Amidst financial frauds, CAG considers auditing RBI

The Dollar Business Bureau

Comptroller and Auditor General of India (CAG) Shashi Kant Sharma said on Friday that there is a need to consider the audit of financial regulators such as the Reserve Bank of India (RBI).

“In India, CAG does not audit the RBI, whose auditors are appointed by Central Government under the provisions of the RBI Act; CAG conducts audit of other financial sector regulators like SEBI, IRDA and PFRDA but does not conduct performance audits”, said Sharma at an ASSOCHAM event in New Delhi. 

“In the wake of growing cases of financial frauds, this is a thought to consider as to whether, in coming times, our audit should take into account the vulnerabilities and risks India’s financial sector is facing and the capability and effectiveness of regulatory bodies to mitigate such type of risks”, he said.

Sharma said that recently frauds against banks have attracted considerable attention, primarily against the public sector banks which are struggling with huge amounts of NPAs (non-productive assets).

“It is believed that a major part of NPAs could be the amount falsely acquired as advances from the banks and a huge portion of these amounts may have been transferred to other countries, which is difficult to be recovered”, he said.

The CAG said that there has to be a broad strategy to tackle them so as to safeguard the integrity of both the financial system and the vast public interest.

In India, where there is financial illiteracy, the chances of fraud are much higher. Therefore, encouraging financial literacy is a long-term approach for mitigating these risks, Sharma said.

The regulators, at the same time, have to collectively work to not only improving their capability to deal with frauds related to finance, but also to eliminate any regulatory arbitrage, he added.