RBI to Hold Meeting with Bank CFOs and Auditors Over Regulatory Compliance, Says Report

RBI is reportedly planning to meet with the chief financial officers (CFOs) and external auditors of commercial banks today to give out its strict stance on compliance and regulatory lapses.

As per a report by the Economic Times, two deputy governors of the central bank, M Rajeshwar Rao and J Swaminathan, will be addressing this meeting with CFOs and auditors.

"There is an element of trust deficit. This has led to a constant rift between the external auditor and the bank, and between the regulator and bank on the interpretation of the regulations, particularly regarding income recognition and provisioning of the loans," according to a source cited in the report.

The RBI is likely to point out the duties of CFOs and auditors to ensure that the balance sheets accurately portray the financial position of the banks.

In a recent conference, Governor Shaktikanta Das highlighted that financial entities must refrain from taking "unacceptable risks" in search of profits.

"Pursuit of business growth is important, but it should never come at the expense of taking on unacceptable risks," he stated.

This development comes as many financial entities have been under RBI's radar lately.

First, it was Paytm Payments Bank that faced restrictions by the central bank from onboarding new customers or even mobilizing new deposits. Later, during the month of March, IIFL Finance was barred from offering gold loans. In the same month, JM Financial was restricted from conducting any business in shares and bond funding.

What came as a major shock was RBI's call on Kotak Bank. The central bank prohibited the private lender from onboarding new customers via digital banking and issuing new credit cards. This action came after RBI found major compliance and regulatory lapses in IT inventory management, user access management, vendor risk management, data security, data leak prevention strategy and etc.