Au­di­tors in trou­ble on de­faults

Hindustan Times (Patna) - - FRONT PAGE - Mahua Venkatesh mahua.venkatesh@hin­dus­tan­times.com

Banks can com­plain to ICAI against ac­count­ing watch­dogs of a com­pany that fails to re­pay loans

NEW DELHI: Au­di­tors could be in trou­ble in case their client com­pa­nies de­fault on loan re­pay­ments.

Un­der new government norms that seems to up­set the in­de­pen­dent ac­count­ing watch­dogs, banks can now lodge a for­mal com­plaint against the au­di­tors with the In­sti­tute of Char­tered Ac­coun­tants of In­dia (ICAI) if the bor­row­ing com­pany fails to re­pay loans on time.

“Banks would have the op­tion of lodg­ing a for­mal com­plaint against the au­di­tors of the de­fault­ing com­pa­nies if it is found that they are neg­li­gent in con­duct­ing au­dits,” a se­nior fi­nance min­istry of­fi­cial who did not wish to be iden­ti­fied said.

The level of bad as­sets - loans that do not fetch any in­ter­est pay­ment for banks - has risen sig­nif­i­cantly in the last cou­ple of years.

In a bid to check to fresh slip­pages in loan ac­counts, banks have been asked to take ad­e­quate steps to iden­tify the prob­lems early.

Banks have al­ready put in place a sys­tem to reg­u­larly mon­i­tor loan port­fo­lios. The top man­age­ment teams of lenders are ex­pected to re­view the sit­u­a­tion from time to time.

"Com­plaints against au­di­tors for any kind of neg­li­gence can be filed by any stake­holder but to say that non-re­pay­ment of loans is due to neg­li­gence of au­di­tors and they would be held re­spon­si­ble for bor­row­ing com­pa­nies not be­ing able to re­pay loans is to­tally mis­placed," said Amar­jit Cho­pra, former ICAI pres­i­dent.

The Re­serve Bank of In­dia has found that growth in new NPAs is faster than the rate at which banks are re­duc­ing old ones.

Fi­nance min­is­ter P Chi­dambaram, mean­while, has asked banks to in­crease re­tail lend­ing to boost the sag­ging econ­omy while look­ing at ways to en­sure that the NPA level does not swell any fur­ther.

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