Page 153 - A Banker Down the Rabbit Hole

He narrated some recent developments in the bank, a few positive and
a few others negative. The enhancement of operational efficiency and
profitability of the bank was a major challenge for our bank like many
other public sector banks in India. He disclosed to us, "The bank had
conducted an internal revenue audit of some selected large sized
branches. Huge leakage of revenue was reported due to not levying
service charges fixed for the transactions, not applying correct rate of
interest applicable to the category of the loan and inaccurate calculation
of interest amount in the loan accounts."

He further told that the reasons were studied and it was revealed that:
i. Branches did not maintain proper files of circulars issued by Head
Office about changes in interest rates and service charges effected
from time to time. This led to inaccurate interest rate applied and
service charges not recovered or less recovered.
ii. The staff did not calculate the interest amount correctly and officers
did not check the calculations done by lower staff leading to non-
detection of errors.

iii. The branches gave a feedback that every year, the consolidated and
updated circulars giving interest rates on all categories of loans and
other service charges should be issued so that the updated guidance
is readily available and position is corrected.

The Internal Management Committee had suggested that the internal
revenue audit should be conducted for all small, medium, large and extra-
large branches once a year and accountability should be fixed for errors
on the concerned staff / officers so that awareness is created and revenue
loss at every point is checked which actually may turn out to be huge
cumulatively.

The Chairman indicated that a revenue audit for the last five years of all
branches was proposed. He expressed his belief that our group of overseas
posted officers was the brightest among the bank officers. He asked if one
of us could prepare interest and service charges manual consolidating 5
years' circulars from Head Office. He kept looking at each one of us and

150 | A Banker down the Rabbit Hole