RBI panel to reconcile NPAs to prevent frauds

In order to stem the wide fluctuation between bad loans and provisions declared by banks and those assessed by the RBI, the banking regulator has decided to constitute an Expert Committee to look into the reasons for this divergence and the steps needed to prevent frauds.

The 5 member Committee, headed by YH Malegam, a former member of the Central Board of Directors of RBI, will also examine the role and effectiveness of various types of audits conducted in banks.

The other members of the Malegam Committee will be Bharat Doshi, Member, Central Board of Directors, RBI; S Raman, former Chairman and Managing Director, Canara Bank and former Whole-Time Member, SEBI; and Nandkumar Saravade, Chief Executive Officer, Reserve Bank Information Technology Pvt Ltd (ReBIT). AK Misra, Executive Director, RBI, will be the Member-Secretary.

RBI Governor Urjit Patel had said that during the Annual Financial Inspections of banks, it had been observed that there was a divergence between the non-performing assets and provisions declared by the banks and those assessed during the AFI process. “This has adverse implications on timely recognition of actual risk, trustworthiness and transparency of books of accounts… To address this, disclosure requirements have been put in place: banks have to disclose… the details of such divergences where these exceed specified thresholds,” the Governor said.