelines are not followed for the same, submit a
detailed report.
 If advances exceeded the prescribed limit - give
details.
 Whether R.B.I. Statement sent regularly ? Whether
Statement details tallied with record.
• BILLS PURCHASED / CHEQUES DISCOUNTED:
• BANK GUARANTEE / LETTER OF CREDIT (ISSUED):
 SHARE CAPITAL / MEMBERS :
◦ Whether members register is prepared /updated as
per bye-laws.
◦ Whether allotment of share certificate is pending? If
yes, since how long?
◦ Give details of new members entered and members
deleted during the year.
◦ Whether share transfer register is maintained ?
Whether provision of Rule 17 have been violated ?
◦ Permission obtained for Authorised Share Capital
and Amount of Paid-Up Capital ?
AUDIT INSPECTION:
 Whether audit committee is formed ?
 No. of Members, Name of Chairman, No. of
meetings during the year.
 Whether Statement is submitted as per Sec.115
(f)(c) ?
 Verify the correctness of the details.
 Whether queries of audit /inspection report of
R.B.I. complied within stipulated time ?
 Give Date of Report & its compliance submitted.
 In case of fraud or misappropriation, whether
Board and Registrar have been informed ? Verify
the details.
 Whether Statement is submitted as per Section
195 (f) (c) in time.
CONTRIBUTION FOR PUBLIC & CHARITABLE
PURPOSES:
• Whether sanction obtained U/s. 70, for utilisation
of 'Dharmada" Fund ?
• Give instances of permission not obtained.
• Appropriation of Dharmada Fund is done as per
Rules ? If not give details.
• Obtain detail about utilisation of Dharmada Fund.
Name of party/trust, Amount, Sanction details.
• Whether permission has been obtained for
utilising the fund for Public purpose as per
Government Resolution.
Discrepancies
found in Audit
reports of UCBS
•Credit Limit to Dairy Farm Rs. 25 Lacs.
Auditors’ remarks : As the dairy products are highly
perishable in nature it is advised to not to classify
hypothecation on such stock
•Credit Limit :
Rs. 1300000 – Dates are not mentioned in any security
document
•In 52 accounts with credit limit of Rs. 23600000 (two
crores thirty six lacs ) stock statements not received for
last 3 month. It should be treated NPA this may lead to
additional provision.
•Bank had additional provision but it is advisable to
insist for classification of such accounts as NPA; this
will increase % of gross NPA; in this case total advances
: Rs.90 crores
NPA Rs. 6.30 Crores
% of NPA 7%
If NPAs of Rs.2.36 crores are added the % of NPAs will
increase to 9%
•One bank had not shown 22 accounts as NPAs
auditors remarked that the number of NPA account
was reported wrongly.
•The balance outstanding in respective accounts was
NIL and only interest was to be recovered; the amount
of interest was shown as CONTRA items. As and when
interest was recovered entries were made to reduce
contra items and credit the amount to interest
account.
•On receipt of recovery in NPA the bank used to credit
the same to principal amount first.
The auditor has objected to this.
This is a case of appropriation of amount on recovery.
The law of appropriation incorporated in the Indian
Contract Act. (section 59 to 61) allows bank to take
amount of recovery first to principal or interest (rule in
Claytons case) But such policy is required to be
adopted by a board resolution and declared in notes
on accounts/change in accounting policy.
Loan against vehicle:
Auditor : loan has been sanctioned as hypothecation
(i.e. pledgement against stock). However in this case
stock cannot be provided. Bank should identify this
account as SHAKHATRA
As on 31-03-11 asset classification of one account was
under loss category and 100% provision is made. The
account was upgraded to D-3 category as on 31-032012. This is an error.
Credit Limits Rs. 1300000
Rs. 650000
-Auditor’s remarks : Equity mortgage should be verified
Occasional membership form is incomplete.
As per guideline RBI limit for gold loan is prescribed to
a maximum of Rs one lac. In this account the gold loan
limit sanctioned is Rs. 1.5 lacs. Which is irregular.
તારણમાાં લેવાયેલ મમલ્કત પર કરજ લેનારના
માલલકી હક્ક મવષે તેમજ તેની કકિંમત મવષે કાયદા
મનષણાાંત તરફથી દાખલો મેળવવામાાં આવે છે ?
