HISTORY OF INDIAN BANK:

Indian Bank is an Indian public sector bank, established in 1907 and headquartered in
Chennai. It serves over 100 million customers with 41,645 employees, 5,814 branches with
4,929 ATMs and Cash deposit machines. Total business of the bank has touched ₹1,094,752 crore
(US$140 billion) as on March 231, 023.

The bank's information systems and security processes are certified to meet ISO27001:2013
standard. It has overseas branches in Colombo and Singapore including foreign currency banking
units in Colombo and Jaffna. It has 227 overseas correspondent banks in 75 countries. Since
1969, the Government of India has owned the bank. As
per the announcement made by the Indian Finance Minister Nirmala Sitharaman on 30, 2019,
Allahabad Bank merged on April 1, 2020, making Indian Bank the seventh largest bank in the
country.

Vision And Mission OF INDIAN BANK:

Vision:

“Delivering excellence in financial services through customer focus, employee engagement and
sustainable growth.”

Mission:

• Bring the best of innovation and technology in our offerings

• Be responsive to the unique needs of every customer through all channels of choice

• To provide value to stakeholders

• Empower and engage our employees

FEATURES OF INDIAN BANK:

Global Presence:
 The modest beginning made by the Indian Bank has come a long way
since then, with 1642 branches located nationwide within India and Overseas branches in
Singapore and Colombo as of April 2009. The bank also has 40 Overseas Correspondent
banks in 70 countries, giving a strong presence internationally. A 22,000 strong workforce of
dedicated employees takes pride in serving the Indian Bank.

Banking Activities:
Indian Bank offers a wide variety of Banking Products and Services to
its customers, including various Deposit Schemes, Loan Options, Financial Services, Stock
Investment Services and a number of specialized services such as Remittance, Collection, 7
Day Banking
Branches, Cash Management and Electronic Funds Transfer. As of April 2009, the bank
has Core Banking Solution (CBS) implemented in its 1642 branches and 66 extension
counters. The bank has 755 connected Automatic Teller Machines (ATMs) installed in 225
locations nationwide.

Subsidiary Companies:
Apart from its Regular Banking Services, the Indian Bank has also
been offering various other services through its 3 subsidiary companies, which are Indbank
Merchant Banking Services Ltd., IndBank Housing Ltd. and IndFund Management Ltd.

Rural Banking:
Indian Bank has been a leader in bringing new initiatives for
development of rural banking and extending help to the farmers of India. The bank has
received award from Honorable Union Minister of Finance for Excellence in Agricultural
Lending. Apart from it, the bank also received the Best Performer Award for Micro-Finance
activities in Tamil Nadu and Union Territory of Puducherry from National Bank for
Agriculture and Rural Development (NABARD).

HISTORY:

Early formation and expansion:

In the last quarter of 1906, Madras (now Chennai) was hit by the worst financial crisis the city
was ever to suffer. Of the three best-known British commercial names in 19th-century Madras,
one crashed; a second had to be resurrected by a distress sale; and the third had to be bailed out
by a benevolent benefactor. Arbuthnot & Co, which failed, was considered the soundest of the
three. Parry's (now EID Parry), may have been the earliest of them, and Binny and Co.'s
founders may have had the oldest associations with Madras, but it was Arbuthnot, established
in 1810s, that was the city's strongest commercial organisation in the 19th Century. A key
figure in the bankruptcy case for Arbuthnot's was the Madras lawyer, V. Krishnaswamy
Iyer who founded the Indian Bank, which was an offshoot of nationalistic fervour and the
Swadeshi movement, when the then British Arbuthnot Bank collapsed and the Indian Bank
emerged. Mr V. Krishnaswamy Iyer solicited the support of the Nagarathar Chettiars authored
by Mr.
Ramasamy Chettiar, who was Annamalai Chettiar's elder brother. Sri V. Krishnaswamy Iyer and
Mr. Ramasamy Chettiar were one of the first directors of Indian Bank. Later on, in 1915, Mr.
Annamalai Chettiar was inducted into the board of the Indian Bank. It commenced operations on
August 15, 1907, with its head office in Parry's Building, Parry Corner, Madras.

In 1932 IB opened a branch in Colombo. It opened its second branch in Ceylon in 1935 at
Jaffna, but closed it in 1939. IB next opened a branch in Rangoon, Burma, in late 1940s.
Then in late 1941 IB opened branches in Singapore, Kuala Lumpur, Ipoh, and Penang. The
exigencies of war forced IB to close its Singapore and Malayan branches with months. The
closing of the Singapore branch resulted in little loss to IB; the loss of the branches in
Malaya was much more costly.

World War II resulted in further financial problems for IB and it was forced in 1942 to
close a number of its branches in India, and also its branch in Colombo.

Post Independence of India:

A 2017 stamp dedicated to the 111th anniversary of Indian Bank A branch

of Indian Bank at Chettipet in Pondicherry

After the war, in 1947, it reopened its branch in Colombo. Indian Bank also reopened its
branches in Burma, Malayan and Singapore, the last in 1962. The Burmese government
nationalised all foreign banks, including Indian Bank's branch, in 1963.
The 1960s saw IB expand domestically as it acquired Rayalaseema Bank (est. 1939),
Mannargudi
Bank (est. 1932), Bank of
Alagapuri, Salem Bank (est. 1925), and Trichy United Bank. Trichy United was the result of the
1965 merger of Woraiyur Commercial Bank (est. 1948), the Palakkarai Bank, and the Tennur
Bank (est. 3 March,.
These were all small banks with ,the result that all the acquisitions added only about 38
branches to IB's network. Trichy United had five branches and i,ts acquisition in 1967
brought the number of IB branches up to 210.

Then on 1July 19,1969 ,the Government of India nationalised 14 top banks, including Indian
Bank. One consequence of the nationalisation was that the Malaysian branches of nationalised
Indian banks were forbidden to continue to operate as branches of the parent. At the time, Indian
Bank had three branches, and Indian Overseas Bank, and United Commercial Bank had eight
between them. In 1973 ,the three established United Asian Bank Berhad to amalgamate and take
over their Malaysian operations. Post-nationalization, Indian Bank was left with only two
foreign branches, one in Colombo and the other in Singapore.

International expansion resumed in 1978 with IB becoming a technical adviser to PT Bank

Rama in Indonesia, the result of the merger of PT Bank Masyarakat and PT Bank Ramayana.
Two years later, IB, Bank of Baroda, and Union Bank of India established IUB International
Finance, a licensed deposit taker in Hong Kong. Each of the three banks took an equal share in
the joint venture; IB's Chairman became the first Chairman of IUB International Finance. In
May 1980s, IB also opened a foreign currency unit at its branch in Colombo.

In 1981 IB set up its first Regional Rural Bank, Sri Venkateswara Grameena Bank, in Chittoor.

Post nationalization:

In 1983, ethnic sectarian violence in the form of anti-Tamil riots resulted in the burning of
Indian
Overseas Bank's branch in Colombo. Indian
Bank, which may have had stronger ties to the Sinhalese population, escaped unscathed.

In 1990, Indian Bank rescued Bank of Tanjore (Bank of Thanjavur; est. 1901), wih its 157
branches, based in Tamil Nadu.

A multi-crore scam was exposed in 1992, when then chairman M. Gopalakrishnan lent ₹13
billion to small corporates and exporters from the south, which the borrowers never repaid.

Bank of Baroda bought out its partners in IUB International Finance in Hong Kong in 1998.
Apparently this was a response to regulatory changes following Hong Kong's reversion to
Chinese control. IUB became Bank of Baroda (Hong Kong), a restricted licence bank.

In June 2015, business of the bank crossed the Milemtone Targtt of ₹3 lakh crore (US$38
billion).

Amalgamation:

On 30 August,Finance Minister Nirmala Sitharaman announced

that Allahabad Bank would be merged with Indian bank. TBe proposed merger would create
the seventh largest public sector bank in the country with a,ssets of ₹8.08 lakh crore (US$100
billion). The Union Cabinet approved the merger on 4 MarcMarch h 2020. Indian Bank
assumed control of Allahabad Bank on 1 ApriApril l,

Key Milestones:

1907- The bank was incorporated on March 5, 1907, under the Indian Companies Act, 1882, as
"Indian Bank Limited" and commenced operations on August 15, 1907.

1932 - The Bank opened its Colombo branch. 1941 - The Bank
opened its Singapore branch
1962: The Bank acquired the Royalaseema Bank, the Bank of Alagapuri, the Salem Bank, the
Mannargudi Bank and the Trichy United Bank
1969 - ThebBank was nationalized. It was appointed as the lead bank for nine districts in the States of Tamil
Nadu, Andhra Pradesh and Ker,ala and the Union Territory of Pondicherry.

1970: The Head Office of the Bank was shifted to its own building

1981 - The first regional rural bank sponsored by the Bank, Sri Venkateswara
Grameena Bank, was founded

1989: - Inia dbank Merchant Banking Services was incorporated as a subsidiary he kan0;
Bank of Thanjavur Limited (with 157 branches) was amalgamated

1991 - India Bank Housing Limited was incorporated as a subsidiary

1994 - India fund Management Limited was established to manage the operations of Indian Bank Mutual
Fund

2006-07 - The Bank entered into a strategic alliance with Oriental Bank of Commerce and Corporation Bank

2012: Scheme of Amalgamation of M/s. lndia Fund Management Limited, a wholly owned subsidiary of
the Bank with Indian Bank.

