POLICY FOR APPOINTMENT OF STATUTORY AUDITORS
- Background:
The Reserve Bank of India (RBI) has issued Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) vide their notification REF.NO.DOS.CO.ARG/SEC.01/08.91.001/2021-22 DATED 27TH APRIL 2021 (RBI REGULATIONS). In line with the same this policy has been prepared and hosted on the website.
- Objective of the Policy:
The primary objective of the policy is to lay down a framework and procedures for appointing Statutory Auditors in compliance with all the Regulatory provisions (like RBI REGULATIONS, provisions of Companies Act, 2013).
- Number of Statutory Auditors:
The number of Statutory Auditors will be based upon the criteria prescribed by Reserve Bank of India in this matter.
The present directive is to appoint a minimum of one audit firm (Partnership firm/LLPs) since the asset size of the Company is less than Rs.15000 Crs. as at the end of previous year, as per RBI Regulations.
- Procedure for Appointment of Statutory Auditors
The company shall obtain a certificate, along with relevant information as per FORM B from the audit firms(s) proposed to be appointed as Statutory Auditors by the company to the effect that the Audit Firm(s) complies with all the eligibility norms prescribed by that RBI for the purpose. Such certificate should be signed by the main partner/s of the Audit Firm.
The audit firm should not under debarment by any Government Agency/Institute of Chartered Accountants of India (ICAI), RBI or any other financial regulator.
The Experience of the Audit Firm in audit of Banking / NBFC’s
After considering the above, the Audit Committee shall short list the audit firm and recommend to the Board for approval after which shareholders’ approval will be sought.
- Period of Appointment:
The Auditors shall be appointed for such number of years as prescribed by Reserve Bank of India.
While NBFCs do not have to take prior approval of RBI for appointment of SAs, all NBFCs need to inform RBI for each year by way of a certificate in FORM A within one month of such appointment.
As per the present directive, the Company is required to appoint one audit firm (Partnership firm/LLPs) for a continuous period of three years, subject to the firms satisfying the eligibility norms each year. If the company is removing the Auditor before completion of three years tenure it shall inform concerned SSM/RO at Reserve Bank of India within a month of such decision. An audit firm would not be eligible for reappointment for six years (Two Tenures) after completion of full or part of one term of the audit tenure.
- Independence of Auditors
The Audit Committee of the Board shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards and best practices. Any concerns in this regard may be flagged by the Audit Committee Board shall be informed to the Board of Directors and The Reserve Bank of India.
The concurrent auditors of the company should not be considered for appointment as Statutory Auditors.
- Professional Standards of the Auditors
The Board/ACB shall review the performance of the Auditors on an annual Basis. Any serious lapses/negligence in audit responsibilities or conduct issues on part of the auditor or any other matter considered as relevant shall be reported to RBI within two months from completion of annual audit.
- Audit Fee and Expenses
Audit fees for Statutory Auditors shall be reasonable and commensurate with the scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting etc.,
REVIEW
The policy shall be reviewed by the Board once in a year. The policy is subject to change in accordance with the directions issued by the RBI/Board. The policy is valid for the period from 01.04.2025 to 31.03.2026.