ICAI issued Guidance Note on Audit of Banks – 2024 Edition

The Institute of Chartered Accountants of India (ICAI) has released Guidance Note on Audit of Banks 2024 Edition

India’s Banking Sector plays a vital role in boosting the economy as it keeps evolving. It has moved beyond providing basic banking services to include insurance, mutual funds, stock trading and risk management services. With technological advancements, services like online banking, mobile apps, and digital payments through UPI have become common.

Payment banks have simplified everyday transactions, such as internet buying. The entry of private/foreign banks and a broader geographical reach have resulted in substantial changes in the sector. These improvements have significant ramifications for bank operations, imposing more expectations on the auditing profession than ever before.

As a result, bank statutory auditors must be well-prepared in terms of knowledge and stay up to date on the newest changes in the banking sector.

The Auditing and Assurance Standards Board (AASB) of the Institute of Chartered Accountants of India (ICAI) issues the Guidance Note on Audit of Banks every year under the authority of the Council of ICAI.

In pursuit of the stated objective, the Auditing and Assurance Standards Board (AASB) of ICAI actively contributes by supporting the members in upholding the quality of bank audits. AASB releases the publication “Guidance Note on Audit of Banks”, annually offering comprehensive guidance to members engaged in audits of banks and their branches. This Guidance Note undergoes regular updates to incorporate the latest developments, the impact of amendments, and changes in the banking landscape. These updates encompass factors such as Master Directions/Circulars from RBI, relevant advisories, ICAI pronouncements affecting bank audits, and changes in applicable laws and regulations.

Personal Banking Department

The Personal Banking Department’s area of operation/function is typically limited to resource mobilization, i.e., obtaining funds (for the bank) through CASA deposits, term deposits, client service, and operations. This Department is in charge of overseeing the deposit section, which is the bank’s primary source of funding.

In today’s new age banking, there are various innovative products which are launched by every bank which has its own unique characteristics and customisation based on the need for funds and customer portfolio of the bank.

For example, the bank may offer deposit products as well as products/services associated with customer categorisation based on preset criteria, providing privileged banking services to a specific segment of consumers. In the era of interest rate liberalisation, every bank is required to be proactive in its interest rate decision-making. Furthermore, banks have specific policies regarding bulk deposits, and they may give need-based preferential rates on such deposits.

Personal banking is responsible for meeting the demands of retail consumers. Each bank will set its own threshold for determining who is a retail customer depending on the products and services it offers. Banks may assign a relationship manager to each customer based on his or her deposit placement (or other characteristics) with the bank, who serves as a single point of contact for all of their banking needs, including loans, cards, deposits, insurance, and investments. This is also known as the Wealth Management Division at some banks.

The Operations Department of a bank oversees a variety of functions. At a broad level, the Banking Regulation Act of 1949 defines the functions that a bank can do. Within this overarching structure, banks carry out a range of operations, which can be centralized or decentralized and vary from bank to bank.

Customer service plays an important role in today’s competitive environment, and the Operations Department must ensure that the team does it properly. Any operational error poses a risk to the bank in the form of customer loss or reputational risk.

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