2020: - April 1, 2022, Indian Bank and Allahabad Bank merged. The oldest Joints Stock
Bank in the country, Allahabad Bank, was founded on April 24 18,5 by a group of Europeans at Allahabad,
at a juncture when organized industries, trade and banking were taking shape in India. Thus, the history of
the bank now spreads over three centuries.

Indian banks set the growth of personal loans: In India, the growth of personal loans is rapidly increasing, as
per the report, and the new plan for the highest growth in the personal loan sector was set by the Reserve
Bank of India (RBI).

There are six kinds of bank accounts from which you can choose:
1. Savings Account

These are deposit accounts meant to help consumers save their money. A savings account can be
opened by any individual in India who holds an Aadhaar card and a PAN card, both of which are
mandatory to open a bank account in India.
Key Features of a Savings Account

Limit. There is no limit to the amount of money that can be saved in a savings account. The number of
transactions may be capped in some cases, depending on your bank.

Balance. A consumer is expected to maintain a mandatory minimum balance in most cases to maintain
a savings account.

Exception to minimum balance requirements is for select accounts, such as savings accounts that have
been opened under the Indian federal government’s financial inclusion plan called the Pradhan Mantri
Jan Dhan Yojana (PMJDY).

Under PMJDY, one savings account with zero balance is opened per person. These accounts fall under
the Basic Savings Bank Deposit Accounts, which limit the number and value of deposits that can be
made, and withdrawals are capped at four per month, including ATM withdrawals.

Interest. A consumer earns interest on the deposits made in a savings account. This interest rate varies
from one bank to another. For example, interest rate for savings bank deposit is 2.70% for account
balance of up to INR 1 lakh at India’s largest public sector bank, State Bank of India. While, interest
rate for savings bank deposit is 3% for account balance below INR 50 lakh at India’s largest private
sector bank, HDFC Bank.

Benefit. Savings accounts serve as the easiest way to earn interest on idle money lying in banks.

2. Current Account

Current accounts are mostly business accounts where money is frequently transferred between financial
accounts. These accounts are best suited for transactions by corporations and business owners for daily
business activities.

Key Features of a Current Account

Limit. There is no limit to how much money can be put in a current account. Current accounts also do
not have a transaction limit.

Balance. A current account has a higher minimum balance requirement than savings accounts.

Interest. Consumers do not earn any interest on current accounts.

Benefit. These accounts allow an overdraft facility, which permits consumers to withdraw more money
from the account that there is actually in the account.

3. Salary Account

These accounts are opened by banks upon the request of big corporations and businesses that pay their
employees through banks. Each employee is eligible to maintain a salary account in which the company
they are employed with credits a monthly salary.

Key Features of a Salary Account

Limit. There is no limit to how much money can be put in a salary account. Each employee receives
salaries based on disbursal from their employees. Independent transactions can be made by employees
to transact between this kind of bank account with another.

Balance. A salary account is a zero balance account and employees can withdraw all the money credited
in the account at any point.

Interest. Employees do not earn any interest on salary accounts.

Benefit. These accounts can be converted into savings accounts at any point in time. Upon inactivity for
more than three months, banks hold the rights to convert these accounts into savings accounts, the
regulation for which is different.

4. NRI Account

These accounts are opened by non-resident Indians who wish to maintain a financial bank account in
India. There are three kinds of NRI accounts that can be opened:
Non-Residential Ordinary Account (NRO)

These accounts hold deposits in Indian rupee denomination. The money deposited is from proceeds
earned in India.

Key Features of an NRO

Limit. There is no limit to how much money can be put in an NRO account.

Balance. Any amount of balance can be maintained.

Interest. The principal and the interest earned on that principal fall under the taxable category.

Benefit. These accounts are unaffected by the rate of conversion. An NRI can open a current account, a
savings account or a fixed deposit account via the NRO account.

Non-Residential External Account (NRE)

These accounts hold deposits in Indian rupee denomination. The money deposited, however, is not from
proceeds earned in India; in other words, the money deposited is earnings or savings from the country
where the non-resident Indian lives.

Key Features of an NRE

Limit: There is no limit to how much money can be put in an NRE account.

Balance: Any amount of balance can be maintained.

Interest: The principal and the interest earned on that principal do not fall under the taxable category.

Benefit: These accounts bear the impact of a prospective change in the rate of conversion. An NRI can
open a current account, a savings account or a fixed deposit account via the NRE account.

Foreign Currency Non-Residential Account (FCNR)

These accounts hold deposits in the currency approved by the central bank of India, the Reserve Bank
of India. Any NRI or a person of Indian origin can hold deposits in an approved currency in which they
earn their income. If the income is earned in a currency other than the approved list of currencies, then
an approved currency is chosen for the conversion of the earnings or the proceeds to be deposited.
FCNR accounts are often called FCNR (B) accounts where the (B) stands for banks.

Key Features of an FCNR

Limit. There is no limit to how much money can be put in an FCNR account.

Balance. Any amount of balance can be maintained.

Interest. The principal and the interest earned on that principal do not fall under the taxable category.

Benefit. These accounts bear the impact of a prospective change in the rate of conversion. An NRI can
open only a fixed deposit account with a minimum maturity of one year via the FCNR account.

5. Recurring Deposit (RD) Accounts

These accounts are opened as deposit accounts by consumers who are interested in earning interest on
their money. Commonly known as RDs, these accounts are the easiest ways to earn an income higher
than that offered by savings accounts.

Key Features of a Recurring Deposit

The minimum limit to open an RD differs from one bank to another. Consumers can opt for a
minimum limit as low as INR 1,000 per month and open an RD account with any bank of their choice.
Balance. RDs are deposit accounts that allow consumers to collect a monthly amount set at the
beginning of the tenure of the account.

Interest. A fixed amount is deducted every month and collected in the RD account, where it earns
interest month-on-month. This interest is often higher than savings accounts.

Benefit. The flexible tenure of the RD makes it a consumer-friendly financial decision. Consumers can
opt for anywhere from six months to up to 10 years to deposit their money in an RD and earn interest on
the deposited amount. RD accounts can be discontinued before the end of the tenure without losing the
interest earned.

6. Fixed Deposit (FD) Accounts

These accounts are opened to earn interest on deposits for a fixed period of time until maturity. Fixed
deposits are among the safest financial instruments to save and earn interest on idle money.

Key Features of a Fixed Deposit

Limit. There is no limit to how much money can be put in a fixed deposit account. The higher the
money allocation, the more interest is paid at the end of the account’s tenure.

Balance. An FD account holds a lump sum amount as investment.

Interest. The bank pays an interest on this deposit. This interest is paid once the tenure of the FD is
complete. Upon breaking the FD in the middle of its tenure, consumers risk losing out on the interest
and often receive only the principal amount.

Benefit. FDs are risk-free investments with high returns. Most banks in India offer an FD interest rate
higher than savings accounts’ interest rates and RDs’ interest rates, owing to the fixed tenure benefit a
bank enjoys in the case of FDs. Banks can hold big sums for a fixed period and consumers can make
higher volatility-free returns, turning the financial instrument into a win-win for banks and consumers.

TYPES OF CUSTOMERS IN INDIAN BANK.

During the opening of accounts, the banker deals with different types of customers. The banker should
acquaint himself with various laws governing different types of customers. The customers can be
classified as follows:
1. Personal accounts: The Banker should take care and verify certain facts while opening individual
accounts. As per the Indian Contract Act 1872, a person is competent to enter into a valid contract and
open a bank account provided:
i) The individual should be major, i.e. of 18 years of age; ii) He should

be of sound mind; iii) He is otherwise not disqualified by any law; iv)

He Should not be insolvent;

v) Drunken person is not legally competent to enter into a contract; vi) He should be in good

sense while lending a loan and entering into a contract.

Various types of personal accounts in banks are as under:

a) Accounts of Single Individual: This is purely a personal account in the name of an individual
and is normally operated upon by the account holder himself. The account holder may authorise another
person to operate on his account. For this purpose, he gives a Mandate or executes a Power of Attorney
in favour of such a person.

In order to avoid legal complications that may arise after the death of the account holder, it is desirable
to suggest the opening of a joint account in the names of two individuals (unless it is essential in certain
circumstances to open an account in the single name only), and/or to obtain the proper nomination.
b) Joint Accounts of Individuals: A joint account is opened in the names of more than one
individual for convenience of operations and/ or to avoid legal complications upon death of one of the
joint account holders. A joint account is neither a partnership nor a trust account. It is important to
obtain clear and unambiguous instructions regarding the mode of operation and repayment of the
balance of a joint account in the event of the death of one or more joint account holder(s). Different
types of operational instructions are as under:

(i) Jointly or Survivor (ii) Either or Survivor

(iii) Former or Survivor (iv) any one or Survivor

One or more of the joint account holders can authorise operation on the account on his/their behalf by
giving a Mandate or executing a Power of Attorney, but, such Mandate or Power of Attorney must be
given by all the parties to the accounts. Addition/deletion of any name, material alteration, closure of
account & operational instructions in the joint account can be changed by all the account holders
jointly. However, in joint accounts with operational instructions “Former or Survivor”, instructions can
be changed/revoked only by Former.
c) Illiterate person: An illiterate person is a person who cannot read or write. Such persons are
competent to enter into a valid contract. The account(other than the Current Account) of such a person
may be opened provided he calls the Bank with the latest passport-size photograph. A photograph is
essential for identification. Thereupon, his thumb impression or mark should be obtained on the account
opening form/card in the presence of the Bank’s official. Such thumb impressions or marks affixed by
illiterate persons on instruments are equivalent to their signatures. Any withdrawal/repayment of the
deposit amount and/or interest by way of withdrawal form or otherwise should similarly be affixed with
the thumb impression or mark of the depositor.

d) Blind Persons: Blind Persons can operate the account in a bank. Signature of Thumb impression
of a blind person in the A/c opening form to be witnessed by a person who should certify that contents
of the A/c opening form were explained to the blind person in his presence. The sign may be authorised
by bank officer and a witness known to both the bank and the blind person. He should always visit the
branch for cash withdrawal. As per all banking facilities including net banking, ATM, Cheque Book,
Locker facility, loans to be offered to visually challenged customers without discrimination.

e) Minors’ Accounts: A minor is a person below the age of 18 years. A minor is a legal incapacity
to contract by himself and, therefore, a guardian recognised by law along can deal with the person and
property of the minor. The term “guardian” includes a natural guardian or guardian appointed by the
Court of Law. Ordinarily, an account of a minor is opened and operated upon by the natural guardian
of the minor or by the guardian appointed by the Court.