ઓડીટર: ના કાયદા મનષણાાંત તરફથી આવો કોઇ
દાખલો મેળવવામા આવતો નથી.
(In fact title clearance report is obtained by bank in all
cases of mortgage of immovable property)
લોન અને કડપોઝીટ ખાતામાાં વ્યાજની ગણતરી
કોમ્પ્યુટર ધ્વારા થાય છે તેમ છતાાં મોટા ખાતાઓમાાં
વ્યાજની ગણતરી વ્યાજના દરનો ફેરફાર, ઓકફસર
ધ્વારા દર મકહને ચેક થાય તેવી પ્રથા અપનાવવા
સુચન છે
Test Check?
System audit?
Auditor/officer?
Inventory value of audited balance sheet as on 31-0311 is Rs. 453177 and as per stock statement provided
to bank and DP short as on 31.03.11 Rs.1253750 stock
and DP short
(many such cases)
The bank has not considered concept of paid stocks as
per RBI norms in case of cash credit accounts
એનેક્ષર-એચ : રોકાણો – રોકાણો સાંસ્થા માટે ઉત્પાદકીય
છે . કે લિનઉત્પાદકીય છે ?
ઓડીટર : ગુજરાત સ્મોલ ઇન્ડસ્રીઝ કોપોરે શનમાાં
કરવામાાં આવેલ રૂ. 30 લાખનુ ાં રોકાણ િીન ઉત્પાદકીય
છે – ઉક્ત રોકાણ ઉપર વ્યાજ મળત ુાં નથી.
એનેક્ષર-કે : રોકાણો – એન.પી.એ. િનેલા હોય તો તે
અંગે પુરત ુાં પ્રોવીઝન કરવામાાં આવેલ છે કે કેમ? તેની
મવગતો મેળવો.
ઓડીટર : રોકાણો નોન પરફોમીંગ િનેલા ન હોઇ પ્રશ્ન
ઉપસ્થીત થતો નથી.
(હકીકતમાાં રૂ. 30 લાખની
ડેપ્રીસીએશન ફાંડ થયેલ છે )
જોગવાઇ
ઇન્વેસ્ટમેન્ટ
િાાંધી મુદતની થાપણો જે પાકી ગઇ છે તેમાાંથી
કેટલીક થાપણો પર િાાંધી મુદતનુ ાં વ્યાજ ચુકવવામાાં
આવે છે અને કેટલીક થાપણો ઉપર કોઇ પણ
પ્રકારનુ ાં વ્યાજ ન ચુકવતાાં માત્ર પાકતી રકમનુ ાં જ
ચુકવણુાં કરવામાાં આવે છે . આવી ક્ષમતઓ દુર કરી
RBI ની માગગદશીકા મુજિ િચત ખાતા પર
મળવાપાત્ર વ્યાજના દરે વ્યાજ ચુકવવા સુચના છે
-No RBI Guidelines
- No overdue int if not renewed
- provision to be made at SB rate
-Bank has its own rules.
Called explanation in course of audit: one auditor has
given a letter to the bank during course of audit, which
inter alia states.
“It is observed that overdue accounts are 109 where as
NPA accounts are 81. All overdue accounts are NPA but
bank has declared 81 NPA accounts out of 109.
overdue accounts. Remaining 27 are NPA but are not
declared NPAs. Kindly explain why such accounts are
not declared as NPAs with your views and justification”
Bank’s reply : RBI guidelines for income recognition
and asset classification (IRAC) Assets (i.e. outstanding
of accounts) are declared as NPAs for the purpose of
making provision which may ultimately effect the
profit. In the 27 accounts there is no outstanding debit
balance in any of them. Hence no provision is to be
made even if they are declared NAPS. For these
accounts norms relating to income recognition are to
be applied Interest is overdue and not taken as income
but is shown as contra items.
In an account limit was Rs. 1.85 crores in this account
ad-hoc additional limit of Rs. 95 lacs was allowed for
one month in this case only demand promissory note
for the additional amount was taken.
Auditor : no additional document so as to create
appropriate additional charge over the security already
obtained was taken or registered by bank. In absence
of this, ad-hoc limit may be termed unsecured advance
and may be violation of exposure limit.
For Guarantee issued:
Vi I collateral security obtained?
Auditor: yes in most of the cases the collateral security
taken is already lying with the bank as security for
other facilities.
