In a bid to contain frauds in banks, the Reserve Bank today asked lenders to rotate staff and put in place check and balances before giving high value loans. Banks may put in place a system wherein the concurrent audit can be undertaken in order to contain the frauds, RBI said in a notification.Banks should verify genuineness documents of title submitted as security for loans, especially for large value loans, it said.
In case of loan against the security of land, it said, the banks may also seek reports from the local revenue authorities regarding the title deeds before sanction of loan.
Besides, the bank should independently verify the authenticity of certification by directly communicating with the concerned authority wherever a Chartered Accountant certificate, property valuation certificate, legal certificate, guarantee/line of credit or any other third party certification is submitted by the borrower. In cases where it is established that the certification given by a chartered accountant, lawyer, registered property valuer or such third party is wrong, IBA should put in place a process to issue a ‘Caution List’ regarding the certifier to all banks, it said.
Aspects such as internal discipline, staff rotation, checks and balances, etc should be ensured by the bank, it said.
RBI noted that it was observed that large number of frauds were perpetrated on account of submission of forged documents by the borrowers which had been certified by professionals’ i.e. valuers or advocates or chartered accountants.
The reason for failure on the part of concurrent auditors may be attributed to the innovative and complex nature of financial products or transactions, it said.
Further, it said, banks have assigned audit responsibility to their own staff without ensuring that they are suitably trained to undertake the audit responsibility.
PTI