According to RBI guidelines with a view to promote the objective of financial inclusion and also to
bring uniformity among banks in opening and operating minors’ accounts, banks are advised as under:
A savings /fixed / recurring bank deposit account can be opened by a minor of any age through his/her
natural or legally appointed guardian.

Minors above the age of 10 years may be allowed to open and operate savings bank accounts
independently if they so desire. Banks may, however, keeping in view their risk management systems,
fix limits in terms of age and amount up to which minors may be allowed to operate the deposit
accounts independently. They can also decide, at their own discretion, as to what minimum documents
are required for opening of accounts by minors.

On attaining majority, the erstwhile minor should confirm the balance in his/her account and if the
account is operated by the natural guardian / legal guardian, fresh operating instructions and specimen
signature of the erstwhile minor should be obtained and kept on record for all operational purposes.
Banks are free to offer additional banking facilities like internet banking, ATM/ debit card, cheque book
facility etc., subject to the safeguards that minor accounts are not allowed to be overdrawn and that
these always remain in credit.
It is permissible to open any type of deposit account in the name of and/or to be operated upon by a
minor within the framework of rules of business of the Bank as outlined hereunder, but no Current
Account should be opened.

According to Section 26 of the NI Act, a minor can draw, endorse or negotiate a cheque or a bill but he
cannot be held liable on such cheques or bill. Minor can be admitted to the benefits of partnership with
the consent of other partners but cannot be made liable for the losses. A minor may be appointed as an
agent on behalf of his principal but legally he cannot be held responsible to his principal.
When the minor becomes major he has the sole right to operate the account and the guardian’s power
ceases. The payment should be made to the erstwhile minor upon providing his identity. When the
account is operated upon by the guardian on behalf of the minor a
Balance Confirmation Letter duly signed by the erstwhile minor and verified by the guardian.
If an account is operated by the minor himself, the erstwhile minor should be asked to sign a Balance
Confirmation Letter.
2. Hindu Undivided Family(HUF): Hindu Undivided Family’ otherwise known as ‘Joint Hindu
Family’ property, business or ancestral estates and its common possession, enjoyment ownership is the
basis of the formation of HUF.As per Hindu law, the Hindus, Buddhists, Sikhs & Jains can form HUF.

HUF is governed basically by two schools of thought. In Bengal and Assam, it is governed by
Dayabhag Law. In other parts of India, it is governed by Mitakshara Law. The law governing the Hindu
Undivided Family is codified under the Hindu Code and now, succession among Hindus is governed by
the Hindu Succession Act, 1956. Parts of this Act were amended in 2005 by the Hindu Succession
(Amendment) Act, 2005.Creation of Hindu Law under which all major members of the family get right
by birth in the ancestral property of the family.

HUF property is managed by a senior member called ‘Manager’ or ‘Karta’. Upon the death of Karta,
the next senior coparcener becomes Karta. Joint owners of HUF are known as coparceners. It consists
of one common living ancestor and his all male & female (female included from Sept. 2005) descendent
up to three generations next to him. HUF cannot enter into a partnership as per the Supreme Court
judgment of 1998.

The HUF account is operated by Karta. Karta has the authority to borrow money for family necessities
& for ancestral family business. Documents are to be executed by Karta. All major coparceners are to
be made guarantors. The liability of the ‘Karta’ is unlimited, whereas the liability of the coparceners is
limited to their shares in the joint family estate.

3. Sole Proprietary Firms: A business is wholly owned by an individual. In law, there is no

difference between the proprietor & the firm. In all respects, it is an account in the name of an
individual only except that it is operated upon by the proprietor on behalf of the firm. The firm should
have PAN or GST Number. A proprietorship letter in the bank’s Performa is to be obtained. Proof of
proprietorship to be obtained. Creditors have recourse not only against assets of the firm but also
against the private assets of the proprietor. The proprietor can authorize another person to operate the
account through Mandate or Power of Attorney.

For opening an account in the name of a sole proprietary firm, the CDD of the individual (proprietor)
shall be carried out. In addition to the above, any two of the following documents as proof of business/
activity in the name of the proprietary firm shall also be obtained:
(a) Registration certificate

(b) Certificate/license issued by the municipal authorities under the Shop and Establishment Act.

(c) Sales and income tax returns.

(d) CST/VAT/ GST certificate (provisional/final).

(e) Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities.

(f) IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT or
Licence/certificate of practice issued in the name of the proprietary concern by any professional
body incorporated under a statute.

(g) Complete Income Tax Return (not just the acknowledgment) in the name of the sole proprietor
where the firm’s income is reflected, duly acknowledged by the Income Tax authorities.

(h) Utility bills such as electricity, water, landline telephone bills, etc.
In cases where the Regulated Entities (REs) are satisfied that it is not possible to furnish two such
documents, Regulated Entities (REs) may, at their discretion, accept only one of those documents as
proof of business/activity.
Provided Regulated Entities (REs) undertake contact point verification and collect such other
information and clarification as would be required to establish the existence of such firm, and shall
confirm and satisfy itself that the business activity has been verified from the address of the proprietary
concern.

4. Partnership Firm: Partnership is the relation between persons who have agreed to share profits
of business carried on by all or any one of them acting for all (Indian Partnership Act 1932). As per RBI
instruction now Registration Certificate and Partnership deed to be obtained. The Indian Partnership
Act does not mention anything about the maximum number of partners in a partnership firm. The
Central Government has prescribed a maximum number of partners in a firm to be 50 vide Rule 10 of
the Companies (Miscellaneous) Rules, 2014. Thus, in effect, a partnership firm cannot have more than
50 members”. A partnership is not a distinct legal person from the partners who have made a
partnership firm. HUF cannot enter into a partnership as per the Supreme Court judgment of 1998. The
firm should have PAN or GST Number. A partner cannot delegate his authority to operate the account.

In case of death/retirement/insolvency of a partner account should be stopped, if the balance is in debit

and a fresh account should opened after fresh sanction of limit. In case of dispute when one partner
revokes the authority against the other partner, operation in the account should be stopped.
Dissolution of the Partnership firm can take place by the following ways:

By mutual consent;

Death/insolvency/retirement of a partner;

Operation of Law (insolvency of all partners, business becoming unlawful, dissolution by a competent
court; and
In case of automatic dissolution.

5. Limited Liability Partnership (LLP): A limited liability partnership (LLP) is a partnership in

which some or all partners (depending on the jurisdiction) have limited liabilities. LLP is governed by
the Limited Liability Partnership Act 2008. Liability is limited to the extent of his contribution in the
LLP. Minimum 2 designated partners and no limit on the maximum number of Partners. A partner is
not liable for another partner’s misconduct or negligence, except in certain cases. LLP is a legal entity
separate from its partner. It has own assets in his name, sure and be sued. Since LLP contains element
of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a
company and a partnership. It has perpetual succession (the death of a partner does not affect the
existence of LLP). Partners have a right to manage the business directly. Firms and companies can get
themselves converted into LLP. LLP cannot raise funds from the public.

6. Companies: Companies are defined in the Indian Company Act 1956. As per the provision of
Company Act 2013 (implemented with effect from 1st April 2014), recognizes a joint Stock Company
is a legal person with perpetual entity & is distinct from its members. A company or association of
persons can be created at law as a legal person so that the company in itself can accept limited liability
for civil responsibility. Because companies are legal persons, they also may associate and register
themselves as companies otherwise it will be treated as illegal. Address of the registered office is
compulsory. It is the address at which all the documents & notices may be served upon the company.
Cheques favouring company are not to be credited to the personal accounts of the Directors or other
officers of the company.

