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RBI Issued Guidelines for Appointment of SCAs/SAs with Continuous 3 Years Tenure

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RBI-guidelines-require-banks,-UCBs-and-NBFCs-to-appoint-auditors-for-3-yearsOn April 27, 2021, the Reserve Bank of India(RBI) issued guidelines for the appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding Regional Rural Banks(RRBs)), Urban Cooperative Banks (UCBs) and Non-banking finance companies(NBFCs) (including Housing finance companies(HFCs)) from FY22 onwards.

Instructions for appointment of SCAs/SAs:

i.Procedure for Appointment of SCAs/SAs

  • The banks have to appoint the SCAs/SAs for a continuous period of 3 years, satisfying the eligibility norms each year. This condition is made to protect the auditor’s/audit firms’ independence.
  • Removal of the audit firms during the 3 years’ period could be done only with the prior approval of the concerned office of RBI.

ii.Prior approval –  They are required to take prior approval of RBI (Department of Supervision) for appointment/reappointment of SCAs/SAs

iii.The number of SCAs/SAs:

Joint audit: The entities with asset size ofRs 15,000 crores and above as at the end of FY21, should conduct the statutory audit under joint audit of a minimum of 2 audit firms Single Audit: All the other Entities (apart from Rs 15,000 asset size entities) should appoint a minimum of 1 audit firm for conducting statutory audit.

Asset Size of the Entity Maximum number of SCAs/SAs
Up to ₹5,00,000 crore 4
Above ₹ 5,00,000 crore  and Upto ₹ 10,00,000 crore 6
Above ₹ 10,00,000 crore and Upto ₹ 20,00,000 crore 8
Above ₹ 20,00,000 crore 12

iv.Guidelines for UCBs and NBFCs:

  • UCBs and NBFCs are allowed to adopt these guidelines from the H2 (second half) of FY22, as this is the first for them to implement such guidelines.
  • Non-deposit taking NBFCs with asset size below Rs 1,000 crores are given the option to continue with their extant procedure.

Recent Related News:

On February 03, 2021, The Reserve Bank of India (RBI) issued guidelines on Risk-Based Internal Audit (RBIA) for selected Non-Banking Financial Companies (NBFCs) and Primary (Urban) Co-operative Banks (UCBs). The mentioned entities have to implement the RBIA framework by March 31, 2022.

About Reserve Bank of India(RBI):

Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
Governor – Shaktikanta Das
Deputy Governors – Mahesh Kumar Jain, Michael DebabrataPatra, and M Rajeshwar Rao