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The Comptroller and <keyword id="2088691" type="UNKNOWN" weightage="20" keywordseo="Auditor-General-of-India">Auditor General of India</keyword> (<keyword id="6356851" type="CITY" weightage="20" keywordseo="CAG">CAG</keyword>) plans to audit the impact of note ban and the affect it has had on government tax revenues, said <keyword id="1925426" type="UNKNOWN" weightage="20" keywordseo="CAG-Shashi-Kant-Sharma">CAG Shashi Kant Sharma</keyword>, according to <keyword id="6367495" type="COMPANY" weightage="20" keywordseo="PTI">PTI</keyword>. 
 In an interview to PTI, he said the auditor is gearing up to audit tax revenues under the new Goods and <keyword id="645517" type="COMPANY" weightage="20" keywordseo="services-tax">Services Tax</keyword> (GST) regime and has started capacity building and reorienting its audit methodology and procedures. 
 Among the special audits, CAG has already completed audit of agricultural crop insurance scheme and flood control and flood forecasting and is now engaged in several important audits like Right to Education, National Rural Health Mission, defence pensions and <keyword id="2259162" type="UNKNOWN" weightage="20" keywordseo="Ganga-rejuvenation">Ganga Rejuvenation</keyword>, he said. "These reports should be ready by the end of the current year." 
 <keyword id="445" type="PERSON" weightage="20" keywordseo="Sharma">Sharma</keyword> asserted that CAG has audit jurisdiction over any body or authority which has any relation to government revenues and expenditure and resistance by some like city development bodies, DISCOMs and metro corporations will wither away. 
 
"We plan to audit certain issues related to fiscal impact of demonetisation, largely its impact on tax revenues," he said. 
 
The government had withdrawn old 500 and 1,000 rupee notes from circulation on November 8 last year, and announced a new tax amnesty scheme for those holding unaccounted junked currency. 
 
CAG audit may look into expenditure on printing of notes, RBI dividend payout and banking transaction data. 
 The auditor has also conveyed to the government its stand on the recent move of the <keyword id="6355040" type="ORGANIZATION" weightage="20" keywordseo="GST-Council">GST Council</keyword> to delete section 65 of the preliminary draft that authorised CAG to audit GST. 
 
"Our mandate covers GST just like the earlier taxation regimes were covered. We have already started work on restructuring of our revenue audit arrangements to methis likely challenge when GST is introduced. 
 
"This exercise would include issues of capacity building, data access and analysis, reorientation of audit methodology and procedures and developing end-to-end IT solutions," he said. 
 
Sharma said executive, legislature, judiciary and audit have clearly demarcated roles and responsibilities. 
 
"The framers of our Constitution were fully aware of the concept of checks and balances and hence you find the mention of Judiciary and CAG in the fifth part of the Constitution along with legislature and executive," he said. "The CAG's DPC Act of 1971 provides the details of the mandate and scope of audit available to us." 
 
Stating that there are no lacunae in CAG's empowerment but with advent of time, the governance models have undergone changes. 
 The September 2014 judgement of the <keyword id="6354977" type="ORGANIZATION" weightage="20" keywordseo="Supreme-Court">Supreme Court</keyword> in the telecom case "reinforced an important principle that wherever public resources are being used by private companies for revenue generation, CAG will have a duty to examine as to whether the government is getting due share of such revenue," he said. 
 
"So, I can say that the bodies and authorities which have any relation to government revenues and expenditure are under the audit jurisdiction of CAG," he said. 
 
City development bodies, electricity distribution companies and metro corporations "resist" CAG audit on the ground of being autonomous or on the ground of getting no support of the government although they perform the functions which were earlier being performed by the government departments, he said. 
 
"I believe the situation will settle down with passage of time and such resistance will wither away," he added.

