The Narendra Modi-led Government should review the existing bank branch audit norms, K Raghu, President of the CA Institute, has said.

All bank branches in the country should be subjected to financial audit, Raghu suggested to the Finance Minister during an event here to markthe Chartered Accountants’ Day celebrations.

At present, certain segments of bank branches — those with advances less than ₹20 crore — are not subjected to annual independent audit, Raghu said, adding that this position needs to be changed.

“A robust audit mechanism is required for bank branches,” he said and added that the issue was also taken up with the Reserve Bank of India Governor Raghuram Rajan.

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The UPA Government had from 2012-13 stipulated that all bank branches with advances of less than ₹20 crore need not have an annual independent audit.

Only a fifth of such branches need to have an independent financial audit. This decision had upset the audit profession regulator, the CA Institute, which sought a re-think of the issue.

Earlier limit

The advance limit for mandatory bank branch audit was earlier pegged at ₹6 crore for 2011-12. From 2006 to 2010-11, the threshold limit for branch statutory audit was pegged at advances of ₹3 crore.

With the BJP gaining absolute majority in the recent general elections, the CA Institute has renewed its attempts to get the bank branch audit norms changed.

Business mix

Amarjit Chopra, a former president of the CA Institute, told Business Line that the criterion for bank branch audit should be “business mix” and not advances provided by the branch.

Also, at least a third and not a fifth of the branches with less than ₹20 crore business mix should be audited each financial year, Chopra added.

The contention of the CA Institute members are that banks are guided by their overall aggregate exposure in branches with advances of below ₹20 crore, and feel that it may not be material enough to warrant a statutory audit every year. (The Hindu Business Line)