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CFOs of commercial banks and All India Financial Institutions should rationalise “internal accounts” completely, bring them down to the essential minimum and exercise greater control through periodical reconciliation and a proper reporting to Audit Committee of the Board (ACB), according to Swaminathan J, Deputy Governor, Reserve Bank of India.
“One area that has come into sharper focus in the last couple of years is the control and management of internal accounts. We found certain banks having lakhs of such accounts with apparently no valid reason. Some of these accounts were also used as a conduit for certain fraudulent transactions and ever-greening of loan accounts. Internal accounts are high risk in nature on account of its potential for misuse,” Swaminathan said.
Maintain integrity
In his address at the Conference of Statutory Auditors and Chief Financial Officers of Commercial Banks and All India Financial Institutions, the Deputy Governor said the CFOs must protect the integrity of the financial reporting by guarding against any misadventure or intelligent interpretation of regulations or accounting standards.
“I would urge the CFOs to have an eye for detail and an honest and transparent communication with the MDs & CEOs and the rest of the top management. You should also keep alive the channel of escalation to the Chair of the Audit Committee of the Board (ACB), if a higher level of guidance is needed in any matter,” Swaminathan said.
He emphasised that CFOs should maintain open and honest communication channels with auditors and bank supervisors.
“It is imperative to eschew the notion of hiding, withholding or providing incomplete information to these teams. Transparency is key; by sharing comprehensive and accurate data, CFOs not only facilitate a smoother audit and supervision process but also reinforce the bank’s commitment to integrity and compliance.
“This collaboration builds trust, ensures regulatory adherence and ultimately contributes to the financial stability and reputation of the institution,” Swaminathan said.
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