In case of loan sanctioned against receivable, bank
should obtain age wise receivables statement. Showing
figure action of outstanding under and above 90 days.
(Bank should not allow drawing against bills due by
end of 90 days)
While sanctioning loan to any member the prudential
and creditworthiness of
guarantor/member not
considered.
In case of CC hypo account bank should consider only
paid stock for considering D/power. Bank has
completely overlooked the paid stock concept even
though huge amount of creditor are shown in trial
balance unpaid stock is taken into consideration while
working out the D/power.
The computer programme does not provide
appropriate check on D/P in number of cases while
allowing operation the DP is ignored and drawing is
allowed is excess of DP.
કે. િી. ......... િેન્ક ધ્વારા આકારે લ પરાં ત ુ વસુલ ન
આવેલ વ્યાજ (Unrealized Interest) ને આવક તરીકે
દશાગવવામાાં આવેલ છે ? કે કેમ? તે ચકાસો. આ ઉપરાાંત
એનરીઅલાઇઝડ ઇન્ટરે સ્ટને રીસીવેિલ ખાતે ઉધારીને
તેની સામે OIR ખાતે જમા કરવામાાં આવેલા છે કે કેમ? તે
હવાલાચકાસો.
“અમોએ રીઝવગ િેન્કના તાજેતરના સરક્યુલર મુજિની
ગણતરી કરતાાં એન.પી.એ. ની ટકાવારી ગ્રોસ 78.30%
જ્યારે નેટ 0.00% છે .”
કરવાપાત્ર જોગવાઇ રૂ. 91.65 લાખ
કરે લ જોગવાઇ રૂ. 112.21 લાખ
વધારાની જોગવાઇ 20.57 લાખ
ખોટ રૂ. 2.89 લાખ
Difference in CRAR
Bank
IO
RWA
705
482
Cap
93.42
43.87
CRAR
13.3
9.1
Reasons :
Bank had not deducted shortfall in provisions from
TIER 1 Capital; compilation of RWA wrong as erosion /
margins were not considered.
ઓડીટરશ્રીએ જણાવેલ છે કે, “સી.આર.એ.આર. રીઝવગ
િેન્કની માગગદશીકા મુજિ સાંતોષજનક છે .”
Net worth assessed by : auditor Rs. 116.35 lacs Net
worth Assessed by auditor in statement is Rs. 116.35
lacs but state in annexure ‘C’ as Rs. 198.72 lacs
RBI Rs. 58.02
RBI Inspection
The difference between the bank's assessment of
CRAR and the ins. officer assessment was attributable
to wrong computation of risk-weighted assets by the
bank and shortfall in provision
Bank
I.0.
RWA
36.68
35.46
Cap
4.79
4.27
The variation between CRAR as calculated by the bank
(23.7 %) and as assessed by I.O. (2.4 %) was due to
higher Tier-I capital calculated by the bank by not
reducing shortfall in the provisions to the extent of
Rs.244.58 lacs. (Provision against NPAs, Standard
assets, difference in GL)Bank had not amortised the
premium every year by charging to Profit and Loss
Account. The erosion was Rs.3.47 lakh on account of
amortisation of premium upto March 31, 2011. The
manager of the bank had taken Rs.1.38 lakh in cash
from the bank for payment to advocate in 2010-11 but
could not submit relevant bill till December 2011
Bank had not imparted any training to staff in last 10
years.
છે લ્લા ત્રણ વષગ દરમ્પયાન
ટકાવારી ચકાસી અહેવાલ કરો:
2008-09
સી.આર.એ.આર.ની
12.50%
2009-10
12.40%
2010-11
04.70%
આ િેન્કની નેટવથગ નેગેટીવ (-512-24) દશાગ વેલ છે .
Bank's total inter bank and single bank deposits
(excluding deposits with GSCB / DCCBs) Rs.740.12
exceeded the ceiling of 20 % and 5 % respectively of
previous year's deposits
The board of Directors had not carried out a half –
yearly review of securities transactions and the review
note was not forwarded to the R.O, as required under
CIR BDP (PCB) 37/72.05.01/2004 – 05 of 26.2 2005.
The bank had a loan policy formulated and approved
by the BOD in 2005 and not reviewed thereafter.
