What changed
This master circular updates the previous July 2012 circular, consolidating all instructions on inspection and audit systems up to June 30, 2013. It reiterates the Ghosh Committee recommendations, including mandatory annual surprise audits, a senior-led internal audit department, and an apex audit committee.
What it means for you
Urban co-operative banks must strengthen their internal audit machinery to detect fraud early, with senior officers heading inspection departments. The circular pushes for surprise audits at least once a year and requires audit committees at the board level, raising the bar for governance and risk management.
What you must do
- Ensure internal audit of all branches is conducted at least once every 12 months as a surprise exercise.
- Appoint a sufficiently senior officer to head the inspection department, reporting directly to the Chairman.
- Make three years of continuous experience in the inspection department a prerequisite for promotion to senior levels.
- Set up an Apex Audit Committee at the board level to oversee audit functions.
- Implement concurrent audit systems and EDP audits as per the circular's annexures.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of Urban Co-operative Banks, Internal audit and inspection departments of Urban Co-operative Banks
What is the minimum periodicity for internal audit of branches?
Internal audit must be conducted at least once every 12 months, and it should be a surprise audit to ensure effectiveness.
Who should head the inspection department at the head office?
The head of the inspection department should be a sufficiently senior person with proven integrity, reporting directly to the Chairman.
What experience is required for promotion to senior levels in the inspection department?
A minimum of three years of continuous experience in the inspection department is required as a prerequisite for promotion to senior levels.