The NPA mess, which runs into over Rs 10 lakh crore, has originated from a "systemic disregard" to cost accounting and cost audit information in the past few years, ICMAI President Balwinder Singh said.
The comments come days after Yes Bank was put under a moratorium by the government and the Reserve Bank of India (RBI) due to an inability to raise capital. The country's largest lender State Bank of India has been forced to lead a scheme of restructuring and has committed Rs 10,000 crore.
The statutory body's president recommended making cost audits mandatory for evaluation of all large new loan proposals and their periodic review to check rising non-performing assets (NPAs).
"Cost statements can provide unit-wise and product-wise profitability based on stringent cost accounting standards, which offer significantly more insights than the corporate-level financial information presently available to the lenders," he said.
Singh also added that the government must take urgent steps in this regard, as traditional financial audit and assurance functions have failed time and again. AA HRS