What changed
RBI issued Master Circular No. 146 updating the Non-Banking Financial Companies Auditor's Report Directions, 2008, which superseded the 1998 version via Notification No. 201 dated September 18, 2008. The circular consolidates all current instructions on auditor reporting for NBFCs as updated to June 30, 2009. It applies to all NBFCs except residuary non-banking companies and miscellaneous non-banking companies.
What it means for you
NBFC auditors now have a single reference document for their additional reporting obligations to the board. They must verify the NBFC's Certificate of Registration, check eligibility to hold it based on asset/income pattern as on March 31 of the applicable year, and confirm correct classification as Asset Finance Company if applicable using RBI criteria from Circular DNBS.PD.CC No.85/03.02.089/2006-07 dated December 6, 2006. This enhances supervisory oversight and ensures compliance with prudential norms.
What you must do
- Ensure your NBFC's auditor submits the separate report to the board as per the 2008 Directions.
- Verify that the auditor checks the company's Certificate of Registration and its eligibility based on asset/income pattern as on March 31 of the applicable year.
- Confirm correct NBFC classification (e.g., AFC) using RBI criteria from Circular DNBS.PD.CC No.85/03.02.089/2006-07 dated December 6, 2006.
Who it affects
All NBFCs (except residuary non-banking and miscellaneous non-banking companies), Auditors of NBFCs, Board of Directors of NBFCs, RBI Department of Non-Banking Supervision
What is the key change in the 2008 Directions compared to the 1998 version?
The 2008 Directions supersede the 1998 version via Notification No. 201 dated September 18, 2008, and are now consolidated into a Master Circular updated to June 30, 2009. The core requirement for auditors to submit an additional report to the board remains, but the circular updates references and includes current prudential norms.
Which NBFCs are exempt from these Directions?
Residuary Non-Banking Companies and Miscellaneous Non-Banking Companies are exempt from these Directions, as per the circular's address.
What must the auditor verify regarding NBFC classification?
The auditor must check if the NBFC is correctly classified as an Asset Finance Company (AFC) based on RBI criteria from Circular DNBS.PD.CC No.85/03.02.089/2006-07 dated December 6, 2006, with reference to the business carried on during the applicable financial year.