Lending under Consortium Arrangement / Multiple Banking Arrangements:
In order to strengthen the information sharing system among banks in respect of the borrowers enjoying credit facilities from multiple banks, the banks are required to obtain regular certification by a professional, preferably a Company Secretary, Chartered Accountants or Cost Accountants regarding compliance of various statutory prescriptions that are in vogue, as per specimen given in Annexure III (Part I and II), to the RBI Circular No. DBOD.No. BP.BC.110/08.12.001/2008-09 dated February 10, 2009. Annexure III is given in CD for reference.
The LFAR should include non-compliance of the RBI Circular, indicating the cases in which the reports have not been obtained for review by the auditors.
Accounts under Consortium arrangements may, notwithstanding that these are classified as Standard, due to servicing thereof in a Bank, may nonetheless be intrinsically weak or may even be NPA in other participating bank(s), including on the basis of the certificate/report as aforesaid. The auditor should consider this aspect and classify the account appropriately based on facts and circumstances, particularly based on any serious adverse remarks/comments in the certificate issued pursuant to the RBI circular.
The auditor should check the compliance with RBI guidelines on unhedged foreign currency exposure. Self-declaration from the client or Independent auditors’ certificate of foreign currency exposure should be obtained by the Bank. Such declaration/certificate can be cross checked with the computation of standard asset provisioning.