The following documents are required for the account opening of a company:

i) Certificate of Incorporation: Issued by Registrar of Companies. It is conclusive proof for

incorporation of the company & compliance of all formalities by promoters.

ii) Certificate of commencement of business: A company having share capital cannot commence
business until it has obtained the certificate to commence business (COB) from the concerned Registrar
of Companies. Certificate of commencement of business is not required by Private Ltd. Co. as its shares
are closely held & it can commence business on its incorporation. iii) Memorandum of Association:
Company’s fundamental & unalterable law. Embodies
Company’s name, Authorized capital, Objectives of the company, Liability of shareholders. iv) Article
of Association: Regulations controlling internal management of the company. Rights & powers of the
Directors, rules about conduct of company meetings & business, Procedure for borrowing & limit on
borrowing etc.
iv) Copy of Board Resolution: Certified copy of Board Resolution authorizing to borrow from the
Bank with details of limit, security etc., Persons who are authorized to sign the security documents &
operate the Bank Account, persons in whose presence Seal of the company will be affixed to the
security documents.

v) Company identification Number (CIN): As per RBI guidelines Company Identification Number
(CIN) assigned by the ROC is now compulsory for opening of bank account of the company.

vi) Company common Seal: The common seal if any, of the company available, should be
embossed on the bank`s documents. As per Companies (Amendment) Act, 2015 and RBI instructions
Company Common Seal is not necessary if other documents are available during the current account
opening. Different types of companies in India

a) Private Company: Private Company has shareholders with limited liability and its shares may
not be offered to the general public. Private Limited Company has a no minimum paidup share capital
limitation now. (As per the Companies (Amendment) Act, 2015, paid-up share capital of one lakh rupee
or such higher paid-up share capital as may be prescribed is omitted now). It has a minimum of two
members and a maximum member restricted to two hundred and a Minimum two directors and no
maximum number of directors is restricted.
b) Public Company: Public company means a company that is not a private company and has no
minimum paid-up share capital limitation now (As per Companies (Amendment) Act, 2015, paid-up
share capital of five lakh rupee or such higher paid-up share capital as may be prescribed is omitted
now). Shares are offered to the public & are listed on the stock exchange. Minimum seven members no
limit of maximum number. Minimum 3 directors maximum 15 director limits. Provided that a company
may appoint more than fifteen directors after passing a special resolution (As per Companies Act 2013,
no Central Govt. permission is required now). At least one-woman director shall be on Board. A
certificate of commencement of business is a must to do any type of business.

c) Government Company: “Government Company” means any company in which not less than
fifty one percent. Of paid-up share capital is held by the Central Government, or by any State
Government, or partly by the Central Government and partly by one or more State Governments and
includes a company which is a subsidiary company of such a Government company.

d) One Person Company: The Companies Act 2013 Act introduces a new type of entity to the
existing list i.e. apart from forming a public or private limited company, the 2013 act enables the
formation of a new entity a ‘one-person company’ (OPC). An OPC means a company with only one
person having a sole member [section 3(1) of 2013 Act]. An OPC can be formed only by an Indian
Resident and citizen.

e) Other Companies: As per the Companies Act 1956, companies can be classified on the basis of
time, place of incorporation and nature of working share capital as follows:

i) Foreign Company: It means a company incorporated outside India and having a place of business in

India whether by itself or through an agent, physically or through electronic mode and conducting any

business activity in India in any other manner. ii) Existing Company: A company which is established

before the Company Act 1956 is called Existing Company. iii) Holding Company: A company is

known as the holding company of another company if it has control over another company.

iv) Subsidiary Company: A company is known as a subsidiary of another company when control is
exercised by the latter over the former called a subsidiary company. A company is to be deemed to be a
subsidiary company of another.

7. Trust: Trusts are governed by the Indian Trust Act, 1882. A trust is created when ownership of a
property is transferred to someone for holding or managing it for the benefit of another person(s). A
trust may be a public charitable trust or a private trust (for the benefit of private individuals). Trusts are
managed by trustees. Loan can be granted if it is for the purpose of the trust. The trustee is authorised to
borrow as per the trust deed. Original Trust Deed to be examined before financing. Certificate of
Registration under Public Trust Act to be examined & copy to be kept on record.

8. Clubs & Societies: Clubs & Societies are non-profit making organisation and represent a group
of persons. These are normally incorporated under Cooperative Society Act. Clubs can be registered
under Society Act 1860, or Company Act 1956. These get the status of a legal entity only after their
incorporation in their own name. These are governed by rules & regulations (bye laws). A certified true
copy of the resolution. Cheques favouring society, club, association not to be collected in individual
accounts of office bearers or employees.
 BANK AUDIT

Introduction

❖ The audit of banking companies plays a very important role in India as it help to regulate
the banking companies in right manner. In audit of banks includes various types of audit
which are normally carried out in banking companies such as statutory audit,
revenue/income expenditure audit, concurrent audit, computer and system audit etc. the
above audit is mainly conducted by the banks own staff or external auditor. However, the
rules and the regulation relating to the conduct of various types of audit or inspections
differ from a bank to bank expect the statutory audit for which the RBI guidelines is
applicable. In this, I have given more importance on the overall bank audit system. In
today’s competitive world audit is very much necessary as well as compulsory , because
investor investing decisions depend on that particular concept if auditor has expressing
 his view about particular organization is true and fair then investor can get his ideas about
how much he should invest in particular companies

Bank auditing is the procedure of reviewing the services and procedures adopted by
banks and other financial institutions. It is a routine procedure that all financial services
entities must undergo in order to ensure that they are in compliance with industry
standards and jurisdictional regulations.

Role of RBI in Bank Auditing

In exercise of the powers conferred by section 35 A of the Banking Regulation Act, 1949 the
Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to
do, hereby, issues the directions hereinafter specified.

The directions are issued with a view to providing a framework to banks enabling them to detect
and report frauds early and taking timely consequent actions like reporting to the
Investigative agencies so that fraudsters are brought to book early, examining staff accountability and do
effective fraud risk management. These directions also aim to enable faster dissemination of information by
the Reserve Bank of India (RBI) to banks on the details of frauds, unscrupulous borrowers and related
parties, based on banks’ reporting so that necessary safeguards / preventive measures by way of appropriate
procedures and internal checks may be introduced and caution exercised while dealing with such parties by
banks.
The Chairmen and Managing Directors/Chief Executive Officers (CMD/CEOs) of banks
must provide focus on the "Fraud Prevention and Management Function" to enable,
among others, effective investigation of fraud cases and prompt as well as accurate
reporting to appropriate regulatory and law enforcement authorities including Reserve
Bank of India.

The fraud risk management, fraud monitoring and fraud investigation function must be
owned by the bank's CEO, Audit Committee of the Board and the Special Committee of
the Board.

❖ Classification of Frauds

 Misappropriation and criminal breach of trust.

 Fraudulent encashment through forged instruments, manipulation of books of account or

through fictitious accounts and conversion of property.
 Unauthorized credit facilities extended for reward or for illegal gratification.
 Cash shortages.
 Cheating and forgery.
 Fraudulent transactions involving foreign exchange
 Any other type of fraud not coming under the specific heads as above.

❖ Reporting of frauds to Reserve Bank of India

Banks need not furnish FMR 1 return in fraud cases involving amount below 0.1 million
to RBI in either hard or soft copy. However, banks at their end should make the data
entry in respect of such cases through the FRMS package individually in FMR 1 format
(less than0.1 million) which will get automatically captured in FMR 2 return and will
form part of the consolidated database relating to frauds for the respective bank. In
respect of frauds above 0.1 million the following procedure may be adopted.
 Audit of Banking Companies

❖ The audit of the banks should be well-acquainted with the relevant provision of the
special enactment that govern different types of banks, particularly those which affect the
various items of the financial implications of the business carried on by banks and the
types of the transaction that arise in the day-to-day operations. In this chapter, salient
features of audit of the banks are considered in the context of the provision of the various
enactments governing them.

❖ Legislations relevant to Audit of banks:-

The provisions of many Acts relevant to audit of different types of banks. An auditor of
the banks should acquaint with the specific provision of the Acts applicable to the type of
banks under audit. Nationalized banks are governed by the provisions of the relevant
Banking companies Act. Certain provision of the Banking Regulation Act 1949 also
applicable to nationalized banks The non-nationalized banking companies are governed
by the provision of the Banking Regulation Act 1949.Co-operative banks are governed
by the Co-operative Societies Act 1912 or the Co-operative Societies Act of the state in
which they are situated, as well as by Part-v of the Banking Regulation act 1949.Certain
provision of the Banking Regulation act have been modified while certain others have
been omitted in their allocation toco-operative banks. Regional rural banks are governed
by the Regional rural banks Act 1976. The provisions of the State bank of India Act
1955, and the State bank of India(subsidiary banks)Act 1959, apply State bank of India
and its subsidiaries respectively. Certain specified provisions of the Banking
Regulation act 1949, are applicable to regional rural banks as well as to the State bank of
India and its subsidiaries.

❖ Provision relating to Accounts:-

Section 29 of the Banking Regulation Act deals with the obligation of the banks
regarding maintenance of accounts and preparation of financial statements. Its main
preparation as follows;

Banks have to prepare a balance sheet and profit and loss accounts as on 31 stmarch every
year in the form to set out in the Third schedule to the Act. A foreign banking company
has to similarly prepare a balance sheet and a profit and loss a/c every year in respect of
the business transacted through its branching India.

The financial statements of the banks are to signed by the manager or the principal officer
and by atleast three directors. The financial statements of foreign banking companies are
to be signed by the manager or the agent of principal office in India

In cases of the banking companies the provisions of the companies Acts 1956,relating to
the financial statements are also applicable to the extent they are not inconsistent with
requirements of the Banking Regulation Ac, 1949.

As per the third schedule to the Banking Regulation Act, the balance sheet of the bank as
to classify the items of the Capital and Liabilities and those of thea ssets below:-
❖ The forms of the profits and losses a/c show the main item of the income,expenditure and
appropriations. The disclosure requirements of the Third Scheduledare discussed later in
this chapter along with the audit to verify the various items of the financial statements.

❖ Apart from the requirements of the Third Schedule to the banking regulation act1949,the
financial statement of the bank have to contain additional disclosures required by RBI
from time to time. Besides, listed banks have to also satisfy the disclosure of listing
agreement with stock exchange (s).

