The Institute of Chartered Accountants of
India (ICAI) has called for the Reserve Bank of India (RBI) to
appoint statutory auditors in state-run banks. The ICAI have sought
government intervention.

Up until 2005 RBI was directly involved in the
appointment of auditors, however, currently the appointment of
auditors is overseen by boards of public sector banks (PSBs) in
consultation with RBI.

 “If appointments are left to bank
managements, there may be a tendency to take short-cuts in these
regards with possible ultimate deleterious effects on the financial
health of the PSBs. This process compromises the independence of
auditors and gives an incentive for promotion of vested interest in
the appointment of auditors,” ICAI president Ramaswamy said.

Ramaswamy said auditors often do not see
eye-to-eye with bank managements. He said there must always be
somebody who will not look at the business from the point of view
of the management, and who will look at it from the point of view
of good governance.

Senior bankers have said the current practice
should be retained as previous regulator-appointing auditors for
PSBs were ineffective.

“That [RBI appointing auditors] was done
earlier and the power was later given back to banks. It obviously
didn’t have the desired effect,” Punjab and Sind Bank executive
director Anand said.   

“The real issue is not independence, but the
quality of auditing, which has seen deterioration in many cases in
the recent past,” said an anonymous partner at a global consultancy