What changed
RBI issued a master circular consolidating the Non-Banking Financial Companies Auditor’s Report Directions, 1998, incorporating all amendments up to June 30, 2005. The original directions from January 2, 1998 remain in force with no new substantive changes; this is purely a compilation exercise.
What it means for you
NBFC auditors must submit a separate report to the board covering registration under Section 45IA, public deposit limits, credit rating validity and limit, prudential norms compliance, capital adequacy ratio, liquidity requirements, half-yearly and deposit returns, and any defaults. For lenders, this ensures consistent audit scrutiny of NBFC compliance, reducing regulatory risk in exposures.
What you must do
- Verify that your NBFC auditor includes the separate report mandated under these directions for each financial year, covering all items in paragraphs 3 and 4.
- Ensure your NBFC has applied for or obtained RBI registration as per Section 45IA and that the auditor confirms this.
- Monitor public deposit levels against permissible limits, credit rating conditions, prudential norms, capital adequacy, liquidity, and returns, and have auditors report any breaches.
- Review your NBFC's compliance with the 1998 Directions and update internal audit checklists accordingly.
Who it affects
All Non-Banking Financial Companies (NBFCs) as defined in Section 45I(f) of the RBI Act, 1934, Auditors of NBFCs, Lenders and investors relying on NBFC audit reports
Does this master circular introduce new requirements for NBFC auditors?
No, it consolidates the existing 1998 directions with amendments up to June 30, 2005. No new requirements are added.
What must an NBFC auditor report specifically under these directions?
The auditor must report on registration status, whether public deposits are within permissible limits, credit rating validity, and any defaults in deposit repayment.
Are all NBFCs covered by these auditor directions?
Yes, the directions apply to every auditor of any NBFC as defined in Section 45I(f) of the RBI Act, 1934.