Bank had not framed investment policy
The investment in Govt. Securities amounted to Rs. 772.23
which constituted 14.5% its NDTL. Bank had not complied
with regulatory requirement of minimum 25% of NDTL in
Govt. Securities as per RBI cir 12/16 of 01-07-10.
ઓડીટર : એનેક્ષરસી 4(1)(એ) સરકારી જામીનગીરીમાાં રોકાણો કરતી
વેળાએ ........ આર.િી.આઇ. ની માગગદશગક સુચનાનુ ાં પાલન થયેલ છે ?
ઉલ્લાંઘનની નોંધ કરો.
(ઓડીટર : હા)
(based
Exposure Limits
RBI Rs.
Auditor
Individual
56.78
59.02
151.42
157.41
on this capital funds)
ઓડીટ રીપોટગ : રોકાણો નોન પરફોમીંગ િનેલા હોય તો તે અંગે પુરતુ ાં
પ્રોવીઝન કરવામાાં આવેલ છે ?
રીમાકગ : નોન પરફોમીગ રોકાણ નથી.
Bank's IDR was 2.70 lakh as against the total requirement of Rs.10.60 lakh.
ઓડીટર : IDR અને IFR
ની જોગવાઇ પ ૂરતી છે .
The bank had classified its investment portfolio of Rs. 262.00
lakh under HTM category. At 25.4% of NDTL investment
under HTM category were slightly beyond the prescribed
limit of 25%
Bank was neither taking into account the borrower's
requirement / purpose of loans based on financials nor had it
taken steps to secure advances
no proof of business / financials
stock statements obtained only at the time of sanction.
Hence it is NPA after 3 months.
Bank's inter – bank deposits excluding deposits with
SCB and DCCB were Rs.376.38 lakh (24.7 %) which
was not within the ceiling of 20 % of previous year end
deposits.
Bank's adherence to prudential norms was considered
satisfactory, as it had introduced a system of classifying
NPA on an ongoing basis.
Functioning of audit committee was found unsatisfactory
in view of non-compliance of concurrent and EDP Audit
observations on irregurities in credit appraisal and post
disbursement supervision.
Bank had reckoned profit of Rs. 26.51 lakh for the year
2010-11 as Tier-I capital, whereas only statutory
reserve and building fund portion and admissible as
per the extant guidelines on capital adequacy.
Bank’s advances were concentrated in mortgage
against land and building forming 55% of total
advances Bank violated real estate exposure norms
presented under RBI circular 23/12 dated 15-11-2010
bank gave importance to security. Assessment of
credit need was not done, system of credit risk
assessment was effective as the bank had not done
ascertainment of purpose of loan and repayment
capacity .
Bank had classified its investment portfolio Rs.262 lakh under
HTM category. At 25.4 % of NDTL investments under HTM
were slightly beyond the prescribed limit of 25 %. It was
however noticed that the bank was taking the discount
amount on purchase of G.sec to its income and showing
securities at face value in its B/S instead of showing at
purchase price. Such amt of Rs. 10.40 lacs is erosion and
needs provision in IDR.
A total Rs.10.40 lakh was taken to P&L in such a manner.
Hence this amount was taken erosion in computing net
worth and CRAR. Bank is advised to follow correct accounting
procedure.
Bank was not getting any dividend on investment of Rs.0.20
lakh in shares of DCCB. Hence the same is treated as erosion.
Bank is advised to make full provision as per Master cir of
1.7.2010.
Asset quality
As per bank
As per I.O
Standard Assets
380.36
243.31
Substandard
18.54
106.27
Doubtful
10.84
27.79
Loss
36.31
68.68
Gross NPA
65.69
202.74
% of NPA
14.7
45.5
Net NPA %
NIL
33.8 %
Bank had not made any provision towards standard
assets.
Proceedings of board meetings were not recorded
properly as blank spaces were left at several places
which were fraught with risk.
In terms of Para 25 of bye – laws the quorum in AGM
had to be 20 % of total members or 100 which ever
was less. However only 87 members attended AGM
held for the years 2009 – 10; As such the proceedings
were carried out in contravention of bye-laws.
