Ref. No. NB. HO. DoS.

CFMC/677 I /2O77-tB 24May 2Ot7

(Circular No. 131 / DoS- 08
The Chairman
All Regional Rural Banks

Dear Sir/Madam

concurrent Audit system in Regiona! Rura! Banks - Revision in Guidelines

Please refer to our circular No.NB.DoS.HO.POL/4915fi-U2OIL-L2 dated L2 March 2072

setting out the scope and coverage of concurrent audit system in Regional Rural Banks.

2. Of late there have been changes in organizational structure, business models, use of
technology (implementation of Core Banking Solution) in RRBs. A need was felt to have a relook at
the concurrent audit system in the banking sector. The Board of Supervision (for StCBs, DCCBs and
RRBs)in its 65th Meeting held on 16 March 2017 discussed the issue of concurrent audit in RRBs and
directed that RRBs may be permitted to engage retired officers for Concurrent Audit in RRBs, with
sufficient checks and controls on issues of accountability. Accordingly, the Board of the RRBs may
decide upon engaging services of retired bank officers for concurrent audit in RRBs.

3. The scope of concurrent audit may be determined and approved by ACB and certain
minimum items of coverage are given in Annexure - l. ln addition to the above, the items where
NABARD / RBI has specifically advised the banks to be covered under concurrent audit, may also be
part of the checklist of the concurrent auditor.

4. The above instructions will come into force with immediate effect.

5. All other instructions contained in our circular No.NB.DoS.HO.POL/49L5/J-L/201,1-i-2 dated

12 March 20!2 remains unchanged.

6. The bank should, once in a year, review the effectiveness of the system and take necessary
measures to correct the lacunae in the implementation of the Programme.

Please acknowledge receipt of the circular to our concerned Regional Office.

(K Venkateswara Rao)
Chief General Manager
TI+q Tfr 3il-{zrrfrurfffirs if+,
Encl: As above
Nationa| Bank for Agriculture and Rural Development
Y{tqnur Errrrr
odre r' *-z+, '# Edr, qinsdt Efl"ilrs, siEI tT4, ,jTg - 4oo 051 . t:fi: +9r zz z65g r8g4 . Sq: +9r zz z653oro3 . f *a: dos@nabard.org
Department of Supervision
PIot No. C-24,'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 4oo o51 . Tel.: +9r 22 2658 1834 . Fax: +gL 22 2653 oro3 . E-mail: dos@nabard.org
 Itrinimrrm Arrelit Drrrrrrart.'rt..e frrr concurrent Audit Svst m in Rgqional Rural Banks
Sr. Items
No.
A t^aoh francaafiane -Vcrifir
and
surprise physical verification of cash at branch and ATM along with safekeeping
(i)
( ii) Oaitv c.asfr transactions, particularly any abnormal receipts & payments'
(!r) o,,.^.i-o .,arifinafinn nf naeh hrr an offieer othef than tng lOlnt CUSIOOIan
Proper accounting @ce cover for inward and outward cash
(iv)
remittances.
(v) Accountinq of currency chest transactions and delays/omlsslon ln reponlng Io Krll'
(vi) Reportinq of Counterfeit Currency.
(vii)
(viii) That all cash transaction of ps. SO,0OO and above invariably indicate Pan No./Form 60
B htaarinrr franeaetions -Verifv
Reconciliation with bank's account at Clearing House and review of old outstanding
(i)
entries for reconciliation.
ii) Drawinos allowed aqainst uncleared instruments - sanctlon by tne
conlrolllng aurnorrty'
c p*i++o^^aelRills for Collection -Vefifv
RemittanCe Of fUndS by Way Of DDS/ I I S/M I S/ I U/Ntrl- l/K I \'D atry utrrtrr
rrrL,'LlE
(i)
exceeding the Prescribed limit.
oT Ine oanK
oocurnents of title (lorry receipts, railway receipts, etc.) obtained ln lavour
(ii)

(iii)
orescribed oeriod.
D Flanacile -Varifrr
f fresh accounts and monitoring o1

(i) t-^naaaliane in cr rah annnttnfs

ur I'Er
Large term depOsits reCeived and repald lnqlgolng CnecKlng oI rePaylrrerrr'
(i i) .r^^^-;+ in aach harrnnr{ narmissihle limit
ACCOUnIS Opened and ClOSed Within a Shgrt Span OI llme
l'e'' aggoulrr'5 wrr'rr r'l
(iii)
mortalitv.
(iv) nctivation and operations in inoperative ac
(v) /^l' ra Aafar{ francantinnq
ag.,rr rDr' rL'or' I suervre
Settlement Of ClaimS Of deceased CUStOmefS ano paymenl oT I lJr\s
of dormant accounts and accounts
(vi) and obtention of indemnities, etc. To check revival
with minimum activities.
(vii) Examination of multiple credits to single accounts'
E Treasu rv oPerations'VerifY
(i)
( ii)
(iii)
(iv)
E) rtifferent currencies vis-d-vis prescribed limit fo!!!e sarne.
(vi)
ReCOnCiliatiOn Of NOStfO and VOSITO aCCOUntS-OalanCeS ln
l\osllo auuuurrtD
(vii) r^.aian
^,,rran^iae ara rruithin the limits orescribed bv the bank.
(viii)

