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The Reserve Bank recently issued guidelines for the appointment of statutory auditors of banks and NBFCs. The guidelines for appointment of statutory central auditors/statutory auditors of commercial banks, UCBs and NBFCs (including Housing Finance Companies) would be applicable for the financial year 2021-22 and onwards. In this article, we shall discuss the key points of the RBI notification relating to the same.
Table of Contents
The RBI guidelines pertaining to the appointment of statutory auditors shall apply to the commercial banks (excluding RRBs), UCBs and NBFCs (including Housing Finance Companies) for financial year 2021-22 and onwards. However, non-deposit taking NBFCs with an asset size below 1000 crore rupees can continue with their extant procedure.
Commercial banks (excluding RRBs) and UCBs will have to take prior approval of RBI (department of supervision) for the appointment/reappointment of Statutory Central Auditors/Statutory Auditors, on an annual basis in terms of aforementioned statutory provisions. They should apply to the department of supervision, RBI, before 31st July of the reference year, and the PSBs should approach RBI in 1 month of receipt of list of the list of eligible audit firms from RBI.
It may be noted that NBFCs don’t have to take prior approval of the RBI for appointment of Statutory Central Auditors/Statutory Auditors, but they should inform RBI about the appointment of Statutory Central Auditors/Statutory Auditors for each year through a certificate in Form A in 1 month of such appointment.
The RBI stated that the audit committee of the board shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards and best practices, for commercial banks and NBFCs.
In case of any concern with the Management of the entities, like non-availability of information/non-co-operation by the management, the SCA/SA can approach the board/ACB/LMC of the entity, under intimation to SSM/RO concerned of the RBI.
The procedure is as follows:
The RBI guidelines, regarding appointment of statutory auditors, has also stated that to protect the independence of the auditors/audit firms, entities should appoint SCA/SAs for continuous period of 3 years, subject to the firms fulfilling the eligibility requirements each year.
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Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
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