-A.N.

Jayaram, Manager

ORGANISATION
What is an ORGANISATION Banking what do you mean by itBasically acceptance of deposits and lending. Banking business- take money, give money and make money Structure Unitary/Two/Three tier structures

Policy formulation and implementation

Policies are formulated at head office level Policies : credit, investment, customer acceptance, recovery, inspection, technology, risk management etc. Implementation takes place at branch level Importance of sensitisation among people who implement banks policies.

SYSTEMS

Systems are tools for transforming objectives/ policies into performance They lay down framework for day-to-day operations

SYSTEMS-Requisites
Systems should have clearly defined objectives It should have necessary controls and safety features, be monitorable & subject to periodic review Should be cost effective and involve optimum use of technology & manpower

SYSTEMS
lGoal setting Long term,Short term lCorporate Planning & Budgeting lMonitoring & Review lOrganizational planning-unitary,two/three tier structure lWork planning-Operations Manual, Advances Manual,Documentation rules, job cards,booklets

Are these updated regularly?

SYSTEMS- in Banks
Delegation of powers & reporting systems. Assigning business targets. Sanctioning /disbursement/documentation Review/monitoring/supervision Physical verification of securities charged to the bank been carried out as per prescribed procedure and reported in control returns.

Internal Controls- Five aspects

Control Environment includes integrity, ethical values & competence of people Risk Assessment Identification & Analysis Control Activities Policies & Procedures Information & Communication -timeliness Monitoring to assess the quality of systems performance over time.

Why internal controls

Effectiveness and efficiency of operations Reliability of financial reporting Adherence to established procedures Compliance with applicable laws and regulations

Types of Internal Control

Control through returns - Off-site Control through audits - On-site Control through visits by executives - On-site Controllers RO/ZO/DO/HO.

MIS & Control returns

Returns Management Information (MIS) and Financial Information Integrity & reliability of data including returns under off site surveillance system to be ensured.

On-site Controls
Various types of audit
lStatutory Audit, LFAR lRevenue/Income audit lInternal audit lConcurrent audit lEDP/computer Audit lRisk based Internal Audit(RBIA)

House keeping
Balancing of books of accounts and reconciliation of balances in control records/GL and Subsidiary records. Inter branch reconciliation. System in place to forward on a daily basis, statement of debit/credit transactions in relation to other branches Old/large outstanding transactions /entries at debit which remain unexplained

Remember..
Bad housekeeping provides ample scope for frauds. There are always unscrupulous elements- either customers or staff members waiting to take advantage of deficient systems. Some instances unauthorised debits in inoperative/ even regular accounts, loans in fictitious names, pledging of spurious jewels, forged documents. CLASSIC EXAMPLE OF DEFICIENT INTERNAL CONTROLS IPO SCAM

What is to be ensured by internal inspectors

The inspecting officers, apart from business parameters, should critically examine: Adequacy of coverage of concurrent/other audits, adherence to prescribed periodicity. Position of compliance, timeliness, quality Comparison of current internal/risk rating with previous ratingsto assess improvement/ deterioration

What is to be ensured
Existence of business continuity plan, disaster recovery plan, conducting of prescribed exercises. Housekeeping- system of rotation of staff, long outstanding entries requiring reversal. Assessment of the level of customer service provided in the areas of normal banking services, currency management, forex and government business An analysis of frauds detected and causative factors

What is to be ensured
Level of adherence to KYC/AML guidelines. Compliance with clean note policy of RBI. Display of particulars regarding Banking Ombudsman Scheme in the premises. Reliability and integrity of data furnished in MIS statements/control returns. Adherence to periodicity of branch visit by controllers, and efficacy of visits.

Sum Up..
What is an OrganisationWhat is Banking business Importance of Systems Need for Internal Controls Types of internal control in Banks How the internal controls are to be ensured