RBI Makes Prior Approval Mandatory For Appointment Of Bank Auditors

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RBI Makes Prior Approval Mandatory For Appointment Of Bank Auditors

These guidelines will be applicable to commercial banks from financial year 2021-22

The Reserve Bank has made it mandatory for commercial banks, urban co-operative banks (UCBs) and non-banking finance companies (NBFCs) to take its prior approval for the appointment and re-appointment of statutory central auditors and statutory auditors. “Commercial Banks (excluding regional rural banks) and urban co-operative banks will be required to take prior approval of RBI (Department of Supervision) for appointment/reappointment of statutory central auditors and statutory auditors, on an annual basis,” the banking regulator said in its guidelines issued on Tuesday.

These guidelines will be applicable to commercial banks from financial year 2021-22.

The commercial banks and urban co-operative banks will have to apply to the Department of Supervision, RBI before July 31 of the reference year, RBI said. Commercial banks (excluding regional rural banks) in India and urban co-operative banks under the Mumbai Region have been directed to approach the Central Office of RBI (Department of Supervision), whereas other urban co-operative banks will have to approach the concerned Regional Office of the central bank.

The central bank said that statutory audit for entities with an asset size of at least Rs 15,000 crore at end of the previous year should be conducted by a minimum of two audit firms and all other entities should appoint at least one audit firm to conduct the statutory audit

The RBI has placed a special emphasis on independence of auditors and absence of conflict of interest. It has mandated that for commercial banks and non-banking finance companies, the Audit Committee of the Board will assess the independence of auditors and conflict of interest position. For others, the Board of Directors will assess the independence of the auditors.

The auditors will be strictly guided by professional standards. The Board of Entities will review performance of the auditors on an annual basis and report serious lapses in audit responsibilities to RBI within two months from completion of the annual audit.

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