The proposal — being discussed at the Indian Banks’ Association (IBA) — will involve appointing established accounting firms as external agencies. The IBA has already identified 75 such firms, and the list has been circulated among banks.
“This is a new mechanism. Established accounting firms are being identified and they will be in charge of monitoring loans continuously. They will provide reports to banks at periodic intervals,” Ashok Kumar Pradhan, managing director and chief executive officer of United Bank of India, told Business Standard. “As of now, the statements which we receive don’t reveal much, especially the money trail. These agencies will vet the books of the company, and conduct a kind of forensic audit on a real-time basis,” Pradhan added.
Further, a Grant Thornton report revealed manipulation by the raters and senior management of IL&FS to hide the financial troubles facing the group.
“The job of monitoring should have been done by rating agencies because their advisory is important not only for banks but also other stakeholders. Clearly, this is not working out as it should have been. That is the reason that the IBA is thinking of appointing external agencies. This mechanism can be implemented quickly as the fraud at Bhushan Power has put a tag of urgency on it,” said Mrutyunjay Mahapatra, MD & CEO, Syndicate Bank.