ICAI suggested for appointment of statutory central auditors for public banks

The CA Institute has suggested that appointment of statutory central auditors (SCAs) of public sector banks should be done by the Reserve Bank of India and not by the bank managements.

The audit regulator is keen that the banks’ auditors be appointed on the lines of Comptroller and Auditor General of India appointing public sector entities’ auditors.

“We have suggested that RBI itself should appoint the statutory auditors of public sector banks. The current system of bank managements appointing statutory auditors should be done away with,” Nihar Jambusaria, President, Institute of Chartered Accountants of India (ICAI), told. This suggestion was conveyed to the central bank at a recent virtual interaction between the top brass of the CA Institute and senior RBI officials.

Also, the ICAI has made several suggestions on the RBI’s April 27 circular that prescribed norms for appointment of Statutory Central Auditors/Statutory Auditors in PSBs and statutory auditors for urban cooperative banks, non-banking finance companies and housing finance companies.

Jambusaria said that CA Institute has suggested to the RBI that instead of prescribing the maximum number of SCAs in public sector banks, the RBI should set the the minimum numbers to be appointed. “We have suggested that instead of having a cap, there should be a minimum number and the current absence of minimum number is leading to reduction in overall number of auditors in PSBs,” he said.

It maybe recalled that bank managements have been appointing SCAs since 2008-09. However during 2011–14, the appointment was done by a Selection Committee comprising representatives of CAG, Ministry of Finance and IBA on a points-based system.

Asked to comment on corporate India’s recent suggestion to RBI that the entire new norms of the central bank be deferred by at least two years, Jambusaria said that ICAI is not in favour of such deferment. He also said that ICAI does not have any objections to making the concept of joint audits mandatory for banks and NBFCs with asset size of over ₹15,000 crore.

“Except for few changes which we have brought to the notice of RBI for consideration, we are happy with most of the norms in the central bank circular,” he said.

ICAI is also understood to have pitched for the reintroduction of compulsory three-year cooling off period after the completion of a SCAs tenure.