The country’s banking sector, which is at its highest level in a decade by financial metrics, is now poised to provide the support needed to drive the growth of the Indian economy, RBI Deputy Governor Swaminathan Jay said.
Addressing a conference of Chief Financial Officers and Statutory Auditors of Commercial Banks and All Indian Financial Institutions, the Deputy Governor said that the RBI has also taken some steps to enhance the effectiveness of the audit process. This includes ensuring a mechanism between the supervisory team and the auditors, reporting, streamlining the process for appointment of auditors and safeguarding the independence of auditors.
Auditors should make their audit process more rigorous to avoid risks such as non-compliance with statutory or regulatory requirements as well as underprovisioning. In addition, a key aspect of the auditor’s role is an in-depth assessment of internal financial controls during financial reporting. By ensuring standards for auditing as well as regulatory guidelines, auditors can reduce the need for supervisors to intervene, Swaminathan said.
Talking about the expectation from auditors to ensure regulatory compliance, he said that auditors can play an important role by informing the bank management and RBI about any weaknesses or deficiencies to be noted.
NPAs of commercial banks at 12-year low at 2.8%
According to RBI’s latest Financial Stability Report, the gross NPA of commercial banks stood at a 12-year low of 2.8% in March 2024 and is likely to decline further to 2.5% by the end of the current fiscal.