What changed
RBI issued a master circular consolidating the original 1998 Auditor's Report Directions for NBFCs, updated as on June 30, 2007. The core requirements remain unchanged: auditors must provide an additional report to the board on registration, deposit limits, credit ratings, and default status.
What it means for you
NBFCs must ensure their auditors are aware of these consolidated directions and comply with the additional reporting requirements. Lenders and investors can rely on auditor reports for clearer disclosure of NBFC compliance with deposit regulations and registration status.
What you must do
- Review your NBFC's auditor engagement letter to confirm the auditor will submit the separate report required under these directions.
- Ensure your NBFC's registration status with RBI is current and documented for auditor verification.
- Maintain records of public deposit limits, credit ratings, and any defaults to facilitate auditor reporting.
- Update internal compliance checklists to align with the matters specified in paragraphs 3 and 4 of the directions.
Who it affects
All Non-Banking Financial Companies (NBFCs) as defined in Section 45I(f) of the RBI Act, Auditors of NBFCs, NBFC boards of directors
Does this master circular introduce new requirements for NBFC auditors?
No, it consolidates the existing 1998 directions without substantive changes. Auditors must still submit a separate report to the board covering registration, deposit compliance, credit ratings, and defaults.
What happens if an NBFC auditor fails to include the required statements?
The directions are issued under Section 45MA(1A) of the RBI Act, making compliance mandatory. Non-compliance could lead to regulatory action against the auditor and the NBFC.