(ix)
within a span of couple of days or a few oays' -
.' '
or GorrtPutattut t'
(x) Sarnpte CheCk SOme Of the deals and Comment Oh the CoffeCIheSS
 Minimum Audit Proqramme for Concurrent Audit System in Regional Rural Banks
Sr. Items
No.
Checking of application money, reconciliation of SGL account, compliance to RBI
(xi)
norms.
Checking of custody of unused BR Forms & their utilization in terms of Master Circular
(xii) on Prudential Norms on Classification, Valuation and Operations of lnvestment
Portfolio bv banks.
fthe bank have b en conducted in accordance
(xiii) fro
with the instructions issued by the RBI
F Loans & Advances-VerifY
(i) Reoort Bills/cheques purchased, if in the nature of accommodation bills'
( ii) Prooer follow-up of overdue bills purchased/discou nted/negotiated.
(iii)
re aff advances) h ve been sanctioned properly
and in accordance with delegated authortty.
Reporting of instances of exceeding delegated powers to controlling/head office by the
(iv)
branch and have been confirmed or ratified by the competent authority.
(v) Securities and documents have been received as applicab
Securities have been properly charged/ registered and valued by competent person.
(vi) jq$!-9y9!911.
Whether the same has been entered in$g
(vii) All conditions of sanction have been complied with.
Master data relating to limit, rate of interest, EMl, moratorium perlod detalls nave oeen
(viii)
correctlv entered and updated/modified in the system.
(x) Value dated entries passed in advances accounts.
post disbursement supervision and follow-up is proper, such as timely receipt of stock
(x) and book debt statements, QIS data, analysis of financial data submitted by borrower,
verification of securities by third pafties, renewal of limits, insurance
Whether there is any misutilisation of the loans and whether there are instances
(xi)
indicative of diversion of funds.
Compliance of prudential norms on income recognition, asset classiticatlon ano
(xii)
nrovisionino oertaininq to advances.
montnt
tner computer system on the- basis of
(xiii) stock statements/book debt statemenU other financial data received from the
borrowers.'
Recovery in compromise cases is in accordance with the terms and conditions of the
(xiv)
compromise agreement.
(xv) To check review and renewal of loans.
G LG/BG -Verifv
LC7BG issued/amended as per the approved formaUmodel guarantee prescribed and
(i) standard limitation clause incorporated. Whether counter indemnity obtained as
prescribed.
perlod
Any deviation from the terms of sanction in regard to margin, security, purpose,
(ii)
beneficiarv. collection of charges, commission/fee, etc.
Whether payment is made to the debit of party's account on due date without creating
(iii)
overdrafUdebiting Suspense, in case of deferred payment guarantee.
H Foreiqn Exchanqe transactions (wherever applicable) -verry
(i) Recovery of charqes as per HO Guidelines.
(i i) Packino credit released, whether backed by LC or confirmed expon oroer'
( iii) Availability of ECGC cover a
Submission of statutory returns on export/ import transactions, llKe HEF stalemenls,
(iv) XOS, write off.of export bills, etc. Follow up of outstanding export bills and exchange
control copv of bill of entry.
I
Minimum Audit Programme for Concurrent Audit System in Reqionat Rurat Banks
Sr.
No. !tems
lrregularities in opening of new accounts and operation in NRo, FCNR, NRE, EEFC,
(v)
etc., and debits/credits entries permissible under the rules.
(vi) Whether operations in FCRA accounts are as permitted by MHA and FCRA quidelines.
(vii) Booking, utilizetion, extension and cancellation of forward contracts.
I House Keeping -Verify
(i)
Exceptional transaction reports are generated and verified by branclr staff as
prescribed.
Review of all balance sheet heads and outstanding entries in accounts, e.g., suspense,
(i i)
sundry and inter-bank accgunts. Review of follow up of entries pendinq for reversal.
Scrutiny of daily vouchers with more emphasis on high value transaction including high
(iii)
value expenses and debit entries in Suspense account.
(iv) Debits in accounts Whglq rignatures are pending for scannino.
Whether records related to KYC/vouchers and other critical areas are sent to specific
(v)
places like archival center, record room as per stioulated oeriodicitv.
(vi)
Adherence to KYC/AML guidelines in opening fresh account and subsequent
modifications of records and monitoring of transaction.
J Verification of Gredit Card/Debit card -Verify
Application for the issue of credit card has been properly examined and record of issue
(i)
of the same has been maintained.
Whether overdrafUdebits arising out of the use of credit cards are prompfly recovered
(i i)
and informed to higher authorities.
Whether undelivered credit cards are properly kept as security items and followed up
(iii)
with credit card department for further instructions.
Physical verification of ATM cards, debit cards, credit cards, passwords and plNS,
(v) control over issue & delivery, safe keeping and custody at allthe locations. Report loss

K Others -Verify
Compliance of provisions relating to Tax Deducted at Source, service tax, trade tax,
o other duties and taxes.
Physical verification of inventory, control over issue of inventory, safe keeping and
( ii)
gUSlody of security forms. Report any loss of such items.
Physical verification of other deliverable items, control over issue, safe keeping and
(iii)
custody.
Physical verification of Gold coins, control over issue, safe keeping and custody.
(iv)
Checking of Gold sale transactions.
(v) Custody and movement of branch keys.
Locker keys and locker operations-linking of FDR as security for locker/operation of
(vi)
locker/inoperative lockers/ nomination/other issues.
Safe custody of branch documents like death claim cases, issuance of duplicate
(vii) DD/PO/FDR, checking of indemnities, etc. and verification of documents executed
during the period under audit.
(viii) Reporting of frauds.

Note : The list illustrative