The Reserve Bank of India (RBI) has asked public sector banks (PSBs) to appoint international audit firms to review their overseas branch operations.In a recent missive dispatched to all PSBs, RBI has categorically said that the review must be done through audit firms operating in the countries where the branches are located. The review should be done on rotation basis — one-third of the branches at a time — the central bank said.The RBI diktat has come in the light of recent irregularities in some of the overseas branches of the PSBs. This norm looks at improving compliance and transparency in the banking system. With the new RBI diktat, it has now become mandatory for PSBs to appoint external audit firms for the review. Thus far, a few banks have been taking the help of external agencies to carry out their concurrent audit for their overseas branches, as per the guidelines in some countries. Banks also carry out internal audit for their overseas branches once in 18 months.The review should be done on half-yearly basis, RBI said. Bankers also feel that for “listed banks”, the review is to be done on quarterly basis, even though the RBI notification is not explicit on this. Pertinent to note here is that the RBI asked all listed PSBs to carry out a quarterly review of their domestic operations, effective June 30. This is in sync with the Securities and Exchange Board of India’s (Sebi) guideline on quarterly results for listed companies.The Reserve Bank had earlier asked the banks to adhere to the new norm from June 30, 2003. The latest move, as articulated in the circular dated June 6, 2003, had reached the public sector banks in the second week of June. Citing the short time for adhering to the norm, banks have requested the central bank to extend the time period to September 30, a senior banker said. “Banks need to issue tenders and quotations before the appointment,” the banker said.