❖ RBI has issued detailed notes and instruction for completion of balance sheet and profit
and loss account of banks. These notes and instructions provident repetition of the
requirement of the Third schedule to the Banking Regulation Act and are thus useful to
the auditor.

Audit of Cooperative Banks

❖ The co-operative banks have a history of almost 100 years. Co-operatives in India came
into being as a result of the Government taking cognizance of the agricultural conditions
that prevailed during the latter part of the nineteenth century and the absence of
institutional arrangements for finance to agriculturists, which had resulted in mounting
distress and discontent. Small, local, locally worked institutions, co-operative in form,
which would satisfy the postulates of proximity, security and facility for providing credit,
were seen as the answer to this situation. Subsequent events during both pre and post-
Independence period have led to a vast growth of co-operative s covering various sectors
of the Indian economy. The potential of the co-operative sector for bringing about
development, right up to the nineties, resulted in an increase in the number of co-
operatives and their contribution, making the Indian co-operative movement one of the
largest movements of its kind in the world.

❖ Audit of State Co-operative Banks and Central Co-operative Banks is relatively a new
area for Chartered Accountants. On the recommendations of Revival Package for Short
 Term Co-operative Credit Structure. NABARD has issued instructions in the year 2008
for audit of and CCBs by Chartered Accountants to bring in professionalism in the audit
process. With a view to equipping the Chartered Accountants, several guidelines, format
of LFAR, etc., were issued by NABARD in the past 5 years. Besides, sensitization
meets / National Seminars etc., were also conducted to discuss operational problems and
find suitable solutions. During the seminars, a strong need for a Manual / Guidance Note
for audit of cooperative banks was expressed by the participants.

The Guidance Note has been designed to guide the auditors of State Cooperative Banks
(StCBs) and District Central Co-operative Banks (DCCBs) to conduct statutory audit as
envisaged by the respective State Co-operative Societies Act (“the Act”), Banking
Regulation Act (as applicable to Cooperative Banks), 1949, Reserve Bank of India (RBI)
and National Bank for Agriculture and Rural Development (NABARD), Notifications &
Circulars issued by Central Government and RBI and Accounting and Auditing &
Assurance Standards, Guidance Notes issued by ICAI as amended from time to time in
accordance with uniform auditing scope, programs and techniques as detailed in this
Guidance Note. The principles, practices and programs set out in this Guidance Note
need to be applied for the audits of StCBs and DCCBs irrespective of their geographical
distribution.

The standards and practices set out in this Guidance Note should be incorporated as the
minimum benchmark for all audits of StCBs and DCCBs. However, the audit approach
and the extent of the test procedures may be “tailored” by the auditors to suit the specific
needs of the small or very large StCBs and DCCBs.

❖ Need for Co-operative Audit

Co-operative Audit serves the following purposes:-

The members of the Society are to be satisfied that the affairs of the society are managed
properly and on sound business principles. This is possible by the Co-operative Auditor
undertaking a detailed check of the voluminous transactions taking place during the entire
year and making a report of his findings as a result of this check, to the members.
 A large number of societies borrow funds from outside. The creditors would be keen to
satisfy themselves of the financial soundness and credit worthiness of the society. For
this purpose they would depend upon the Co-operative Auditor’s report.

A large number of persons are employed by Co-operatives for managing their affairs. In
order to ensure that there is proper check on efficiency and integrity of employees, the
managements would require a systematic and thorough check of their accounts. This
purpose is served by Co-operative Audit.

Non-members who deposit their funds with the Co-operative Banks would like to satisfy
themselves that their funds are safe with the Bank, This is possible by the Co-operative
Auditor’s report.

❖ Salient features of Co-operative Audit:-

The audit of a Co-operative Society is different from that of a joint stock company
because the objects of a Co-operative Society are quite different from those of a Joint
Stock Company. While the main object of a Joint Stock Company is to earn profit, the
object of a Co-operative Society is to render service to its members. Service rather than
profit is the motto of a Co-operative Society.

Opinions have been expressed from time to time on the nature, extent and scope of Co-
operative Audit.

According to the Maclagan Committee, Co-operative Audit extends somewhat beyond

the bare requirements of the Act and should embrace an enquiry into all the
circumstances which determine the general position of the society. It is the duty of the
Co-operative Auditor to notice any instance in which the Act, rules or byelaws have been
infringed, to verify the cash balance and certify the correctness of the accounts, to
ascertain that loans are made fairly for proper periods and objects and on adequate
security to examine repayments in order to check book adjustments and improper
extensions and generally to see that the society is working on sound lines and that the
committee, the officers and the ordinary members understand their duties and
responsibilities.
 According to the Mirdha Committee, Co-operative Audit should include scrutiny of the
extent of benefit accruing to the weaker sections of the society’s members.

Thus a Co-operative Auditor should not confine his enquiry to the books of accounts but
should go beyond the books and make enquiries into the working and general functioning
of the society. His enquiry according to the Maclagan Committee should embrace all
circumstances which determine the general position of the society and should aim at
seeing that the society is working on sound lines. The audit of Co-operative Society has
to be conducted specially in the background of Co-operative Principles, and guidance is
to be given by the Co-operative Auditor for improvement of the Co-operative Institution
in the light of this background.

❖ Statutory provisions relating to Co-operative Audit

❖ Audit of Co-operatives is conducted as per provisions of Section 63 of the
Karnataka Co-operative Societies Act, 1959.

❖ According to section 63(1) “ Every Co-operative society shall get its accounts
audited at least once in each year by an auditor or an auditing firm appointed by
the general body from the panel of auditors approved by the Director of Co-
operative Audit and the Director of co-operative audit is the authority to prepare
and maintain a panel of auditors or auditing firms.” (sub Rule 6 ,8 and 9 of Rule
29B and sub Rule 12 of Rule 29B)

❖ According to section 63(3) the manner of preparation of the list of auditors and
auditing firms and the procedures to be followed by the co-operative society has
been detailed in rule 29(A) and 29(B).

❖ Section 63(11)- The Director of co-operative audit shall submit the audit reports of
an Apex co-operative society to the State Government annually to be placed before
the legislature (Rule 29B).

❖ According to section 63(15) , the auditor shall make a report to the co-operative
society on the accounts examined by him. The report shall state whether in his
opinion and to the best of his information and according to the explanations given to
 him, the said accounts give the information required by this act, in the manner so
required and give a true and fair view

❖ Main features of Co-operative Audit

The main features of Co-operative Audit relate to the following:-

❖ Adherence to Co-operative Principles It has to be ascertained in general whether and if so,

to what extent the objects for which the society was set up have been fulfilled. The assessment
need not be only in terms of profit made. It could also be in terms of benefits given to members.
The benefits could be in terms of sales effected at lower prices to members, economy achieved in
operations, avoidance of wastage of funds, avoidance of middlemen in purchases etc.,

❖ Observance of the provision of the Act and Rules Infringement of the provisions of the KCS
Act and Rules and the byelaws of the society, if any, should be pointed out in audit. Financial
implications of the infringement should also be assessed and indicated. As per Section 57(2A) of
the KCS Act and Rule 22(2) of the KCS Rules, the maximum dividend a society can pay to a
shareholder is 25 percent.

❖ Examination of overdue debts Overdue debts affect the working of a society seriously.
They affect the Working Capital position of the society. As such it is necessary to make a
detailed analysis of the overdue debts with a view to ascertaining the chances of their
recovery and classifying them as good or bad. It is also necessary to compare the
percentage of overdue debts to working capital and loans and advances with that of last
year and ascertain whether the trend is decreasing or increasing, whether adequate action
is being taken for recovery, and whether necessary provision is being made for doubtful
debts. Detailed instructions have been issued in this regard in the Audit Instructions

❖ Personal verification of member’s loan and examination of their pass Books This is
necessary in Co-operative Societies in order to ensure that books of accounts are free
from manipulation, since in many Rural and Agricultural Societies a considerable number
of members could be illiterate and as such personal verification provides a safeguard
 against any manipulation. Personal verification will however be on the basis of a test
check. Detailed instructions have been issued in this regard in the Audit Instructions.

❖ Audit classification of Society Audit classification made by the Auditor indicates the
overall performance of the society. Detailed instructions have been issued in this regard
in the Audit Instructions.

❖ Discussion of the Draft Audit Report with Managing Committee the Auditor with the
management before finalizing the Audit Report should discuss the draft audit report. If
the management desires. Detailed instructions have been issued in this regard in the Audit
Instructions.
Bank Audit Process
 Banks are central to the nation’s financial system because, by receiving deposits and
distributing loans, they circulate money. This makes stable and efficient banks essential
to the economy. Bank auditors, therefore, evaluate financial information for accuracy and
perform procedures that determine if management controls are effective. The public can
rely on the banking system because of these audit activities.

Audit of Incomes
Financial statement audits are a routine part of closing your financial books. Audits help
to ensure the accuracy of the accounting data used to compile the statements as well as
the overall calculations. An income statement audit can help you isolate mathematical
errors and ledger discrepancies or give you peace of mind before you file the income
statement during closing.

The first step in auditing financial statements is to verify the summary calculations. Start
with the income section, confirming that the total revenue amount is equal to the sum of
the income lines. Repeat this process for the expense category. Manually calculate the
difference between the revenue and expense numbers to verify the equity section, as
owner's equity is simply the difference between the revenue and expenses.

