It seems that the elaborate labyrinth of procedures, documentation needs and rules that banks display with audacity are implemented only for retail lenders and small players. For the bigger players and the corporate players there are a different set of rules that hardly requires them to sweat. This may be due to business targets or earnings pressure or simple bullying due to Political pressure.
This malady has persisted since the beginning of nationalization of banks in our country and only the quantum of this loan is leading to the wagging of tongues.
In order to ensure that this time around it is not limited to only wagging of tongues, the Government has to take a decision on whether the present regulatory environment really serves the purpose?
RBI as we know has a regulatory as well as a monetary role which is more than it can chew. RBI appointed auditors (Chartered Accountants) are working as per their rules under Banking Regulation Act, 1949 and Guidance Notes issued by the Institute and can verify and vouch but not question policy. The present regulatory practices aim to provide a audit assurance through predominantly concurrent audits. Though the system seems robust and done as per the Standards on Auditing issued from time to time, the process needs to have a impartial unrelated third party review to highlight the grey areas. Thus there is a requirement for a third party review of the policies , implementation of the policies and audit of the underlying records.
As it stands the NPA position of Indian Banks are pretty bad hovering around the six percent mark despite support from the Central Bank which has gone ahead and even told that defaults in Q4 need not be seen as NPA http://economictimes.
Being a regulator as well as a Central Bank creates vested interests which makes the institution to compromise and find a middle path in order to balance the roles and mitigate the outcome
C&AG has been a impartial critic in many public areas with their role getting more and more public attention as time progresses. The records of the PSU banks in particular should come at least in a limited way under the audit of the Public auditor.This impartial view and audit even if in a limited way will go a long way in ensuring that glaring lapses are kept at check at least for the fear of post-audit if not for morality or ethics.
