Banks’ auditors under lens: RBI seeks explanation on differences in write-downs

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According to RBI data, PSU banks in FY17 have written off Rs 81,683 crore against Rs 2.49 lakh crore in the past five years.

The Reserve Bank of India (RBI) has questioned scores of auditors at 27 public sector banks on the process and logic they had used to compute and report write-downs at the lenders, two people close to the development told ET.

The RBI has sought written explanation on differences in the write-down assessments by its own inspectors and those certified by the auditors. A write-down is a reduction in the estimated and nominal value of an asset, and is charged off as a loss to the profit and loss account for the relevant period. In some cases, the RBI has also questioned the provisioning methodology and non-performing asset (NPA) figures arrived at by the auditors at a few public sector banks, sources told ET.

The banking regulator is examining whether auditors at these state-run lenders followed RBI guidelines on write-downs, provisioning and NPAs. “This is part of RBI’s annual assessment. Auditors will have to explain how they provisioned for NPA and how they calculated write-downs,” said a person aware of the matter.

The write-downs, NPA and provisioning figures arrived at by the auditors and RBI inspectors differ by up to 10%.

WRITE-DOWNS & PROVISIONING
According to RBI data, PSU banks in FY17 have written off Rs 81,683 crore against Rs 2.49 lakh crore in the past five years. In a few cases, the audit reports of some of these lenders do not reflect these write-downs, said one of the persons cited above. Most banks do not separately report write-downs in their accounts, combining them often with quarterly provisioning.

Most Indian public sector banks use more than one auditor due to the enormous size of their balance sheets. Most auditors are mid-to-small Indian firms that audit several branches. The 27 public sector banks collectively employ 115 auditors, according to data analysed by the ET Intelligence Group.

According to the people in the know, auditors at State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Allahabad Bank and Bank of India (BoI) were sent the show-cause notices about two weeks ago.

ET’s detailed email queries to the regulator and the affected lenders – SBI, PNB, BoB, IDBI, Indian Overseas Bank, Canara Bank, BoI, Oriental Bank of Commerce (OBC) and Allahabad Bank – did not elicit any response.

REGULATOR HAS PRIVILEGED ACCESS’
According to a major bank’s auditor who did not wish to be identified, the differences are not unexpected. “The RBI has access to information an auditor may not. Like, if a loan in bank X has gone toxic, the auditor of bank Y may not know, but the RBI would,” he said. He added that there is a time lapse between auditors preparing an account and the RBI conducting inspections. “What you must look at is the impact on the P&L of a bank due to divergence. In most cases, that is not much,” he said.

To be sure, there may have been ‘technical’ errors in interpreting the writedown rules, resulting in the differences. “There is a direct impact of the new accounting standards on the way write-downs are arrived at,” said a senior executive at a top audit firm. “Under the old accounting system, the rules around write-downs were not as precise, and there is a possibility that some auditors may have ignored this.”

Source: Economic Times

Pace of new bad loan formation has decelerated: RBI

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RBI Deputy Governor S S Mundra today said the pace of formation of new non-performing assets (NPAs) or bad loans has decelerated although some banks have posted losses for the first quarter of the current financial year due to higher provisioning.

He also said most of the banks are adequately capitalised and the government has promised additional capital if they require.

In a bid to shore up cash-strapped public sector banks, the government last month announced infusion of Rs 22,915 crore capital in 13 lenders including SBI and Indian Overseas Bank to revive loan growth that has hit a two-decade low.

As far as bad loans are concerned, he said, they are showing a mixed trend.

“When I look at individual results, there are number of banks for whom it appears that the worst is over but then there are other banks…still they are in middle of it and they would need to do some work before they get out of it,” he said.

“It would be naive to believe that there won’t be any NPA formation but the pace of new NPA formation has clearly decelerated, that is what the major trend is,” he added.

Gross NPAs of the public sector banks had surged from 5.43 per cent (Rs 2.67 lakh crore) of advances in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.

As per the latest Financial Stability Report by RBI, the Gross NPA ratio for public sector banks may go up to 10.1 per cent by March 2017 under the baseline scenario.

