bank audit: Banks to report borrowers not cooperating in forensic audits

Borrowers who won’t cooperate in their forensic audits will now be reported to all banks. The move comes as lenders want to speed up the forensic audit while preventing such borrowers from taking any more loans from other banks.

According to an official, who did not wish to be identified, banks have agreed to update the status of such borrowers in the Central Repository of Information on Large Credits (CRILC) constituted by the sector regulator, Reserve


“Banks can take a decision based on this information and decide not to lend until the borrower gets a clean chit,” he said.

Indian Banks’ Association chief executive Sunil Mehta confirmed the development and said this will bring more discipline among the borrowers. “Today, based on various parameters, including early warning signals (EWS), banks do such audits to take proactive action,” he said.

The first official quoted above said that some borrowers deliberately delay the audit process withholding key information. “Taking advantage of this delay, they secure loans from other lenders, who were not aware about the borrower being under scrutiny,” he said.

Financial institutions including non-banking financial companies (NBFCs) need to report all exposures of ₹5 crore and more to CRILC, a move aimed at early recognition of financial distress.

Another banker aware of the matter said that while there was a proposal to put such borrowers under the category of ‘wilful defaulters’, it was not taken up for consideration as it would have required legal changes and could have been struck down by courts.

The gross non-performing assets (GNPA) ratio of all scheduled commercial banks dropped to the lowest in six years in FY22, helped by recoveries and technical write-offs.

In its annual report for FY22, RBI noted that frauds worth ₹60,414 crore were reported in 2021-22, down 56.28% from ₹1.38 lakh crore in 2020-21. The Reserve Bank of India data considers frauds of ₹1 lakh and above only.

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