BTL 837 - Dangers of Excess Income Collected

 

The Banking Tutor’s Lessons

BTL 837                                                                  06-11-2025

Dangers of Excess Income Collected 

Auditors or Controllers, normally, consider Short Income Collected (Income Leakage) as a short-coming  or  irregularity.  No doubt, it is a short-coming as it affects bottom line (i.e. Profit). 

We have come across many cases of Excess Income Collected also.  When we report the same, Controllers / other colleagues have taken it seriously, as they opine that there is no harm / loss  to bank in case of Excess Income Collected and as such it need not be reported / refunded. 

However, on following grounds  we  treat Excess Income Collected also as a Short Coming/ Irregularity. 

For example, for a Corporate Borrower , Bank has collected Rs 18 lacs  as Processing Charges instead of  Rs 10 lacs thus resulting in Excess Processing Charges Collected of Rs 8 lacs in June 2017.  

While preparing  the accounts of Corporate Borrower, their internal auditor has observed that the Bank has collected more than the required from his client (our Corporate Borrower) and he has brought the same to the Notice of the Borrower. Borrower has brought the same, in turn, to the notice of the Branch. Branch has referred the matter to Controlling Office.  All this happened during  May 2018 to  August 2018. 

After a detailed calculations, thread bare  discussions Controlling Office has come to a conclusion that Rs 8 lacs is  excess income collected. But they have  advised Branch not  to  refund  immediately, as it may affect their  Target  for Non Interest Income for September 2018. Also, advised branch to refund some where in October 2018, if and only if Borrower continue to request. 

Once the amount of Rs 8 lacs is refunded, that  is not the end of the story.  This excess income is booked in Profits declared by the Bank for FY ended March 2018.  Based on the said profit, Bank has paid Dividends, paid Income Tax. 

Can we get back these Dividends and Income Tax paid ?   

After getting back Rs 8 lacs from Bank, Borrower is demanding for refund of GST recovered on excess income collected. Can we get the amount paid to Government by way of GST that much easily ! 

More than monetary loss Our Reputation is at  Risk. 

Please verify your P&L Accounts carefully and avoid cases of Income Leakage and also cases of Excess Income Collected. 

Do not indulge in short cuts to reach Targets. This sort of manipulation is a sort of vicious circle. Once you enter such Vicious Circle it is not that much easy to come out.  Please be Prudent. Do Business, but only of Quality. 

Sekhar Pariti

+91 9440641014

(Repetition of BTL 548 dt. 27-05-2023)