The books of a large number of bank branches are likely to go unaudited this March, leading to a rise in the level of bad loans. Non-performing assets (NPAs) are loans that do not yield any return for banks.

According to a recent government directive, only branches with advances upward of Rs. 20 crore would be scrutinised by auditors and chartered accountants. Until last year, bank branches with advances of Rs. 6 crore were exempted from audits.

Though the move is aimed at providing more autonomy to banks, experts suggest otherwise.

"This new rule could prove detrimental especially as we see NPAs rising," Amarjit Chopra, former president, Institute of Chartered Accountants of India (ICAI) told HT. Though core banking solution has been implemented by banks, the system is yet to "settle in," said Chopra.

A senior government official, however, said that the finance ministry is keeping a close watch on the situation. "There is no need to raise an alarm and things are well regulated and even the government gets a regular update on the performance of banks."

Indian banks have been witnessing a surge in the level of bad assets in recent years.