Demonetization – profit or
loss? Let CAG deconstruct it

<ul><li>Total exposure of Indian banks in the alleged fraud is approximately Rs 20,000 crore</li><li><keyword id="6355975" type="COMPANY" weightage="20" keywordseo="axis-bank">Axis Bank</keyword> has an exposure of Rs 20-30 billion, <keyword id="6358005" type="COMPANY" weightage="20" keywordseo="allahabad-bank">Allahabad Bank</keyword> has Rs 40 billion and SBI, Rs 13 billion. </li><li>As a result of the scam, the Reserve Bank of India (RBI) decided to ban LoU-based transactions on March 13.</li></ul> <keyword id="62034" type="CITY" weightage="20" keywordseo="Punjab-National-Bank">Punjab National Bank</keyword> (PNB) has five days to honour its guarantees to the <keyword id="63524" type="CITY" weightage="20" keywordseo="Union-Bank-of-India">Union Bank of India</keyword> to the tune of Rs 10 billion. If it fails to do so, Union Bank, in an unprecedented move, will have no option but to consider PNB a defaulter in its books and may even have to classify the unpaid amount as a non-performing asset (NPA) based on the recommendations of its auditors. Both banks are state-owned and if this default happens, it could shake the foundation of the banking sector leading to both the people and international banking institutions losing faith in the banking system. The only way this can be avoided is if the government or the RBI swoop in and bail PNB out. All this stems from the <keyword id="571991" type="ORGANIZATION" weightage="20" keywordseo="Nirav-Modi">Nirav Modi</keyword> case which involves fraudulent letters of undertaking (<keyword id="368886" type="PERSON" weightage="20" keywordseo="Lou">LoU</keyword>). And though this matter is being investigated by government agencies, Union Bank contests that there is no fraud in its books. Rajkiran Rai, MD of Union Bank told the <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/pnb-may-become-1st-bank-to-be-labelled-as-defaulter/articleshow/63459075.cms">Economic Times</a>, “For us, it is a genuine claim on PNB backed by documents. It is not a fraud in our books... We will take the auditor’s view. However, we don’t want to list PNB as a defaulter. We are expecting some intervention from either the government or RBI so that there is a resolution by March 31.” LoUs are essentially a tool used between Indian banks as guarantees under which customers of one bank can raise money from the other Indian bank's foreign branch in the form of a short-term credit arrangement, typically 90 days long. In the case of Nirav Modi and Mehul Choksi scam, the total exposure of Indian banks in the alleged fraud is approximately Rs. 20, 000 crore--almost twice the initial estimate. According to <a href="http://www.business-standard.com/article/finance/in-5-days-pnb-may-be-first-bank-to-get-defaulter-tag-due-to-nirav-modi-118032600248_1.html" data-type="tilCustomLink">Business Standard</a>, apart for Union Bank of India, <a class="storyTags" href="http://www.business-standard.com/search?type=news&amp;q=axis+bank" target="_blank">Axis Bank </a>has an exposure of Rs 20-30 billion, <a class="storyTags" href="http://www.business-standard.com/search?type=news&amp;q=allahabad+bank" target="_blank">Allahabad Bank </a>has Rs 40 billion and SBI, Rs 13 billion. As a result of the scam, the Reserve Bank of India (RBI) decided to ban LoU-based transactions on March 13. However, this move has raised concerns with a bunch of bankers. Asked if the RBI decision is an overreach action by the <a href="https://economictimes.indiatimes.com/news/economy/policy/policymakers-need-to-be-careful-sanyal-on-lou-ban/articleshow/63302747.cms">Economic Times</a>, the Finance Ministry's Principal Economic Advisor Sanjeev Sanyal said, "I am not in a position to comment on RBI decision they have just introduced… But, the general point remains that you have to take a nuanced view of these things in particular because you are not dealing with a silo system. You are dealing with an inter-connected ecosystem and if you block off oxygen in one part it rapidly spreads to rest of the system.”

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Demonetization – profit or loss? Let CAG deconstruct it

BI India Bureau

PNB might become first bank to get 'defaulter' tag in 5 days

Kavita Majumdar

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