Won’t ease norms RBI stands firm on its auditor stand
The RBI is unlikely to ease its new norms for bank audit, despite a stream of protest from industry others groups, who are arguing that the rules are meant to avoid any conflict of interest and make the process more transparent. As per sources there is a large pool of auditors to choose from around 600-700 empanelled by the Comptroller & Auditor General and the plan has support from professional bodies such as the Institute of Chartered Accountants of India.
This changes in rules has come after a series of problems incurred in the financial sector, starting with the fall of IL&FS followed by the crises at Yes Bank, DHFL, PMC Bank and so on.
The main crux of the protest is the RBI’s decision to stop reappointment of a firm for six years after its three-year term is over. Besides, it has put in place rules barring statutory auditors from taking non-audit work to avoid any conflict of interest. In case of public sector banks, all-India financial institutions and urban cooperative banks in Maharashtra, a three-year term is already the norm for statutory central auditors (SCA). For private banks the term was fixed at four years.
Similarly, the six years’ rotation policy has been in existence for SCAs of private and foreign banks, which has now been extended to other entities. Dismissing suggestions that RBI’s April guidelines are meant to favour Indian firms, as per sources the idea was to provide better monitoring of some of the failed and controversial ventures in recent years, which were audited by some of the big names in business.
On 26th May 2021, chartered accountants’ associations from across the country, including Mumbai, Chennai, Ahmedabad and Lucknow, among others, supported the RBI position with respect to auditor.