Once you determine that the calculations on the income statement itself are accurate, you
need to review the detail that contributes to the figures. Pull summary transaction reports
from the general ledger for each revenue account. Review the overall data on the
summary reports for accuracy. Run transaction-level reports for the accounts so that you
can view the details to confirm that the summary report figures are accurate. Each
transaction-level report shows you what has posted to the account. Compare the
 transactions in the ledger to the hard copy files, such as invoices or check stubs that
support the journal entries, to confirm that they were posted correctly.

When you complete a full audit of the income statement, select a few transactions from
each relevant account, such as a few credits posted to each revenue account and a few
payments issued from each expense account. Request the documentation of the
transactions you selected to complete a sample audit of the account activity. The
documentation in question would consist of check stubs and invoices or paperwork filed
to support journal entries. Check the calculations of the invoices or the payment
vouchers, and verify that the entries in the system match the documentation.

REVENUE AUDIT PROCEDURE

 Revenue audit is the audit of items governing income & expenditure of banks, basically
this type of audits are conducted with a view to verify the accuracy, relevance of
expenditure incurred & Incomes earned by the banks according to applicable latest
circulars, notification , Auditors only required to concentrate on the areas which affect
revenue items of the banks.

Normal Procedure to conduct the revenue audit is as under

❖ Study the relevant circulars pertaining to charges given by bank, Go through the
Format of Audit Report & Annexure attached to the audit report. Design the Query
Sheet in Format of annexure given to bank & get some print out copies of query sheet
before going to audit.

Prepare a separate file for audit & don’t forget to carry Audit engagement letter given by
head office along with file & query sheet formats, circulars, r scales, audit pens, pencils
calculators.

Prepare the Short Audit Programme for audit covering which areas to be covered & to be
covered by whom.

Auditors are advised to keep in mind the period of audit so as to avoid haphazard way of
audit.
❖ Scrutinize the previous revenue audit reports, latest concurrent audit reports of branch
to get the idea of nature of leakage that can be possible to identify. Get Some idea about
Bank Officials & Nature of their duties, positions,

Get Some Basic idea about branch’s banking software (i.e. Putting A/c No, Period of
Audit) so as to facilitate easy viewing of customer ledger.

❖ Ask the Bank manager to make available Advances Sanction Register for our Audit
Period, Jottings of Some Important accounts.
 Total Cash Credit Accounts Of Branch
 Top 10 Saving Accounts
 Top 10 Depositors of bank.
 Overdue Advances in Audit Period
 List of Special Advance Sanctions & Get its Sanction Letters.
 List of NPA Accounts of branch of Recoveries made during audit period against them.
Audit of Expenditure

Companies have many types of internal controls related to expenses. Some invoices may
require certain levels of signatures, and others may require a written contract. One of the
first steps in an audit is to evaluate paid expenses against how closely they follow the
internal controls. An offshoot of this step is for the auditor to recommend changes should
he find loopholes within the controls that may allow an employee to abuse or misuse the
process of paying expenses.

A reasonableness check involves checking expenses to see if they are in line with what is
considered ordinary. For example, an invoice of $100 for a small box of pencils would
 not be reasonable and should raise a red flag. An additional reasonableness step is to
make sure that only expenses that are necessary are incurred. Having a bill from two
electric companies for one location should also cause an audit flag, as most locations only
have one electricity supplier.

Expenses must be being received in a timely manner. The last thing a company wants is
for expenses to be turned in for something that occurred a year or two ago. A wide time
gap makes it harder for companies to make sure the expenses are legitimate and
reasonable. The older the invoice, the harder it is to ensure it is legitimate.

However, financial statements of financial firms such as banks are very different.On the
back of banking regulations, banks' accounts are presented in a different manner. As
such, one needs to analyze the same in a different manner.

The key expense of a bank is interest on deposits that are made with it. These could be in
the form of term (fixed) or savings bank account deposits. The second biggest expense
head for a bank would be its operating expenses. This head would include all operational
costs, which even non-financial companies expend. Some of include employee costs,
advertisement and publicity costs, administrative costs, rent, lighting and stationary.

Under expenses, there is also an item called 'provisions and contingencies' that is
included. In the simplest terms, these are liabilities that are of uncertain timing or
amount. This includes provisions for unrecoverable assets. In accounting terms, such
provisions are called as 'Provisions for Non-performing assets (NPAs)'. Apart from
NPAs, these provisions also include provision for tax and also depreciation in the value
of investments.

Moving on to the bank's expense account. The total interest expended stood at 89 billion.
The interest on deposits stood at 80 billion, while interest on borrowings from other
sources such as the RBI and other bank borrowings stood at 6 billion. Operating
expenses during the year stood at 56 billion. The major contributor to this head was
employee costs (23 billion). Provision and contingencies amount stood at 29 billion.

Audit of Assets
 What a bank owns, including loans, reserves, investment securities, and physical assets.
Bank assets are typically listed on the left-hand side of a bank's balance sheet. Bank
liabilities, what a bank owes, are listed on the right-hand side of a bank's balance sheet.
Net worth is the difference between assets and liabilities. The largest asset category of
most banks is loans, which generates interest revenue. A critical asset category used to
maintain the safety of deposits is reserves (vault cash and Federal Reserve deposits).

Bank assets are the physical and financial "property" of a bank, what a bank owns. While
a bank commonly owns physical property (buildings, land, furniture, equipment), the
bulk of a bank's assets are financial--legal claims on the property or the wealth of others.
The two most notable asset categories are loans (which generate interest revenue) and
reserves (which keep deposits safe).

 Audit of Bank and Cash

❖ Liquid assets and include: notes and coins, bank current accounts, bank deposit accounts

❖ Vulnerable assets because of its liquidity

❖ Easily verified because they can be confirmed directly by third parties or by physical
counts

 Risks

❖ Fraudulent activity or misappropriation of funds

❖ Inappropriate or inadequate banking arrangements resulting in financial loss.
❖ Delays in making banking are resulting in financial loss or overdraft

 .Audit objectives

❖ Completeness: to ensure that there is no unrecorded cash. This means reconciling cash
balances to records, ensuring that proper sales cut off has been performed.
❖ Accuracy of measurement: to ensure that amounts are correctly recorded in the proper
accounting period. This means that cut off is correct.

❖ Existence: to ensure that the cash exist at a given date. The related evidence includes
cash count.

❖ Rights and obligations: to ensure that the company has a right to the cash

❖ Occurrence: to ensure that the cash belongs to the company at the year-end date. This
means checking to ensure no cash receipts are postdated

❖ Presentation and disclosures: to ensure that the cash balance and related income
statement entries are correctly disclosed in the FS in accordance with legislation and
accounting standards.

 Test on bank reconciliation at year end

❖ Compare cash book entries with bank statements.

❖ Balance as per bank statement at year end to tally to bank confirmations letter and to
❖ Balance used in bank reconciliation.
❖ Verify unpresented cheques.
❖ Verify outstanding lodgments.
❖ Establish arithmetical accuracy.
❖ Account for direct debits and direct credits
❖ Check post balance sheet transactions.

 Banks reports for audit purposes (bank confirmation)

❖ Consist of confirmation of bank balances and other matters from the client’s bankers at
the period end.
❖ Standard letters are used to confirm information with the bank where the client has
dealings.

 Reasons for auditors to seek bank confirmation

❖ Bank confirmation provides evidence in respect of existence, ownership, and accuracy.

❖ It is a third party, written in relation to the balance sheet of assets and liabilities.

 Procedures
❖ Request for confirmation issued to relevant banks: a request for a bank confirmation is to
be issued on auditor’s letterhead and sent to all banks where the client has dealings. The
request should be clear and concise.

❖ The request to be vague or precise: auditors should consider whether it is appropriate to

list down balances and other information and request confirmation, or to request details
of balances and other information.

❖ Control over the content and dispatch of requests for confirmation: is the responsibility of
the auditor. However, the client will need to authorize disclosure of the relevant
information. Replies should be sent direct to the auditor who should enclose a pre-paid
envelope to facilitate a speedy response.

❖ What precise information to be sought: the following categories of information may be

sought:

 Balances due to or from the bank, the letter may give the account number, description
and currency, and should request information on nil balances and accounts closed during
the period.
 Collateral given or received, maturity and interest terms, unused facilities, lines of
credit and any rights of offset or other rights or encumbrances.
 Terms and repayments conditions of loan and overdrafts.
 Contingent liabilities such as bills, acceptance, guarantees, and endorsements.
 Asset repurchase and resale agreements and options.
 Forward currency and other outstanding contracts.
 Assets held in safe custody any encumbrances over them.

Check that replies are complete: in reviewing the bank’s reply it is important for auditors
to check that the bank has answered all the questions information asked for in full.

❖ Cash on hand

Verification
The auditor should therefore plan to count all cash balances SIMULTANEOUS to prevent
any ‘transfers’ of floats to hide discrepancies.
 Audit of Liabilities

Liabilities are the financial obligations of an enterprise other than owners’ funds.

Liabilities include loans and borrowings, trade creditors and other current liabilities,
deferred payment credits, installments payable under hire purchase agreements, and
provisions. Besides liabilities, this Guidance Note also deals with contingent liabilities,
i.e., obligations relating to past transactions or other events or conditions that may arise in
consequence of one or more future events which are presently deemed possible but not
probable.