In one bank position of NPAs as on 31-3-2011 as
stated by bank, RBI and auditors were as under :
given by Bank to
Changed
by Certified
RBI
RBI
by
Auditors
Auditors
Sustandard
18.54
77.86
106.27
As submitted
Doubtful
10.84
42.93
27.79
by the Bank in
Loss
36.31
20.53
68.68
65.69
141.32
202.74
Total
Copy of statement 2 in transparency
Statement. 2 *
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T[ H A[\SDF\ RBI o The Bank had not adhered to the IRAC norms as
mentioned in Annex-V
(Note : RBI had considered all accounts in which stock statements were
not received for more than 3 months as NPAs)
Statement – 2
Details of non performing assets
No
Position
No of
NPAs
NPA
Amount
R.s
Out of
Which
substand
ard
Doubtful
Loss
Provision
Required
Provision
made
Net
NPA
1
2
3
4
5
6
7
8
9
10
392
67.58
18.18
7.60
38.83
54.02
76.41
0
7.60
38.83
54.02
76.41
0
-18.30
7.74
1.92
-
2053
61.76
78.33
14.25
1
Beginning of the
year
2
Recovery during
the year
3
Upgradation during
the year
4
Reschedulement
during the year
5
Write off during
the year
6
Balance of NPAs
out of those in the
beginning of the
year
392
67.58
18.18
7
New NPAs this year
155
73.44
9.68
8
NPAs of the end of
the year
547
141.32
77.86
35.33
42.93
Loss assets constitute 90% of gross NPAs
Bank had prepared staff accountability policy but had
not considered the same for fresh slippage of NPAs
Statutory audit for the year ending 31.03.11 was
carried out by CA awarding a classification which was
generally in order; however it was not satisfactory in
respect of irregularities observed in IRAC norms, credit
appraisal post disbursement supervision under
provisioning and inflated profit.
“િેન્કની પ્રગમત એકાંદરે ઠીક છે . .......... માકગ સને
ધ્યાનમાાં રાખીને ઓડીટ વગગ ‘ડ’ આપવામાાં આવે છે .”
“31.03.11 ના અંતે કુલ મુદતવીતી િાકી રૂ. 93.96
લાખ હતાાં”
Overdue amounts are different from NPAs
All overdues may or may not be NPAs
All NPAs are not necessary overdues.
Bank had granted loan against mortgage of private
limited CO's asset but charge is not registered in favour
of bank at ROC.
Equitable mortgage not created on property. Only
undertaking on Rs.100 stamp paper taken.
Stock statements not received for 2/3 months.
Bank officials had not taken regular visits to verify
stocks.
Bank had not formulated a recovery policy.
The general performance of the BOD requires
improvement on non formulation of certain policies
like investment / recovery / recruitment/ donation /
staff accountability / KYC
Discrepancy in value of immovable property taken
in mortgage:
Sr.
No
1
2
3
Stated
Rs in lacs
Valuation
Rs in lacs
Loan
Amount
Rs. In lacs
Date
Value
Date
Value
Value
17-05-10 9.50 14-05-10 37.30
26
15-5-10 2.10 21-05-10 17.90
12
29-12-10 1.70 11-1-11 6.09
3.50
ઓડીટર : એનેક્ષર સી7(2) : અન્ય િેન્ક સાથેના મેળવણા
(1) લાાંિા સમયથી િાકી ખેંચાતી રકમો અંગે સ્પષટતા મેળવો
(જવાિ : પત્રક સામેલ છે )
(1) પત્રકમાાં એક રકમ રૂ. 78124.69ની ગુજરાત સ્ટે ટ કો.ઓ. િેન્ક
સાથે તફાવતની જણાવેલ છે . (+) કે (-) દશાગવેલ નથી. ડયારે
રીઝવગ િેન્ક ઓફ ઇન્ડીયાએ આ રકમને shortfall in provision
ગણેલ છે . કારણ કે તે 1987 થી લેવાની િાકી છે .
(2) તેવી જ રીતે મેમ્પિરશીપ ગીફ્ટની રકમ રૂ. 2.10 લાખ ની
હોવાથી તે પણ shortfall in provision ગણેલ છે .
(3) સ્ટાફ ગ્રેજ્યુઇટી ની રકમમાાં shortfall in provision રૂ. 29
લાખની ગણેલ છે .
(4) MMCB માાં ડીપોઝીટ રૂ. 15લાખની shortfall in provision
ગણેલ છે .
(ઓડીટર : રોકાણો નોન પરફોમીગ નથી જેથી પ્રોવીઝનનો
પ્રશ્ન નથી.)
Thank You
88