ICAI blames lopsided selection of auditors for bank NPA mess
The central government had bestowed powers on banks to appoint their own statutory auditors under the autonomy package in 2008-09.
Hyderabad: With Indian banking sector reeling under mounting pile of bad loans, Institute of Chartered Accountants of India (ICAI) on Wednesday blamed the lopsided policy of allowing banks to appoint their own auditors for the enormous increase in non-performing assets (NPAs) in the key financial sector.
“Banks are being allowed to appoint their own auditors. This is one of the reasons for increase in NPAs across the banking sector as bank managements tend to appoint those auditors with whom they are comfortable,” M Devaraja Reddy, the newly-elected president of ICAI, told media here.
Reddy, who has assumed charge as all India chief of the chartered accountants' apex body last week, is the first Telugu person to occupy the coveted position. The central government had bestowed powers on banks to appoint their own statutory auditors under the autonomy package in 2008-09.
However, they have to choose from a list of auditors selected by the Reserve Bank of India (RBI). Prior to that, RBI used to select central statutory and joint auditors for each bank based on its advances. “We have brought this issue to the notice of the government as well as RBI, but nothing has happened so far. I sought appointment with Finance Minister.
I will raise this issue also when I meet him,” Reddy said, underlining the need for reverting to the old system of RBI appointing statutory auditors to the banks. He further said the ICAI would extend whatever support was needed on the NPA issue if the central government were to agree for its proposal.
Meanwhile, the chartered accountants' body has submitted the pre-budget memorandum to the Ministry of Finance for Budget 2016-17. The suggestions given by ICAI do not only relate to fiscal laws and taxation, but also pertain to overall economic development.
“The memorandum has been prepared after incorporating suggestions from members and stakeholders at large. We have raised concerns over income tax laws such as the ones mandating quarterly filing of TDS forms and penalties for non-filing.
It’s better government makes TDS filing a half year exercise as businessmen need to focus on doing business,” he explained. Reddy further said that implementation of Goods and Service Tax (GST) would lead to increase in government’s revenues.