Banks improve internal auditing

The commercial banks have improved their internal auditing.

In comparison to fiscal year 2007-08's huge difference between non-audited reports as opposed to the audited ones, the fiscal year 2008-09's deviation has come down heavily.

There was a difference of up to 100 per cent between the audited and unaudited reports in the fiscal year 2007-08 but it has come down to 17.32 per cent in the fiscal year 2008-09 thanks to the Public Accounts Committee (PAC) that has taken the issue seriously after The Himalayan Times published the news last year.

The PAC has directed the central bank, finance ministry and the banks to improve the internal auditing.

"The central bank has been keeping hawk's eye since then," said former president of Nepal Bankers Association (NBA) and Kumari Bank's CEO Radhesh Pant.

Financial institutions dominate the domestic secondary market because they are considered more transparent than any other sector. Investors pick their choose in the secondary market by checking the non-audited reports as they are published ahead of the annual general meetings. The audited reports are usually published after almost six months.

"As per the non-audited report of 2008-09, Sunrise Bank has posted a profit of Rs 102 million. But, the audited document reveals that it has raked only Rs 84.77 million -- a drop of 17.32 per cent in profit during the year," stated a report compiled by Securities Research Centre and Services (SRCS). Sunrise Bank had a whopping 100.47 per cent difference between the audited and unaudited reports, a year ago.

"At times, a bank may think that loan is either good or entails a medium risk. But, central bank might think otherwise and make the bank provision more leading to the difference in the profit," Pant added.

Of the 27 commercial banks, the SRCS has compared the non-audited and audited reports of 23 commercial banks that are listed in the secondary market.

According to the central bank's directives, banks and financial institutions -- commercial banks, development banks, finance companies and others -- are obliged to publish their non-audited balance sheet immediately after the end of the fiscal year to ensure the transparency in the financial sector.

Reputed banks like Standard Chartered Bank Nepal, Nepal Investment Bank Ltd, Everest Bank and Nabil Bank have a nominal difference in their non-audited and audited reports. In fact, records reveal that their net profit has 'marginally' increased or decreased in the audited report, which is nominal. They are considered safe and sound banks.

INSET

Variation in audited and un-audited reports of banks (2007-08)

Nabil - (0.00001 per cent)

NIBL - (1.52 per cent)

SCNBL - (0.03 per cent)

HBL - (1.40 per cent)

NSBL - (5.37 per cent)

NBB - (12.70 per cent)

EBL - (2.35 per cent)

BoK - (0.04 per cent)

NIC - (0.24 per cent)

MBL - (32.62 per cent)

Laxmi Bank - (1.52 per cent)

KBL - (1.15 per cent)

Lumbini Bank - (15.39 per cent)

NCC - (1.17 per cent)

SBL - (1.07 per cent)

NMB - (2.63 per cent)

BoAN - (0.02 per cent)

Citizens' ( 0.0009 per cent)

DCBL - (0.00065 per cent)

Global - (13.72 per cent)

Prime - (0.65 per cent)

Sunrise - (17.32 per cent)