What changed
RBI has formalized guidelines under Section 30(1A) of the Banking Regulation Act, 1949, for StCBs and CCBs, effective April 1, 2024. These replace earlier informal practices, requiring prior RBI approval for all auditor appointments, reappointments, or removals. NABARD will now prepare an annual All-India State-wise list of eligible audit firms from ICAI data, which banks must use for selection.
What it means for you
Co-operative banks must now follow a structured process for auditor selection, reducing discretion and ensuring compliance with RBI norms. The annual approval cycle and NABARD-prepared list increase regulatory oversight, potentially limiting auditor choices but enhancing audit quality. Banks need to align their board and audit committee processes to meet the July 31 application deadline each year.
What you must do
- Ensure your bank obtains prior RBI approval for any appointment, reappointment, or removal of statutory auditors from April 1, 2024.
- Select audit firms only from the annual All-India State-wise list prepared by NABARD, based on ICAI data.
- Submit applications for prior approval to RBI's Department of Supervision before July 31 of the reference financial year.
- Seek annual prior approval for reappointment of statutory auditors, as per the new guidelines.
- Update board and audit committee procedures to comply with the eligibility criteria in Appendix I of the circular.
Who it affects
State Co-operative Banks (StCBs), Central Co-operative Banks (CCBs), Statutory audit firms serving co-operative banks, NABARD (as list preparer), Institute of Chartered Accountants of India (ICAI) (as data source)
When do these new guidelines take effect?
The guidelines come into effect from April 1, 2024, and apply to all accounting periods starting on or after that date.
What is the deadline for submitting the prior approval application to RBI?
Banks must submit the application for prior approval to RBI's Department of Supervision before July 31 of the reference financial year.
Who prepares the list of eligible audit firms?
NABARD prepares an annual All-India State-wise list of eligible audit firms, using data from the Institute of Chartered Accountants of India (ICAI) and applying the eligibility criteria specified in the guidelines.