Industry bodies are now planning to petition the regulator Reserve Bank of India to ease the norms and delay their implementation on Auditor appointments at least to next year.
- The Reserve Bank of India (RBI) has informed that banks and NBFCs cannot continue with the same auditor beyond three years down from four years earlier and 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, which 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.
- Moreover, these changes have been made effective in the current fiscal not giving banks and NBFCs enough time to prepare.
- It is remarked that through these changes the RBI has put the burden of compliance, audit and risk on banks. They have to comply and run more and more checks and the RBI will just wet the numbers.
- Also, it is said that RBI’s view of tightening these regulations but they don’t seem feasible at all.
- Bankers point out that many auditors would have completed three years this fiscal and hence would not be eligible to be reappointed next year.
- The process itself for the appointment will be expensive and time consuming.