Board of Financial Supervision (BFS) clears proposal that RBI will conduct an independent audit of big corporates declared fraudulent by banks
Following a sequence of investigations by the banks themselves in high-profile cases viz. Deccan Chronicle, Kingfisher Airlines, etc. which yielded very little, the RBI has now decided to itself investigate such high-profile fraud cases. The Board of Financial Supervision (BFS), chaired by RBI governor Raghuram Rajan, has cleared a proposal that RBI itself will now conduct an independent forensic audit of corporates who have taken loan of more than Rs 1,000 Crore and are declared fraudulent by banks.
Why RBI has taken this decision to itself and independently audit high profile fraud cases?
In past few years, there has been a huge rise in the number of cases of bad loans. The Gross NPAs (Non-Performing Assets) – bad loans prior to making provisions, for year 2013 stood at Rs 24,3210 Crores, up by 35% (Y-o-Y) Year on Year basis. Not only this, the number of cases referred to the CDR (Corporate Debt Restructuring) has also gone high in near past.
In order to curb rise in such NPA (Non-Performing Assets), the RBI has come with strong measures to ascertain that banks in India don’t brush off bad loans under the carpet.
Besides, the number of cases referred to the corporate debt restructuring (CDR) cell has also risen sharply in recent months.
Will an Independent forensic audit by the RBI put a check on the rise in stressed assets in the banking system?
The findings from independent forensic audit will allow RBI to formulate policies that will assist it keep a close watch on the creditor-borrower relationship, and promptly step in when there’s an abuse in the banking system.
What is Board of Financial Supervision (BFS)? What are the Functions of Board of Financial Supervision (BFS)?
The Financial Supervision functions are carried out by the Reserve Bank of India under the guidance of the Board for Financial Supervision (BFS). Board for Financial Supervision (BFS) is chaired by the Governor of Reserve Bank.
The chairman is supported by the 4 co-opted directors as members for a 2 year term. There is a Vice chairman of the board who is one of the Deputy Governors of the Bank. The Board meets typically every month. The chairman is supported by the 4 co-opted directors as members for a 2 year term. There is a Vice chairman of the board who is one of the Deputy Governors of the Bank. The Board meet s typically every month.
Some typical functions of Board of Financial Supervision (BFS) are:
- Restructuring of the system of bank inspections
- Introduction of off-site surveillance,
- Strengthening of the role of statutory auditors and
- Strengthening of the internal defenses of supervised institutions.
Categories: Business, Economy & Banking