Many banks require CA signature on project reports and cma data. However, do one really need to get their projected report signed by a chartered accoutant? How can someone attest a document which is based on uncertain assumptions and are not actual numbers?
Project report is a document that banks require before sanctioning credit facility to business. Project report contains numbers which are not actual but based on assumptions. Project report is prepared to show the future results of a business.
Can someone really certify future projections? This question is very relevant because banks ask applicants to get their project reports certified by chartered accountants.
A RTI was filed before RBI to know whether, it has instructed banks to get certified financial projections.
Reserve Bank of India (RBI), has replied to RTI application stating that:
We have not issued any specific instructions in this regard.
However, it may be noted that credit related issues are mostly deregulated. The Reserve Bank of India has advised banks to have documents of investment policy, loan policy, loan recovery policy etc. prepared and duly vetted by their Boards of Directors. Banks are required to take credit related decisions based on Board approved policies subject to the instructions contained in our Master Circular on “Loans and Advances – Statutory and Other Restrictions” issued vide DBR. No.Dir.BC.10/13.03.00/2015-16 dated July 1, 2015 which is available on our website www.rbi.org.in under the head ‘Notifications’.
By reading above reply one can understand that, RBI has not issued any guidelines to get projected report to be certified by a CA.
Hence, one need not to get project report signed by a chartered accountant and if any bank officer asks for certification, you can show him RBI response to RTI.
By certifying projected financials, even CA's are risking their membership. A matter came before Culcutta High Court where CA was warned on signing a project report.
The case was "Binod Kumar Agarwala vs. CIT". Here CA certified a project report and loan was given based on this ceritifcation.
However, the applicant defaulted on loan repayments and was declared NPA.
Court gave strong remarks on CA and CA firms. Court also slammed CA's for certifying projected financials. CA firm Roy Ghosh and Associates issued certified projections with note, We are giving the information and explanations herewith purely based on estimate basis and have no relation with the actual figures and to avail the bank loan.
In nutshell CA's should be very careful in certifying projections and read ICAI guidelines before certifying any financials.
Even ICAI have strong guidelines regarding signing on projections. One should refer to these guidelines before signing on any projected financials.
Chartered Accountants should not sign a project report. No one can vouch for projections, even promoter cannot vouch for projections. But some bank managers are so without brain, they need signature of CA on project reports which is against law.
Posted on: Jan. 2, 2022, 9:49 a.m. by GuestGenerate Accurate and globally accepted project report for financing