Tag: CAG

CAG flags treatment of bank recap expenditure in FY18-19, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The Comptroller and Audit General (CAG) has raised its concerns over treatment of expenditure of bank recapitalisation during 2017-18 and 2018-19, stating that it was against the provisions of the fiscal responsibility and Budget Management (FRBM) Act.

For recapitalisation of state-run banks, the government provided ₹80,000 crore in 2017-18 and of ₹1.06 lakh crore in 2018-19 respectively.

The CAG has flagged in the expenditure budget the above mentioned expenditure on recapitalisation of the PSBs, had been netted against receipts from issue of special securities, while in the receipt budget, receipts from the securities have been netted against expenditure on recapitalisation.

It said that during the two financial years, funds for these investments were raised by the government through issue of non-transferable special securities to the same PSBs.

According to CAG, the finance ministry had stated that bank recapitalisation was not fiscally neutral but cash neutral, as issue of securities would get reflected in the total government debt and coupon payments for the special securities when made would be reflected in the deficit of the relevant year.

The concept of recapitalisation bonds was first introduced in 2017. Earlier, the capital infusion was to done by the government to a bank through cash outgo from the Consolidated Fund of India led to fiscal pressure.In 2017, the government had introduced recap bonds.

Under this, the government issues recapitalisation bonds to a public sector bank which needs capital. In turn, banks subscribe to the bond against which the government receives the money. Now the money received goes as equity capital of the bank. So the government doesn’t have to pay anything from its pocket.

The national auditor also pointed out the deficit in operation of the National Small Savings Fund (NSSF), which comprises all collections of small saving schemes.

“The balances under NSSF do not explicitly disclose the substantial accumulated deficit in the fund, which would have to be made good by the government in the future. There is also inadequate disclosure that significant amounts were being provided from NSSF for funding revenue expenditure of the government which would have to be serviced through budgetary support. It also raised concerns over inadequacies in disclosure under the FRBM rules.

The CAG pulled up the union government for adopting an erroneous process of devolution of Integrated Goods and Services Tax to states and short-transfer of cesses to reserve funds, which resulted in under-reporting of deficit figures for the 2017-18 and 2018-19 fiscals. The IGST, which is levied on inter-state sale of goods and services, is shared between the Centre and states in the 50:50 ratio.

In its report on the union government accounts tabled in Parliament, the Comptroller and Auditor General of India (CAG) found that ₹13,944 crore was left unapportioned and retained in the Consolidated Fund of India (CFI) in 2018-19, even though the amended IGST Act now provides for a process for ad-hoc apportionment of IGST.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

RBI should appoint statutory auditors for public sector banks: ICAI

Banking & Finance

[ad_1]

Read More/Less


The CA Institute has suggested that appointment of statutory central auditors (SCAs) of public sector banks should be done by the Reserve Bank of India and not by the bank managements.

The audit regulator is keen that the banks’ auditors be appointed on the lines of Comptroller and Auditor General of India appointing public sector entities’ auditors.

“We have suggested that RBI itself should appoint the statutory auditors of public sector banks. The current system of bank managements appointing statutory auditors should be done away with,” Nihar Jambusaria, President, Institute of Chartered Accountants of India (ICAI), told BusinessLine. This suggestion was conveyed to the central bank at a recent virtual interaction between the top brass of the CA Institute and senior RBI officials.

Also, the ICAI has made several suggestions on the RBI’s April 27 circular that prescribed norms for appointment of Statutory Central Auditors/Statutory Auditors in PSBs and statutory auditors for urban cooperative banks, non-banking finance companies and housing finance companies.

‘Minimum numbers’

Jambusaria said that CA Institute has suggested to the RBI that instead of prescribing the maximum number of SCAs in public sector banks, the RBI should set the the minimum numbers to be appointed. “We have suggested that instead of having a cap, there should be a minimum number and the current absence of minimum number is leading to reduction in overall number of auditors in PSBs,” he said.

Selection committee

It maybe recalled that bank managements have been appointing SCAs since 2008-09. However during 2011–14, the appointment was done by a Selection Committee comprising representatives of CAG, Ministry of Finance and IBA on a points-based system.

‘Not for deferring norms’

Asked to comment on corporate India’s recent suggestion to RBI that the entire new norms of the central bank be deferred by at least two years, Jambusaria said that ICAI is not in favour of such deferment. He also said that ICAI does not have any objections to making the concept of joint audits mandatory for banks and NBFCs with asset size of over ₹15,000 crore.

“Except for few changes which we have brought to the notice of RBI for consideration, we are happy with most of the norms in the central bank circular,” he said.

ICAI is also understood to have pitched for the reintroduction of compulsory three-year cooling off period after the completion of a SCAs tenure.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

CA Institute approves revised networking guidelines for firms

Banking & Finance

[ad_1]

Read More/Less


The CA Institute’s central council has approved the revised networking guidelines that would help Indian audit firms to grow big and gain larger assignments in the country. “The guidelines are expected to make it conducive for Indian audit firms to come together,” Nihar Jambusaria, President, Institute of Chartered Accountants of India (ICAI) told BusinessLine.

They were initially framed in 2005 and later revised in 2011. “A group was formed last year to revise the guidelines and make them conducive to enable CA firms to go in for networking, which is much required,” he added.

‘Allotment purpose’

ICAI will now approach regulators like Reserve Bank of India and Comptroller and Auditor General of India to submit that “registered networks within the fold of ICAI should be recognised” by them for the purpose of the allotment of public sector and bank branch audits.

“For public sector audits, it may take some time to recognise such networks. But we will take efforts,” Jambusaria said. It has also been specified in the guidelines that chartered accountants can share their fees with others.

In February this year at the council meeting some changes were suggested to the guidelines and they have now been carried out, he added. These guidelines have already been forwarded to the Corporate Affairs Ministry (MCA).

Meanwhile, the ICAI President also said that separate guidelines have to be framed for networking of domestic firms with foreign firms and a separate group has been set up for this purpose. “During this year itself we will come with guidelines for networking with foreign firms,” he said.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,