New Delhi, Oct. 3: The Reserve Bank of India (RBI) is examining the feasibility of launching criminal action against the promoters and directors of the erstwhile Global Trust Bank (GTB) for misrepresenting financial statements in two consecutive fiscal years ? 2001-02 and 2002-03.

However, the absence of any judicial power in the existing legislation could prove to be a deterrent in RBI’s plan.

According to bankers, RBI may find itself in an intriguing situation where despite being the regulator of the banking sector, it does not possess the authority to regulate auditors.

Even as the RBI has rolled out a slew of prudential and supervisory measures in the wake of events leading to the merger of GTB with Oriental Bank of Commerce (OBC), sources said under the existing laws, there was no obligation on the auditors of a bank to report any violation of the provisions of the Banking Regulation Act, 1949.

This is in clear contradiction of international accounting standards where it is mandatory for auditors to report to the regulator any matter that is found to be incompatible with existing norms.

Significantly, the government did propose to amend section 30 of the Banking Regulation Act in the Banking Regulation (Amendment) Miscellaneous Provisions Bill, 2003. However, the bill lapsed due to dissolution of Parliament.

Bankers pointed out that due to some inexplicable reason, the Banking Regulation (Amendment) Bill, 2005, which replaces the lapsed bill, does not contain any proposal for amending section 30 for empowering RBI to regulate the auditors if the need arose.

RBI has the power to direct auditors of non-banking financial firms to report any matter pertaining to the balance sheet and disclosure liablities if any instance of non-compliance of norms is noticed.