Reserve Bank of India (Rural Co-operative Banks - Statutory Audit) Directions, 2026

1. Framed under section 30

These rules are framed under section 30(1A) of the Banking Regulation Act.

1. Audit rules for RCBs

This paper sets who may audit rural co-operative banks and for how long.

2. Start date

These Directions came into effect immediately upon issuance.

BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.

3. Who is covered

These Directions apply to every rural co-operative bank.

4. Rural means State and Central

A rural co-operative bank means a State or a Central Co-operative Bank.

5. A proprietor firm counts

For these banks an audit firm may also be a proprietorship firm.

1. Report concerns to NABARD

Concerns the Board or its committee raise must be reported to NABARD.

2. Report a lapse to NABARD

A serious lapse by the auditor must be reported to NABARD.

3. Publish the audit policy

A Board approved policy on appointing the auditor must be put on the public website.

4. Be open and objective

The policy must be transparent and objective on every major part of the choice.

5. Write the procedure too

A procedure for selecting, appointing, reappointing and removing the auditor is needed.

1. Fifty per cent growth

A branch whose business grew by half or more over last year must be taken up for audit.

BankPulse example. A branch did ₹40 crore of business last year and ₹64 crore this year. That is growth of 60 per cent, which is 50 per cent and more. The branch has to be taken up for audit on that ground alone.

2. One year for the staff

Professional staff must have been with the firm a year to be counted.

3. No debarred firm

A firm debarred by any government agency, the reporting authority or RBI is out.

4. And bars the whole group

If a partner is a director in a bank, the firm cannot audit that bank's group entities.

5. No sub-contracting

Sharing or sub-contracting the audit to another firm in the network is not allowed.

6. Weigh the bank's own shape

In choosing branches, the bank must weigh how centralised its processes are.

7. Publish the coverage

The bank must publish how much of its branches and business the audit covered.

8. Check the partner's income

The Board must satisfy itself that the partner earns enough from the firm to count as a full-time partner.

9. Follow the code of ethics

The appointment must follow the institute's code of ethics and raise no clash of interest.

10. Regain eligibility before starting

A firm that loses eligibility must regain it before the annual audit begins.

11. Go to the committee first

Where the management blocks the audit, the auditor must approach the audit committee.

12. Incoming must be unconnected

The incoming firm is ineligible if it is tied to the outgoing one or its network.

13. Fee must fit the work

The fee must be reasonable and match the size, spread and complexity of the audit.

14. Audit the suspect branch

A branch where fraud or a suspicious transaction is suspected may be taken up for audit.

15. What counts as experience

Audit experience means work as a central or branch auditor of a bank or institution.

16. Tax work is allowed

Tax audit, tax representation and tax advice do not normally create a clash.

1. Old repeals stand

Anything repealed before these Directions stays repealed.

2. These add to other law

These Directions add to any other law and do not cut it down.