Banking frauds: IBA seeks applications to make forensic auditors’ list

The Indian Banks’ Association (IBA) on Tuesday invited applications for the empanelment of firms to conduct forensic audit of frauds in the banking industry. The industry body plans to rope in firms for two separate categories of frauds — up to Rs 50 crore and above
Rs 50 crore. According to a document put out by the IBA, auditors whose terms are expiring on August 27, 2019 will have to send in applications through this route. Those whose terms end on October 15, 2020 will not be required to apply.

At present, 72 audit firms are on IBA’s list of empanelled entities for conducting forensic frauds of up to Rs 50 crore, all of whom will see their terms ending on August 27, 2019. The list includes the likes of Alvarez & Marsal India, Ernst and Young, BDO India, Price Water House Coopers, BMR Advisors, Deloitte and KPMG.

Among the 39 firms empanelled for audits of frauds of over Rs 50 crore whose term ends in August this year is Grant Thornton as also the others named above.

The number of bank frauds involving amounts of Rs 1 lakh and above stood at 5,917 in FY18, up 17% from 5,076 in FY17, according to a February 2019 statement by the ministry of finance placed in Parliament.

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In a separate reply to a question in Parliament, the ministry said that the aggregate reported amount for frauds involving an amount of Rs 1 lakh and above, as reported by scheduled commercial banks (SCBs) and select financial institutions, stood at Rs 41,167.71 crore in FY18, up 72% from Rs 23,933.85 crore in the previous financial year.

Following the letter-of-undertaking (LoU) scam unearthed at Punjab National Bank (PNB) in February 2018, the government had issued what it called the framework for timely detection, reporting and investigation into large-value bank frauds to public sector banks (PSBs).
The framework mandated that all accounts exceeding `50 crore, if classified as non-performing assets (NPAs), be examined by banks from the angle of possible fraud and a report placed before the bank’s committee for review of NPAs on the findings of this investigation.
PSBs would also be required to carry out an examination for wilful default immediately upon reporting fraud to RBI and seek a report on the borrower from the Central Economic Intelligence Bureau in case an account turns NPA.

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