BOMBAY Aug 7 Indias central bank has tightened its regulatory control over the banking sector to prevent a repeat of the scandal that rocked the country two years ago. reports Reuter.

Chakravarty Rangarajan. Governor of the Reserve Bank of India (RBI), said on Saturday banks have been asked to introduce a system of concurrent auditing covering 50 per cent of their business operations and 100 per cent of treasury operations.

"This should facilitate early detection of errors and failures. Rangarajan told the Indian Banks' Association.

The US I 28 billion dollar financial scandal, in which bankers and brokers clouded to Illegally divert funds from the inter-bank securities mar ket to the then-booming stock markets, briefly disrupted an economic liberalisation programme and is still embarrassing the government.

Rangarajan said the Institute of Chartered Accountants had issued guidelines defining the scope of external audit. It lets auditors report directly to the RBI any serious irregularity.

He admitted that there were serious shortcomings in RBI's supervision in the part. Until recently, the state-run banks were inspected once in four years. They will now be inspected once a year

Foreign banks will be in-sf»ected every 12 months Instead of the current 18 months. Rangarajan said.

The RBI last week served notice on 20 banks, including nine foreign ones, saying they must pay 1.47 billion rupees for accepting funds irregularly In India's worst financial scandal.

American Express Company's American Express Bank Ltd, ANZ Grindlays Bank Plc Citicorp's Citibank. Standard Chartered Plc and Hong Kong and Shanghai Banking Crop are

among the foreign banks issued the notice.

The RBI has created a separate department of supervision for inspection and post-In--spectlon follow up. he said.

It has also introduced prudential norms relating to income recognition, asset classification and capital adequacy which compel banks to look at the quality of loan assets and risks attached to lending, the governor said.

They will also make balance sheets and Income and expenditure statements provide a truvreflection of the health of banks, he added.

"We will also have to conform to international account Ing standards if Indian banks are to get their due to place and recognition in the global financial market," Rangarajan said.

He expected all banks operating in India to fully conform with the new standards within two years.