ICAI released Manual on Concurrent Audit of Banks

The Institute of Chartered Accountants of India (ICAI) has released the Manual on Concurrent Audit of Banks , September 2023 Edition.

In India, Banking Sector plays an important role in the development of the economy. The Government has focused on expanding banking coverage in India through various schemes such as Pradhan Mantri Jan Dhan Yojana and Post Payment Banks, etc. With these schemes, combined with key banking sector reforms such as digital payments, neo-banking, the rise of Indian NBFCs, and fintech, have considerably improved the India’s financial ecosystem and helped to fuel the country’s credit cycle.

This changing landscape in banking sector has put more emphasis on risk management and control functions and made the role of concurrent Auditors very important.

The Manual on Concurrent Audit of Banks is being issued by the Board of Internal Audit and Management Accounting (BIAMA) of the Institute of Chartered Accountants of India (ICAI) with the objective to provide detailed guidance to the members on concurrent audit of banks. Note that the Board has come out with this revised and updated 2023 edition of “Manual on Concurrent Audit of Banks” for benefit of the members and stakeholders at large.

This Manual provides guidance to members regarding critical issues related to concurrent audit of banks, including redirecting the scope of concurrent audit to include risk-based audit approach to make it more meaningful and effective.

Understanding the Banking Business and Its Legal Framework:

Banking in India

Banking was carried on in ancient Babylon, Egypt and Greece. Temples are the places where they are served deposit of money in the initial stages. In the year 210 BC, at Rome an ordinance was issued to set aside a place of money changers.

The work “Bank” has come from Italian word “Banco”. Money changers of Italy did their business in the street on a bench and that bench in Italian word is called as “Banco”.

‘Banco di Rialto’ was first set up in Venice in the year 1587. ‘Banco di Rialto’ has accepted deposits from the depositors and allow them to use and write cheques to withdraw the money.

Later on in the year 1619, ‘Banco Del Giro’ took over ‘Banco di Rialto”. ‘Banco Del Giro’ was set up in the year 1609 at Amsterdam. In the year 1694, ‘Bank of England’ was set up. After setting up of ‘Bank of England’ lot of countries have started to set up Central Banks for their respective countries.

Banking Origin in India

The first ever bank in India was set up in the year 1786 under the name and style of “General Bank of India”.

Bank of Hindustan and Bengal Bank followed “General Bank of India”. In the year 1809, “Presidency Bank of Bengal” was established. It was followed by establishment of “Presidency Bank” in Mumbai (Bombay) in the year 1840 and “Presidency Bank” in Chennai (Madras) in 1843.

Till 1860, the existing banks have opened branches in various cities and towns like Agra, Mumbai, Chennai, Banaras, Simla and Delhi, etc. In the end of 1900, there were three classes of banks in India viz, the Presidency Banks (three in number), the Joint Sector Banks (nine in number) and Exchange Banks or Foreign Banks (Eight in number).

Prominent Joint Sector Banks were the Allahabad Bank, the Alliance Bank of Simla, the Oudh Bank and the Punjab National Bank.

In the year 1934, “The Reserve bank of India Act” was passed. After getting Independence for India, RBI was taken over by Government of India by passing the “Transfer of Public Ownership Act” and RBI holders of 1934 were paid compensation.

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