Accounting regulator ICAI today cautioned the Reserve Bank against over-reliance on a centralised audit system for banks that have completed computerisation of their operations in view of the Rs 400 crore fraud unearthed at Citibank”s Gurgaon branch. “The Citibank fraud has brought to forefront that audits need to be more vigorously followed at the branch level, rather than relying upon the audit of the information generated at the central/regional or zonal level alone,” Institute of Chartered Accountants of India (ICAI) President Amarjit Chopra told PTI.

The RBI, he said, is contemplating to do away with the branch audit system for banks that have opted for core banking solutions (CBS).

He said that deliberations are being held within the banking division of the Finance Ministry and in the RBI to replace branch audits with a centralised auditing system at such banks.

”Core Banking” is a term used to describe the services provided by a group of networked bank branches. Bank customers can access their funds and other simple transactions from any of the member branch offices in real-time. Under the CBS architecture, there are remote server (called data centres) and client (called service outlet) branches.

Chopra”s statement comes in the aftermath of the fraud at the Gurgaon branch of multinational lender Citibank, wherein the funds of depositors were diverted to the stock market.

Several high net-worth individuals (HNIs), including the promoters of Hero Group, were lured by Citibank”s Relationship Manager Shivraj Puri — the main accused in the scam — into investing funds on the promise of high returns.

Besides the Gurgaon Police, market regulator Sebi and the RBI are looking into the matter.

The police investigation followed a complaint that the bank was offering abnormal returns on an investment scheme. It was found that Puri had collected the money on the basis of a fake SEBI circular, which claimed the scheme was genuine.

Market regulator Securities and Exchange Board of India (SEBI) later wrote to the bank saying no such scheme was approved by it.

The RBI has also said it is considering putting in place a system that will allow it to directly monitor all transactions at various banks.

Once in place, the new system will enable complete automation of the process for submission of transaction returns filed by all banks to the RBI, doing away with the need for manual intervention.

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