Banks and NBFCs with more than Rs 1,000-crore asset base must bring in new auditors:RBI
Published On: Wednesday, May 26, 2021 | By: Team KnowMyStock
RBI in its April 27th norms on auditors had said banks and NBFCs, excluding those that don’t take deposits and have a sub-Rs 1,000-crore asset base, must immediately bring in new auditors. The para banks, however, were allowed to do the change from the second half of the fiscal year. Banks and NBFCs, having an asset size of Rs 15,000 crore or more, were asked to appoint joint auditors. Crucially, there was retrospective applicability of the extended eligibility criteria for auditors, including those relating to the provision of audit and non-audit services. Both the NBFC lobby group Finance Industry Development Council and the Confederation of Indian Industry protested the rules. However, the RBI argued that the guidelines are compulsorily applicable to only 300 NBFCs, of the 9,600 operational in India. The other NBFCs, with asset sizes below Rs 1,000 crore, have the option to continue with their existing auditors.
“This will improve audit quality, avoid conflict of interest, and ensure the independence of auditors. These measures will further facilitate increasing the experienced audit pool to cater to the needs of a growing economy," according to a source. Besides, the policy of joint audit is only applicable to a few, the RBI reasoned. As on March 31, 2020, other than public sector banks (PSBs), 46 NBFCs, three urban co-operative banks (UCBs), and 36 commercial banks had an asset size more than Rs 15,000 crore. As many as 645 audit firms meeting the eligibility criteria for appointment as statutory central auditors (SCAs) of PSBs were empanelled by the Comptroller and Auditor General office for 2020-21.
The RBI has argued that a tenure of three years is already in place for SCAs of PSBs, all-India financial institutions, and UCBs in Maharashtra, and so far, this arrangement has worked well. Private sector bank auditors had a tenure of four years, which the RBI has tried to reduce to three years in line with public sector peers.
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