Banks asked to audit high value loan
exposure to check frauds--Business Line 8th June 2013
Banks are presently
required to put in place a system of concurrent auditors to look into and
report genuineness of the documents especially of large value loans
In order to contain frauds, Reserve Bank today
directed banks to periodically audit and re-verify documents of all
credit exposures of Rs 5 crore and above till the loan is fully repaid.
"On a review, it has been decided that the banks should also subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and above to periodic legal audit and re-verification of title deeds with relevant authorities as part of regular audit exercise till the loan stands fully repaid," RBI said in a notification.
Banks are presently required to put in place a system of concurrent auditors to look into and report genuineness of the documents especially of large value loans.
It said banks, on quarterly intervals, may give information of such audit, how many accounts covered, list of deficiencies observed by auditors, steps taken to rectify the deficiencies.
Besides, they should also report about number of accounts in which rectification could take place, course of action to safeguard the interest of bank in such cases as well as action taken on issues pending from earlier quarters.
RBI in a study of large value frauds, particularly when the branches were also under concurrent audit, has found that large number of frauds were perpetrated on account of submission of forged documents by the borrowers. These had been certified by professionals such as valuers or advocates or chartered accountants.
"On a review, it has been decided that the banks should also subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and above to periodic legal audit and re-verification of title deeds with relevant authorities as part of regular audit exercise till the loan stands fully repaid," RBI said in a notification.
Banks are presently required to put in place a system of concurrent auditors to look into and report genuineness of the documents especially of large value loans.
It said banks, on quarterly intervals, may give information of such audit, how many accounts covered, list of deficiencies observed by auditors, steps taken to rectify the deficiencies.
Besides, they should also report about number of accounts in which rectification could take place, course of action to safeguard the interest of bank in such cases as well as action taken on issues pending from earlier quarters.
RBI in a study of large value frauds, particularly when the branches were also under concurrent audit, has found that large number of frauds were perpetrated on account of submission of forged documents by the borrowers. These had been certified by professionals such as valuers or advocates or chartered accountants.
Put loan collaterals through periodic
legal audit, RBI tells banks
MUMBAI, JUNE 7:
To
contain fraud, the Reserve Bank of India on Friday asked banks to subject the
title deeds and other documents in respect of all credit exposures of Rs 5
crore and above to periodic legal audit. They should also re-verify the title
deeds with relevant authorities as part of regular audit exercise till the loan
stands fully repaid.
Bankers
say such a directive may have been prompted by rising bad loans and the
necessity to ensure that collateral are sufficient to make recoveries.
The
central bank said banks should furnish a review note to their board/audit
committee of the board at quarterly intervals on an ongoing basis.
The
review note should contain information in respect of legal audits covering
aspects such as the number of loan accounts due for legal audit for the
quarter, how many accounts covered, list of deficiencies observed by the
auditors, and steps taken to rectify the deficiencies.
The
note should also mention the number of accounts in which the rectification
could not take place, course of action to safeguard the interest of bank in
such cases, action taken on issues pending from earlier quarters.
Chidambaram tells banks to contain
NPAs-Business Standard
'Raise profitability to
meet Basel-III capital needs over next five years'
Finance Minister P Chidambaram today asked public sector banks to
increase profitability by containing non-performing assets (NPAs) in
view of the huge capital requirements over the next five years because of the
implementation of Basel-III norms. Speaking at the annual general meeting of
the Indian Banks’ Association, Chidambaram said huge provisioning for NPAs is
eating into the profits of state-owned banks. He asked the banks to take steps
to reduce NPAs.
The finance minister said, “While I will be very happy if all the equity that is required is provided by promoters, non-promoter shareholders. But I am afraid that is not how capital is found for running enterprises. A significant portion of capital has to come from retained earnings. That can happen only if banks’ profitability increases, which can happen only if you are able to contain non-performing assets.”
Indian banks will be required to raise an additional Rs 5 lakh crore of capital to meet the Basel III capital rules, including Rs 3.25 lakh crore of non-equity capital and Rs 1.75 lakh crore of equity capital, Reserve Bank of India Governor Duvvuri Subbarao said yesterday. “A significant proportion (of the capital that banks would need to infuse) has to come from retained earning,” he said. Although the government may continue to infuse capital in public sector banks, which could be in the region of Rs 15,000 crore to Rs 20,000 crore every year, banks also have to pay attention to their profitability,” said Chidambaram. This year, the government plans to infuse around Rs 14,000 crore in public sector banks, compared with last year’s Rs 13,000 crore. On an average, the government holds 60 per cent stake in public sector banks, said the finance minister.
