According to the auditors, claims of Rs 8.79 crore (including Rs 3.80 crore for the latest year) are yet to be allowed by the income tax department.

"Such accounting is not in confirmity with AS-9 issued by the Institute of Chartered Accountants of India. The profit for the year is overstated by Rs 3.80 crore," the auditors say.

Further, a sum of Rs 13.35 crore was accounted for as interest on income tax refunds during the year, but this has been shown as "interest income--others".

According to analysts, "If the interest earned on tax refunds for the year (Rs 13.35 crore) and the income tax claims (Rs 3.80 crore) for the year are deducted, net profit for the year will stand reduced to Rs 14.21 crore. This brings down the net profit for the fiscal 2000 below the previous year's level of Rs 14.69 crore."

Also, the auditors' report says that the bank has not provided for liabilities on account of wage arrears for staff and employees effective from November 1997 to April 1998. The amount of wage arrears has, however, not been quantified by the auditors. The bank may have to shell out higher wages once a new wage deal comes into force.

The report also mentions that inter-branch accounts, accounts with the Reserve Bank of India (RBI) and other banks/institutions and Nostro accounts have a number of unresponded/unreconciled entries which have been pending for a long period. Also balancing and reconciliation of books and adjustment of entries are pending in a number of branches. But, according to the auditors, the consequential effect on the accounts could not be ascertainable.

A senior public sector bank official said that many nationalised banks face similar problems in reconciling their entries due to lack of computerisation in many of their up-country branches those at the semi-urban and rural level.

"To get over this problem, some of the banks have taken up a policy of decentralisation by setting up inter-branch reconciliation centres at major centres all over the country. This approach helps to manage the type of entries within the command areas of the branches concerned. The whole thing is basically a problem of focus that has to be provided by the management," the official added.