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Banks told to rationalise internal accounts to prevent fraud

RBI Deputy Governor Swaminathan J, has emphasised the urgent need for better control and management of internal accounts within banks. Speaking at the Conference of Statutory Auditors and Chief Financial Officers of Commercial Banks and All India Financial Institutions, Swaminathan highlighted that some banks have a significant number of internal accounts without valid reasons. These accounts, he noted, pose high risks due to their potential misuse for fraudulent transactions and the ever-greening of loan accounts.

“One area that has come into sharper focus in the last couple of years is the control and management of internal accounts. We found certain banks having lakhs of such accounts with apparently no valid reason. Some of these accounts were also used as a conduit for certain fraudulent transactions and the ever-greening of loan accounts. Internal accounts are high risk in nature on account of their potential for misuse,” Swaminathan stated.

To mitigate these risks, Swaminathan urged CFOs to rationalise these accounts, reducing them to an essential minimum. He stressed the importance of exercising greater control through periodic reconciliation and proper reporting to the Audit Committee of the Board (ACB).

Swaminathan also called for increased investment in technology and data analytics to provide more accurate and real-time financial insights. This, he said, would aid strategic decision-making and enhance the ability to swiftly respond to issues identified during audits or supervisory reviews.

PR Newswire

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