Banks plan to appeal RBI to ease auditor norms delay their deployment
Banks: As India has only a handful of quality audit firms, it might be difficult to operationalize central bank directions on systemic oversight at high-street lenders. Moreover, Mint Road has capped audit tenures at banks and NBFCs, sought joint audits, and limited the number of firms an auditor can oversee.
However, industry bodies are now planning to petition the regulator to ease the norms and delay their implementation at least to next year. In a notification released on Tuesday, the Reserve Bank of India (RBI) said that banks. And NBFCa cannot continue with the same auditor beyond three years down from four years earlier. While Lower than the five years permitted by the companies act.
Moreover, an audit firm has to compulsorily have a cooling-off period of six after auditing a bank for one tenure. This means banks will have to hunt for a new auditor every three years. Audit firms can also audit not more than eight NBFCs and banks have been asked to hire joint auditors which will increase the cost of compliance for banks and NBFCs enough time to prepare.
Besides, these changes have been made effective in the current fiscal not giving banks and NBFCs enough time to prepare. Through these changes, the RBI has the burden of compliance, audit, and risk edge. They have to comply and run more and more checks and the RBI will just wet the numbers.
One understands RBI’s view of tightening these regulations but they don’t seem feasible at all, said a banker. While bankers point out that many auditors would have completed three years this fiscal. And hence would not be eligible to be reappointed next year. But, the process itself for the appointment will be expensive.
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