Many banks including Bank of India, Dena Bank, and Central Bank of India, reported losses for the quarter ended June 30, due to a sharp jump in provisions for NPAs on account of an asset quality review mandated by the RBI in December.

Talking about the recapitalisation, Mundra said the Finance Minister has indicated that if there is a need the government would be ready to provide additional capital.

“So, as far as the present situation is concerned I think most of the banks are adequately capitalised to take care of minimum regulatory requirements. We will keep a watch. As we move into the year we will see how things pan out,” he said.

On controversial virtual currency bitcoin, Mundra said: “This entire area fintech as we mentioned…you should not be stifling the innovation. Be mindful and what they call as regulator sand marks means you allow some of the experiments to happen under the control conditions so that the positive or the negative fallouts can be well understood and calibrated.”

Source: http://economictimes.indiatimes.com/articleshow/53825048.cms

 

RBI asks income tax assessees to pay dues in advance, 29 banks authorized to accept payments

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The Reserve Bank appealed to income tax assessees to pay dues in advance of the due date as well use alternate channels of authorized banks to avoid the rush during end of March.

“Pay I-T dues in advance at RBI or at authorized bank branches. Appeal to income tax assessees to remit their income tax dues sufficiently in advance of the due date,” RBI said in a release.

“It is observed that the rush for remitting Income-Tax dues through the RBI has been far too heavy towards the end of March every year and it becomes difficult for the RBI to cope with the pressure of issuing receipts although additional counters to the maximum extent possible are provided for the purpose”, it said.

RBI said assessees can use alternate channels like select branches of agency banks or the facility of online payment of taxes offered by these banks.

A total of 29 agency banks have been authorized to accept payments of Income-Tax dues. The authorised banks include SBI and its five associates, HDFC Bank, ICICI Bank, Axis, Bank, Punjab National Bank, Bank of Baroda, Bank of India, Indian Overseas Bank.

Among others are Corporation Bank, Dena Bank, Canara Bank, Central Bank of India, Syndicate Bank and others.
RBI said by remitting dues at the designated banks will obviate the I-T assessess’ inconvenience in standing in long queues at the RBI offices.

 

Source: http://www.firstpost.com/business/rbi-asks-income-tax-assessees-to-pay-dues-in-advance-29-banks-authorized-to-accept-payments-2628134.html?utm_source=FP_CAT_LATEST_NEWS

Hong Kong eyes strengthening business ties with India

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Pushing for an investment promotion agreement, Hong Kong today called for strengthening business ties with India and boosting bilateral trade.

“India is Hong Kong’s seventh-largest trading partner globally, with bilateral trade of USD 23.7 billion last year. We are looking at strengthening business ties with India and increase trade manifold,” Hong Kong Trade Development Council (HKTDC) Executive Director Margaret Fong told reporters here.

Hong Kong and India enjoy strong ties formed over more than 150 years of business and cultural links, Fong said.

In 2015, India was Hong Kong’s fourth-largest export market with shipments expanding 8.1 per cent y-o-y to USD 13.1 billion.

On the other hand, India was Hong Kong’s ninth-largest source of imports in 2015, amounting to USD 10.6 billion, said Fong, who is leading a business delegation to India.

HKTDC, the global marketing arm for Hong Kong-based manufacturers, traders and service providers, has a proven track record in helping Indian businesses expand into new markets using the special administrative region’s platform, Fong added.

“With India’s tremendous economic potential, trade and investment between Hong Kong and India are expected to expand continuously in the coming years.

“The Investment Promotion and Protection Agreement (IPPA) will further strengthen the economic and investment ties between the two places, bringing mutual economic benefits,” Hong Kong Special Administration Region Chief Executive C Y Leung said in a statement.

“Hong Kong and India will launch negotiations on an IPPA,” Leung added.

Many Indian companies have established offices in Hong Kong. As of June 2015, there were 12 Indian companies with regional headquarters in Hong Kong, 15 with regional and 37 with local offices. The ranges of businesses include trading, banking, IT and logistics.

Leading Indian companies with operations in Hong Kong include Bank of India, UCO Bank, Jet Airways, Infosys and Tata Group.

Source:http://economictimes.indiatimes.com/articleshow/50856674.cms