Banks asked to audit high value loan exposure to check frauds

Banks are presently required to put in place a system of concurrent auditors to look into and report genuineness of the documents especially of large value loans

In order to contain frauds, Reserve Bank today directed banks to periodically audit and re-verify documents of all credit exposures of Rs 5 crore and above till the loan is fully repaid.

"On a review, it has been decided that the banks should also subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and above to periodic legal audit and re-verification of title deeds with relevant authorities as part of regular audit exercise till the loan stands fully repaid," RBI said in a notification.


Banks are presently required to put in place a system of concurrent auditors to look into and report genuineness of the documents especially of large value loans.

It said banks, on quarterly intervals, may give information of such audit, how many accounts covered, list of deficiencies observed by auditors, steps taken to rectify the deficiencies.

Besides, they should also report about number of accounts in which rectification could take place, course of action to safeguard the interest of bank in such cases as well as action taken on issues pending from earlier quarters.

RBI in a study of large value frauds, particularly when the branches were also under concurrent audit, has found that large number of frauds were perpetrated on account of submission of forged documents by the borrowers. These had been certified by professionals such as valuers or advocates or chartered accountants.

Source:http://www.business-standard.com/article/finance/banks-asked-to-audit-high-value-loan-exposure-to-check-frauds-113060700869_1.html