What changed
This Master Circular updates and consolidates all previous instructions on inspection and audit systems for Primary Urban Co-operative Banks up to June 30, 2007. It reiterates the Ghosh Committee recommendations on internal audit machinery, periodicity, coverage, and supplementary inspections. It also includes guidance on concurrent audit, EDP audit, and the role of the Audit Committee of the Board.
What it means for you
Urban co-operative banks must strengthen their internal inspection and audit systems to detect fraud and irregularities early. The circular highlights that poor audit quality and casual follow-up have been major issues, and banks need to deploy competent staff with sufficient experience. Compliance with these guidelines is critical for risk management and regulatory adherence.
What you must do
- Review and update your bank's internal audit policies to align with the Ghosh Committee recommendations.
- Ensure the head of the inspection department is a senior official reporting directly to the Chairman.
- Implement or strengthen concurrent audit systems and EDP audit for electronic data processing.
- Establish an Audit Committee of the Board (Apex Audit Committee) to oversee audit functions.
- Conduct supplementary short inspections and revenue/credit portfolio audits as prescribed.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of Urban Co-op Banks, Internal Audit and Inspection Departments, Board of Directors and Audit Committees
Does this circular require banks to have concurrent audit?
The circular includes a section on Concurrent Audit Systems, providing guidance that banks should consider implementing concurrent audit as part of their internal control framework.