Administrator, A to Z in Banking

 

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WHAT IS NEW IN BANKING

The Reserve Bank of India (RBI) has imposed, by an order dated January 13, 2021, a monetary penalty of ₹1 lakh on The Mandvi Mercantile Co-operative Bank Ltd., Mandvi, Dist. Kutch (Gujarat) (the bank)  and a monetary penalty of ₹0.50 lakh on Alavi Co-operative Bank Ltd., Vadodara (Gujarat) (the bank) for contravention of RBI directions on ‘Loans and Advances to Directors, Relatives and Firms/Concerns in which they are Interested’ and ‘Placement of Deposits with Other Banks by Primary (Urban) Co-operative Banks (UCBs)’. 

The Reserve Bank of India (RBI) has, by an order dated January 12, 2021, imposed a monetary penalty of ₹2 crore (Rupees Two Crore only) on Deutsche Bank AG (the bank) for non-compliance with certain provisions of directions issued by RBI contained in the “Reserve Bank of India (Interest Rate on Deposits) Directions, 2016”. 

Reserve Bank of India (RBI) has, vide order dated January 08, 2021 cancelled the licence of Vasantdada Nagari Sahakari Bank Ltd., Osmanabad, Maharashtra to carry on banking business, with effect from the close of business on January 11, 2021. 

The Reserve Bank of India, in exercise of powers conferred on it under Section 45-IA (6) of the Reserve Bank of India Act, 1934, has cancelled the Certificate of Registration of the following companies. 1. Abhinav Hire Purchase Limited 2. Jupiter Management Services Private Limited 3. N. E. Leasing and Finance Private Limited 

Risk based Internal Audit (RBIA) Framework – Strengthening Governance arrangements (RBI notification dated 07.01.2021)

To bring uniformity in approach followed by the banks, as also to align the expectations on Internal Audit Function with the best practices, banks are advised as under:

1. Authority, Stature and Independence - The internal audit function must have sufficient authority, stature, independence and resources within the bank, thereby enabling internal auditors to carry out their assignments with objectivity. Accordingly, the Head of Internal Audit (HIA) shall be a senior executive of the bank who shall have the ability to exercise independent judgement. The HIA as well as the internal audit function shall have the authority to communicate with any staff member and have access to all records or files that are necessary to carry out the entrusted responsibilities. 

2. Competence - Requisite professional competence, knowledge and experience of each internal auditor is essential for the effectiveness of the bank's internal audit function. The desired areas of knowledge and experience may include banking operations, accounting, information technology, data analytics and forensic investigation, among others. Banks should ensure that internal audit function has the requisite skills to audit all areas of the bank.

3. Staff Rotation - Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the Board should prescribe a minimum period of service for staff in the Internal Audit function. The Board may also examine the feasibility of prescribing at least one stint of service in the internal audit function for those staff possessing specialized knowledge useful for the audit function, but who are posted in other departments, so as to have adequate skills for the staff in the Internal Audit function.

4. Tenor for appointment of Head of Internal Audit - Except for the entities where the internal audit function is a specialised function and managed by career internal auditors, the HIA shall be appointed for a reasonably long period, preferably for a minimum of three years. 

5. Reporting Line - The HIA shall directly report to either the Audit Committee of the Board (ACB) / MD & CEO or Whole Time Director (WTD). Should the Board of Directors decide to allow the MD & CEO or a WTD to be the ‘reporting authority’ of the HIA, then the ‘reviewing authority’ shall be with the ACB and the ‘accepting authority’ shall be with the Board in matters of performance appraisal of the HIA. Further, in such cases, the ACB shall meet the HIA at least once in a quarter, without the presence of the senior management, including the MD & CEO/WTD. The HIA shall not have any reporting relationship with the business verticals of the bank and shall not be given any business targets. In foreign banks operating in India as branches, the HIA shall report to the internal audit function in the controlling office / head office.

6. Remuneration - The independence and objectivity of the internal audit function could be undermined if the remuneration of internal audit staff is linked to the financial performance of the business lines for which they exercise audit responsibilities. Thus, the remuneration policies should be structured in a way that it avoids creating conflict of interest and compromising audit’s independence and objectivity.

 Card Transactions -The Reserve Bank decided to increase the contactless card per transactions limit from ₹2,000/- to ₹5,000/- on December 04, 2020.