At end-December 2012, the capital adequacy ratio (CAR) of the aggregate banking system stood at 13.5 per cent with a Tier-1 capital ratio of 9.7 per cent. “It is expected that the long timeframe, up to March 2018, to phase in Basel-III capital requirements will allow banks to make a smooth and non-disruptive transition,” the RBI governor had said yesterday. Voicing concern over asset quality, the finance minister asked banks to differentiate between wilful defaulters and borrowers who are impacted due to genuine reasons.
FM expects new bank licences before March
Finance Minister P Chidambaram expects the Reserve Bank of India to issue fresh licences for new banks by March 2014. The regulator had issued the final norms for new bank licences in February this year. It also issued a clarification on June 3 in response to some issues raised by banking aspirants.
“RBI has released guidelines for licensing on new banks. and I hope that some of the banks will be licensed before the end of the financial year,” said Chidambaram, adding the new banks will help in financial inclusion.
The deadline to apply for banking licence expires on July 1. Applications will be shortlisted by an internal committee of RBI and then forwarded to a panel for vetting. The final decision will be taken by RBI’s top brass.
The finance minister said, “While I will be very happy if all the equity that is required is provided by promoters, non-promoter shareholders. But I am afraid that is not how capital is found for running enterprises. A significant portion of capital has to come from retained earnings. That can happen only if banks’ profitability increases, which can happen only if you are able to contain non-performing assets.”
Indian banks will be required to raise an additional Rs 5 lakh crore of capital to meet the Basel III capital rules, including Rs 3.25 lakh crore of non-equity capital and Rs 1.75 lakh crore of equity capital, Reserve Bank of India Governor Duvvuri Subbarao said yesterday. “A significant proportion (of the capital that banks would need to infuse) has to come from retained earning,” he said. Although the government may continue to infuse capital in public sector banks, which could be in the region of Rs 15,000 crore to Rs 20,000 crore every year, banks also have to pay attention to their profitability,” said Chidambaram. This year, the government plans to infuse around Rs 14,000 crore in public sector banks, compared with last year’s Rs 13,000 crore. On an average, the government holds 60 per cent stake in public sector banks, said the finance minister.
At end-December 2012, the capital adequacy ratio (CAR) of the aggregate banking system stood at 13.5 per cent with a Tier-1 capital ratio of 9.7 per cent. “It is expected that the long timeframe, up to March 2018, to phase in Basel-III capital requirements will allow banks to make a smooth and non-disruptive transition,” the RBI governor had said yesterday. Voicing concern over asset quality, the finance minister asked banks to differentiate between wilful defaulters and borrowers who are impacted due to genuine reasons.
FM expects new bank licences before March
Finance Minister P Chidambaram expects the Reserve Bank of India to issue fresh licences for new banks by March 2014. The regulator had issued the final norms for new bank licences in February this year. It also issued a clarification on June 3 in response to some issues raised by banking aspirants.
“RBI has released guidelines for licensing on new banks. and I hope that some of the banks will be licensed before the end of the financial year,” said Chidambaram, adding the new banks will help in financial inclusion.
The deadline to apply for banking licence expires on July 1. Applications will be shortlisted by an internal committee of RBI and then forwarded to a panel for vetting. The final decision will be taken by RBI’s top brass.
Independent body likely to review debt
recast cases: Takru
MUMBAI, JUNE 7:
To
prevent unfit cases from getting their loans restructured under the corporate
debt restructuring (CDR) mechanism, the Finance Ministry plans to set up an
independent common oversight body, said Rajiv Takru, Financial Services
Secretary.
The
body will be a recommendatory unit which will vet CDR cases above a certain
threshold.
However,
he did not specify what the threshold will be and said it will be decided by
the banks.
“When
banks get a CDR case above a certain amount, they can send it to the body which
can give its view to the banks,” he said.
He said
that there would not be any government official or banker on the panel. The
members would include experts from legal, investigation and financial fields.
The
body will give its opinion to the banks in writing so that the banks cannot
later say that they were not sufficiently forewarned about the suitability of
the case, he added.
Takru
further told that banks cannot afford to waste any time to start the recovery
process.
“Whatever
the assets (collaterals) are, banks must auction them. If banks do not get the
right price for the asset, then banks must buy it out,” he added
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