Inter-branch Reconciliation
These are:
Comments on the system/ procedure and records maintained.
Test check for any unusual entries put through inter-branch/ head office accounts.
Position of outstanding entries; system for locating long outstanding items of high value.
Steps taken or proposed to be taken for bringing the reconciliation upto- date.
Compliance with the RBI guidelines with respect to provisioning for old outstanding entries.
Inter-branch accounts are normally reconciled by each bank at the central level. While practices with various banks may differ, the inter-branch accounts are normally sub-divided into segments or specific areas, e.g., ‘Drafts paid/ payable’, ‘inter-branch remittances’, ‘H.O. A/c’, etc. The auditor should report on the year-end status of inter-branch accounts indicating the dates up to which all or any segments of the accounts have been reconciled. The auditor should also indicate the number and amount of outstanding entries in the interbranch accounts, giving the relevant information separately for debit and credit entries. The auditor can obtain the relevant information primarily from branch audit reports. Where, in the course of audit, the auditor comes across any unusual items in inter-branch/head office accounts, he should report the details of such items, indicating the nature and the amounts involved. The auditor should examine the procedure for identifying the high-value items remaining outstanding in inter-branch reconciliation. He should review the steps taken or proposed to be taken by the Management for clearing the outstanding entries in inter-branch accounts, particularly the high-value items. If he has any specific suggestions for expeditious reconciliation of inter-branch accounts including any improvements in the systems to achieve this objective, the same may be incorporated in the report. In the new CBS environment the branch reconciliation is done of IT department at H.O. in most of the banks.
Considering the extent of arrears in inter-branch accounts, the RBI, vide its circular no. DBOD No. BP.BC. 73 /21.04.018/2002-03 dated February 26, 2003 has advised banks to arrive at the category-wise position of unreconciled entries outstanding in the inter-branch accounts for more than six months as on March 31, 2004 and make provision equivalent to 100 percent of the aggregate net debit under all categories. While doing so, it may be ensured that:
(i) The credit balance in the Blocked Account created in terms of instructions contained in circular DBOD No. BP.BC.73/21.04.018/98 dated July 27, 1998 is also taken into account; and
(ii) The net debit in one category is not set-off against net credit in another category.