Lots of ‘holes’ in Kerala Bank: Auditors expose major flaws

THIRUVANANTHAPURAM: As is known to all, Kerala Bank is a dream project of the state Government and was established way back in 2019 with much fanfare.

But why have critical basics, such as the issuance of share certificates, been so blatantly ignored?

It’s close to five years now since 13 district cooperative banks (DCBs) in the state, barring Malappuram DCB, were merged with Kerala State Cooperative Bank (KSCB) to form a larger bank, also has since been known as Kerala Bank.

But surprisingly, the newly formed bank is yet to issue share certificates in the name of Kerala State Co-operative Bank to the existing shareholders of the merged entity.

Other major flaws

Besides the negligence in the issue of share certificates, the auditors have raised concerns about other serious lapses on the part of the management of the bank.

Talking to businessbenchmark.news, a chartered accountant specialising in company affairs said this is very serious as the share certificate is the predominant document that proves the ownership in an entity.

And more seriously, there are certain shareholders, who have been allotted shares at Rs100 per share, whereas the current share price of Kerala Bank is at Rs1,000 per share.

Accounts qualified

The bank’s auditors have flagged these issues and have gone as far as qualifying the 2023-24 (FY24) accounts of bank.

In accounting and auditing terms, a ‘qualification’ indicates serious concerns and a lack of confidence in the financial statements.

This step suggests that the auditors are deeply concerned about the legality and accuracy of the bank’s financial reporting in light of these unresolved issues.

The auditors have also stated that they are unable to verify the pre-migration transactions prior to the merger and, therefore, cannot comment on the accuracy of the opening balances after the migration of financial statements of the individual DCBs in the financial statements of the merged entity.

Unclaimed dividends

The details of the unclaimed dividends also seem to be incomplete with regard to KSCB.

 “We have not obtained the aging schedule of the unclaimed dividends. Therefore, in the absence of the required evidence we are unable to comment on the amount to be transferred to the Depositor Education and Awareness Fund (DEAF) account,” they noted.

After ten years of inactivity, the amount in such unclaimed accounts is transferred by the bank to the DEAF account

Why rental income?

The auditors have also questioned the propriety of the rental income earned by the bank.

“We have noted that bank has earned rental income during the financial year. Earning income from any activity other than banking business is against the RBI guidelines,” they further added.