CII wants RBI to review circular on selection of bank, NBFC auditors

New Delhi: Industry chamber CII has asked the Reserve Bank to review its circular on appointment of auditors for banks and NBFCs saying it was inconsistent with the provisions of the Companies Act and would create hardship for businesses in times COVID.

The Reserve Bank in its circular on April 27, 2021 imposed various restrictions on appointment of auditors by banks and NBFCs and prescribed a cooling off period for re-appointment.

Urging the RBI to review the circular, the Confederation of Indian Industry (CII) said the proposals "will cause significant hardship to the companies, its stakeholders as well as industry in general". The chamber said that few matters that warrant an immediate attention of the RBI include a clarification that the circular is only intended to cover banks and NBFCs and their respective audit firms.

"The RBI may not apply the same principles to the commercial banks and NBFCs, including in respect of cap on maximum number of audits, mandatory joint audits, and rotation/cool off principles. The NBFCs may continue to be governed by the Companies Act, 2013," it said.

It also suggested to re-consider severe restrictions on capacity and eligibility requirements, limit on number of audits, maximum engagement period of 3 years and 6 years cool off period after rotation.

"The RBI may consider aligning them with the provisions in the Companies Act, 2013. The RBI may still achieve its objectives, without diluting any of the principles," it said.

CII further asked for review of definition of related parties, which as per the circular include the group entities using a common brand name as this has far reaching implications and unintended consequences; and restrictions on audit/non-audit services during one year before/after the appointment as auditors of a bank/NBFC, covering the entity and its group entities.

"These provisions may create severe capacity constraints, without adding any qualitative parameters," CII said.

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