What changed
RBI issued the Non-Banking Financial Companies Auditor's Report (Reserve Bank) Directions, 2008, replacing the 1998 version. The new directions consolidate and update auditor reporting requirements for NBFCs, effective from September 18, 2008.
What it means for you
Auditors of all NBFCs must now include specific statements in their reports: whether the company holds a valid Certificate of Registration (CoR), whether it continues to meet CoR eligibility based on asset/income pattern, and for AFCs, whether classification is correct. This tightens oversight and ensures compliance with prudential norms.
What you must do
- Ensure your NBFC's auditor is aware of the new 2008 Directions and the requirement for a separate report to the board.
- Verify that your company's asset/income pattern as on March 31 aligns with CoR eligibility criteria per relevant prudential norms.
- If classified as an Asset Finance Company (AFC), confirm classification correctness based on RBI's December 6, 2006 circular.
- Update internal compliance checklists to include auditor report requirements under the new Directions.
Who it affects
All Non-Banking Financial Companies (NBFCs) excluding RNBCs, Auditors of NBFCs, Board of Directors of NBFCs
What is the effective date of the new Directions?
The Directions came into force with immediate effect from September 18, 2008, superseding the 1998 Directions.
Does the auditor need to submit a separate report?
Yes, in addition to the report under Section 227 of the Companies Act, 1956, the auditor must submit a separate report to the board covering matters like CoR status and asset/income pattern.
Which NBFCs are covered under these Directions?
These Directions apply to every auditor of a non-banking financial company as defined in Section 45 I(f) of the RBI Act, 1934, excluding RNBCs.