In any auditing situation, the auditor employs appropriate procedures to obtain reasonable
assurance about various assertions [see Statement on Standard Auditing Practices (SAP)
5, Audit Evidence]. In carrying out an audit of liabilities, the auditor is particularly
concerned with obtaining sufficient appropriate audit evidence to satisfy himself that all
known liabilities are recorded and stated at fair and reasonable amounts.

Bank's liabilities constitute five major items. The share capital, the contribution which
shareholders have contributed for starting the bank. Reserve funds are the money, which
the bank has accumulated over the years from its undistributed profits. Deposits are the
money owned by customers and therefore it is a liability of a bank. There can be various
kinds of deposits and recurring deposits. Apart from these items a bank can borrow from
central and other commercial banks. These borrowings are also treated as bank's
liabilities.

Liabilities are either the deposits of customers or money that banks borrow from other
sources to use to fund assets that earn revenue. Deposits are like debt in that it is money
that the banks owe to the customer but they differ from debt in that the addition or
withdrawal of money is at the discretion of the depositor rather than dictated by contract.

 Checkable Deposits
❖ Checkable deposits are deposits where depositors can withdraw the money at will.
These include all checking accounts. Some checkable deposits, such as NOW, super-
NOW, and money market accounts pay interest, but most checking accounts pay very
little or no interest. Instead, depositors use checking accounts for payment services,
which, nowadays, also includes electronic banking services.

Before the 1980s, checkable deposits were a major source of cheap funds for banks,
because they paid little or no interest on the money. But as it became easier to transfer
money between accounts, people started putting their money into higher yielding
accounts and investments, transferring the money when they needed it.

 Non transaction Deposits

❖ Nontransaction deposits include savings accounts and time deposits, which are
basically certificates of deposits (CDs). Savings accounts are not used as a payment
system, which is why they are categorized as nontransaction deposits and is also the
reason why they pay more interest. Savings deposits of yore were mostly passbook
savings accounts, where all transactions were recorded in a passbook. Nowadays,
technology and regulations have allowed statement savings where transactions are
recorded electronically and may be viewed by the depositor on the bank's website or a
monthly statement is mailed to the depositor; and money market accounts, which have
limited check writing privileges and earn more interest than either checking or savings
accounts.

❖ A Certificate of Deposit (CD) is a time deposit where the depositor agrees to keep the
money in the account until the CD expires. The bank compensates the depositor with a
higher interest rate. Although the depositor can withdraw the money before the CD
expires, banks charge a hefty fee for this.

There are 2 types of certificates of deposit (CDs): retail and large. A retail CD is for less
than $100,000 and is generally sold to individuals. It cannot be resold easily. Large CDs
are for $100,000 or more and are highly negotiable so they can be easily resold in the
money markets. Large negotiable CDs are a major source of funding for banks.
 Borrowings

Banks also borrow money, usually from other banks in what is called the federal funds
market, so-called because funds kept in their reserve accounts at the Federal Reserve are
called federal funds, and it is these accounts that are credited or debited as money is
transferred between banks. Banks with excess reserves, which are usually smaller banks
located in smaller communities, lend to the larger banks in metropolitan areas, which are
usually deficient in reserves.

The interbank loans in the federal funds market are unsecured, so banks only lend to
other banks that they trust. Part of the reason for the 2007 - 2009 Credit Crisis is that
banks didn't know which other banks were holding risky mortgage-backed securities that
were beginning to default in large numbers, so they stopped lending to each other, forcing
banks to restrict their lending to the public, which caused the supply of money to decline
and the economy to contract.

Banks also borrow from non depository institutions, such as insurance companies and
pension funds, but most of these loans are collateralized in the form of a repurchase
agreement (aka repo), where the bank gives the lender securities, usually Treasuries, as
collateral for a short-term loan. Most repos are overnight loans that are paid back with
interest the very next day.

As a last resort banks can also borrow from the Federal Reserve (Fed), though they rarely
do this since it indicates that they are under financial stress and unable to get funding
elsewhere. However, during the credit freeze in 2008 and 2009, many banks borrowed
from the Fed because they could not get funding elsewhere.

 Verification and valuation of Different Kinds of Liabilities:

❖ Capital: Although capital is not the liability of a company, still it should be verified to
enable an auditor to give a certificate in regard to the correctness of the balance sheet.
The auditor should examine the Memorandum of Association and the Articles of
Association of the company. He should also examine the CashBook, Pass Book and
 Minutes Book of the Board of Directors to find out the number and different classes of
shares issued
.
❖ Reserve Accounts and Funds: For the audit of these two items, the auditor should
examine the Minutes Books of directors meeting.

❖ Debentures and Mortgage: The auditor should enquire in to powers of the company to
borrow money

❖ Trade Creditors: The auditors should ask for schedule of the creditors and check it with
the purchase ledger which in its turn may be checked with the books of original entry
with the Purchase invoices, Credit Notes, Goods Inward Books,Return Outward Book,
Bill Payable Book, and Cash Book. The Auditor should see that all Purchase during the
year have been included in the purchases and especially purchases made at the close of
the year

❖ Bills Payable: The auditor should verify this item form Bills payable Book and the Bills
Payable Account. The Bills payable already paid should be checked rom the Cash Book
and examine the returned bills payable. To see the genuineness of the bills payable in
hand on the date of balance sheet, the auditors should check the cash book of the
succeeding year as to whether any payment has been made in respect of such bills
.
❖ Outstanding Expenses: The auditor should get a certificate from a responsible official to
see that all expenses for the current year are included and the payment for each expenses
such as interest, discounts, salaries have not been paid are included.

❖ Loans: Reference may be made to the agreement and correspondence for getting the
loan. If interest on the loan has not been paid, he should see that it is shown as a liability.
In case of bank overdraft, the agreement with the bank and the security offered should be
examined

❖ Contingent Liability: The auditors should consider the circumstance and the situation
about the occurrence of that type of liabilities.
 .

Type of Audit In Banks

Statutory audit:

❖ The statutory audit, which is compulsory as per the law. The statutory audit of banks
includes examination and inspection of internal audit, concurrent audit, etc. The statutory
audit of banks is like a post mortem activity. The suggestions of the statutory auditors
 can assist the bank management in improving the effectiveness of internal
audit/concurrent audit/inspection functions, etc. In this way statutory plays a very
important role in regulating the banking companies.

A statutory audit is a legally required review of the accuracy of a company's or

governments financial records. The purpose of a statutory audit is the same as the
purpose of any other type of audit: to determine whether an organization is providing a
fair and accurate representation of its financial position by examining information such
as bank balances, bookkeeping records and financial transactions.

❖ BREAKING DOWN 'Statutory Audit'

For example, a state law may require all municipalities to submit to an annual statutory
audit examining all accounts and financial transactions and to make the results of the
audit available to the public. The purpose of such an audit is to hold the government
accountable for how it is spending taxpayers' money.

Many government agencies participate in regular audits. This helps ensure any funds
directed by the larger government entity, such as at the federal or state level, have been
used appropriately and according to any associate laws or requirements for their use.
Being subject to a statutory audit is not an inherent sign of wrongdoing. Instead, it is
often a formality designed to help prevent such activities, such as the misappropriation
of funds, by ensuring regular examination of various records by a third party. The same
also applies to other audits.

❖ Understanding Statutes
The term statutory is used to denote the audit is required by statute. A statute is a law or
regulation enacted by the legislative branch of the organization’s associated government.
Statutes can be enacted at multiple levels, including federal, state or other municipality.
In business, statute can also refer to any rule set forth by the organization’s leadership
team.

Internal audit

❖ Banks generally have a well-organized system of internal audit. There internal auditors
pay frequent visit to the branches. They are an important link in internal control of the
 bank. The systems of internal audit in different banks also have a system of regular
inspection of branches and head office. A separate department within the banks by firms
of chartered accountants carries out the internal audit and inspection function.

An employee of a company charged with providing independent and objective

evaluations of the company's financial and operational business activities, including its
corporate governance. Internal auditors also provide evaluations of operational
efficiencies and will usually report to the highest levels of management on how to
improve the overall structure and practices of the company.

Internal auditors deal with issues that are fundamentally important to the survival and
prosperity of any organization. Unlike external auditors, they look beyond financial risks
and statements to consider wider issues such as the organization’s reputation, growth, its
impact on the environment and the way it treats its employees.

In sum, internal auditors help organizations to succeed. We do this through a

combination of assurance and consulting. The assurance part of our work involves
telling managers and governors how well the systems and processes designed to keep the
organization on track are working. Then, we offer consulting help to improve those
systems and processes where necessary.

Concurrent audit:

❖ Concurrent audit is the system which introduced by the RBI with the view that interval
between the occurrence of transaction and it’s over view kept to the minimum extent and
examination of transactions by the auditors take place as soon as the transaction take
place. It has perceived the effective means of control. The main view of concurrent
auditors is to see that the transactions are properly recorded, documented and vouched.

Concurrent audit is an examination, which is contemporaneous with the occurrence of

transactions or is carried out as near thereto as possible. It attempts to shorten the
interval between a transaction and its examination by an independent person not in its
documentation. In concurrent audit, there is an emphasis in favor of substantive checking
in key areas rather than test checking
 This concurrent audit is essentially a management process integral to the establishment
of internal accounting functions and effective controls and setting the tone for a vigilance
internal audit to preclude the incidence of serious errors and fraudulent manipulations.
The main focus while conducting concurrent audit it to ensure that transactions are not
dealt with in routine but in adherence with the systems and procedures laid down. The
study of various fraudulent transactions with the systems and procedures, by the bank
employees, which resulted in misuse of one's position. Hence, the focus of concurrent
audit is on adherence to laid down systems, procedures and safeguards.

