What changed
This master circular updates and consolidates all previous instructions on inspection and audit systems for urban co-operative banks up to June 30, 2009. It reiterates the Ghosh Committee recommendations on internal audit machinery, periodicity, and coverage, and adds emphasis on concurrent audit, EDP audit, and an Audit Committee of the Board.
What it means for you
Banks must strengthen their internal audit departments with senior, competent staff and ensure audits are conducted at least annually. The circular highlights the need for better fraud detection through rigorous inspection, including credit portfolio and investment audits. Non-compliance could lead to undetected irregularities and regulatory action.
What you must do
- Ensure internal audit department is headed by a senior official reporting directly to the Chairman.
- Conduct internal audit of all branches at least once a year, with supplementary short inspections as needed.
- Implement concurrent audit systems for larger branches or those with high transaction volumes.
- Establish an Audit Committee of the Board to oversee audit quality and follow-up.
- Make three years of continuous experience in inspection a prerequisite for promotion to Scale IV and above.
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
What is the minimum periodicity for internal audit of branches?
The internal audit of branches should be conducted at least once a year, as per the Ghosh Committee recommendations adopted in this circular.
Who should head the internal inspection department?
The head of the inspection department at the Head Office should be a sufficiently senior person and should report directly to the Chairman.
What experience is required for promotion to Scale IV in inspection?
A minimum of three years of continuous experience in the Inspection Department is required as a prerequisite for promotion to Scale IV and above.