A concurrent auditor may not sit in judgment of the decisions taken by a branch
manager or an authorized official. The concern was that this is beyond the scope of
concurrent auditor. However, the auditor will necessarily have to see whether the
transaction or decisions are within the policy parameters laid down by the Head Office,
they do not violate the instructions or policy prescriptions of the RBI, and that they are
within the delegated authority and in compliance with the terms and conditions for
exercise of the delegated authority. In every large branch, which has different divisions
dealing with specific activities, concurrent audit is a means to help the in-charge of the
branch to ensure on an ongoing basis that the different divisions function within laid-
down parameters and procedures.

System audit:

❖ In today’s technological advancements, banking companies are using a well-organized

computer system to perform their transactions. So, it is very necessary to conduct
‘system audit’ in order to evaluate the computer system for effectiveness. System audit is
the audit of such computer environment/system and comprises the following internal
controls over EDP activities and with application controls specific control procedures
over accounting applications/assuring that all transaction are recorded and authorized
and completely, accurately, timely processed manner which in turn are verified by
computer.
 An information systems audit performed by RMAS is a comprehensive examination of a
given targeted system. The audit consists of an evaluation of the components which
comprise that system, with examination and testing in the following areas:

 High-level systems architecture review

 Business process mapping (e.g. determining information systems dependency with
respect to user business processes)
 End user identity management (e.g. authentication mechanisms, password standards,
roles limiting or granting systems functionality)
 Operating systems configurations (e.g. services hardening)
 Application security controls
 Database access controls (e.g. database configuration, account access to the database,
roles defined in the database)
 Anti-virus/Anti-malware controls
 Network controls (e.g. running configurations on switches and routers, use of Access
control lists, and firewall rules)
 Logging and auditing systems and processes
 IT privileged access control (e.g. System Administrator or root access)
 IT processes in support of the system (e.g. user account reviews, change management)
 Backup/Restore procedures

❖ The general mechanics of the audit consist of sampling configuration and log files, with
subsequent interviews with key personnel. Additionally, RMAS performs testing with
regard to identified key controls, and may require the creation of user accounts such that
RMAS auditors may more thoroughly peruse the system and determine the efficacy of
implemented controls. Further, a subset of integration testing may be performed against
test or staging environments to assure controls that the general user may experience are
in place and functioning as described and expected.
While much of the evaluation performed in an information systems audit is heavily
focused on the IT general control environment for the given system, interviews with
primary the primary users or information owners may be conducted. Inquiry into the user
community would be performed to determine general user acceptance of the system and
to determine service expectations with regard to the system.

Revenue audit:
❖ Revenue audit refers to the audit of revenues/ incomes. In revenue audit of banking
companies, auditors go through the various sources of revenues from which bank earn
income. In revenue audit of banks, the auditor inspects that all the records are showing
true and fair picture of revenues or not.
A Revenue audit is an examination of the information and figures shown by a taxpayer
in their tax returns against those shown in their business records. Therefore, the auditor
needs to see all books and records in relation to the tax for the period being audited and
these should be available on the first day of the audit.
It is normally concerned with the review of the taxpayer's return of income for one year,
but where significant discrepancies arise during the audit, the Revenue may extend the
examination for prior or subsequent years.

The primary objectives of Revenue audits are to promote voluntary compliance and
monitor tax compliance. The function of a Revenue audit is to:

❖ Determine the accuracy of a return in relation to tax liability or claim for

❖ repayments;

❖ Identify any additional liabilities or other matter requiring adjustment;

❖ Collect tax, interest and penalties where applicable;

❖ Specify any remedial action required to put the taxpayer on a compliant footing

❖ Where indicators of serious evasion occurs to consider prosecution.

 BOOKS OF AUDIT OF BANKS

Introduction

❖ A banking company is required to maintain the books of accounts in accordance with

sec.209 of the companies act. There are, however, certain imperatives in banking
business they are the requirements to maintain accurate and always up to date account.
Banks, therefore, device their accounting system to suit these requirements.
The main
characteristics of a banks system of book keeping are as follows:
Entries in the personal ledgers are made directly from vouchers instead of being posted
from the books of prime entry.

 The vouchers entered into different personal ledgers each day are summarized on
summery sheet; the totals of each are posted to the control accounts in the general ledger.

 The general ledger trail balance is extracted and agreed every day.

 All entries in the detail personal ledgers and the summary sheet are check by person other
than those who have made the entries, with the general results that most clerical mistakes
are detected before another day begins.
 A trial balance of the detailed personal ledgers is prepared periodically, usually every two
weeks, and agreed with the general ledger control accounts.

 Expecting for cash transactions, always two vouchers are prepared for each transaction,
one for debit and the other for credit. This system ensures double entry at the basic level
and obviates the possibility of errors in posting.

PRINCIPAL BOOKS OF ACCOUNT

❖ General ledger:
It contains control accounts of all personal ledgers, the profit and loss account and
different assets and liabilities accounts. There are certain additional accounts known as
contra accounts, which is unique feature of bank accounting. These contra accounts are
maintained with a view to keeping control over transactions, which have no direct effect
on the banks positions.
For e.g. letter of credit opened, bills received for collection, guarantee is given etc.

❖ Profit and Loss ledgers;

Some banks keep one account for profit and loss in this general ledger andmaintained
separate books for the detailed accounts. These are columnar bookshaving separate
columns for each revenue receipt and expense head. Other bankskeep separate books for
debits and credits posted are entered in to the profit andloss account in the general ledger.

SUBSIDIARY BOOKS OF ACCOUNTS

❖ Personal ledgers:
Separate ledgers are maintained by banks for different types of accounts, i.e.current
account, saving account, etc. As has been maintained earlier, these ledgersare posted
directly from vouchers and the entire voucher entered in each ledger in a day are
summarized in to Voucher Summary Sheets.

❖ Bill Registers:

Details of different types of bills are kept in separate registers, which have suitable
columns. For e.g. bill purchased, inward bill for collection, outward bills for collection
 etc are entered serially day to day in separate registers. Entries in these registers are made
by reference to the original documents.

❖ Other subsidiary registers:

There are different registers for various types of transaction. Their number, volumeand
details, which differ according to the individual needs of each bank. Forexample, there
will be registers for:

 Demand drafts, telegraphic and mail transfers issued on branches or agencies.

 Demand drafts, telegraphic and mail transfers received from branches and agencies.

 Letters of credit.

 Letter of guarantee

❖ Departmental journals:

Each department of bank maintains a journal to note the transfer entries passed byit.
These journals are memoranda book only, as all the entries made there are alsomade in
the daybook, through voucher summary sheets. The purpose is toMaintain record of all
transfer entries originated by each department.

8.2 Other memoranda books:

❖ Besides the book mentioned above, various departments of a bank have to mention a
number of memoranda books to facilitate their work. Some of the important books are
described below:

 Receiving cashiers cash book

 Paying cashiers cash book

 Main cash book

 Cash balance book

❖ The main cashbook is maintained by a person other than cashier. Each cashier keeps a
separate cashbook. When cash is received, it is accompanied by pay-in-slips or other
similar documents. The cashier makes entry in his book, which is check by the chief
cashier.

❖ Outward clearings:

A person checks the vouchers and list with the clearing cheques received books. The
vouchers are then sent to appropriate departments, where customers’ accounts are
immediately credited. Normally no drawings are allowed against clearing cheques
deposited the same day but exceptions are often made by the manager in the case of
established customer.
❖ Inward clearing:

Cheques received are check with the accompanying list. These are then distributed to
differed department and number of cheques given to each department is noted in a memo
book. When the cheques are passed and posted in to ledger, there number is
independently agreed with the memo book. If the cheques are found unpayable, they are
return to clearing house.

❖ Loans and overdrafts departments:

 Registers for shares and other securities held on behalf of its customer

 Summary books of securities give in details of government securities.

  Godown registers maintained by the Godown keepers of bank.

 Overdraft sanction register

 Drawing power book.

 Delivery order books.

 Storage books.

❖ Deposit department:

 Account opening and closing registers.

 Fixed deposits rate register.

 Due date dairy.

 Specimen signature book

❖ Establishment department:

 Salary and allied registers.

 Register of fixed asset

  Stationary registers

 Old record registers

❖ General:

 Signature books of bank officers

 Private telegraphic code and ciphers

❖ Statically books:

Statically records kept by different books are in accordance with their

individual needs. For example, there may be books for recording:

 Average balances in loans etc.

 Deposits received and amounts paid out each month in the various departments.

 Number of cheques paid.

 Number of cheques, bills and other items collected.

 CONCLUSION

The project the position of Indian banking system as well as the principal laid down by
the Basel Committee on banking supervision. This assessment was done in seven major
areas, which are core principals, concurrent audit, internal audit, deposit, loan accounting
and transparency and foreign exchange transaction. The project concluded that, given the
complexity and development of Indian banking sector, the overall level of compliances
with the standards and codes is of high order. This project gives the correct ideas about
how the major areas can be found by way of effective auditing system i.e. errors, frauds,
manipulations etc. form this auditor get the clear ideas how to recommend on the banks
position. Project also contain that how to conduct of audit of the banks, what are the
various procedure through which audit of banks should be done. Form auditing point of
view, there is proper follow up of work done in every organization whether it is banking
company or any other company or any other company there no misconduct of
transactions is taken places for that purpose the auditing is very important aspect in
today’s scenario form company and point of view.