The Reserve Bank of India has withdrawn the blanket ban imposed on the international audit and consultancy firm PricewaterhouseCoopers (PwC) from auditing banks and non-banking finance institutions.

According to sources close to the development, the central bank has sent a written communication to banks and NBFCs confirming the withdrawal.

The banking regulator reportedly reviews every penalty after a specific period of time. PwC, however, did not respond to a questionnaire that was faxed on Wednesday evening.

PricewaterhouseCoopers was banned from auditing banks and NBFCs following its association with the now defunct Global Trust Bank as its auditor for financial years 2002 and 2003.

The RBI had found that the audit company under-provided for non-performing assets. As a result, it barred PwC from bank audits in December 2004 and non banking finance companies in February 2005.

The case was also referred to Institute of Chartered Accountants of India. PwC subsequently filed an appeal in Kolkata High Court against the RBI order and the High court in turn stayed the RBI ban.

The banking regulator had also filed an affidavit in response to the stay.

Global Trust Bank had incurred losses as overexposure to the capital markets had eroded its net worth.

It had tried to rope in a strategic partner — Newbridge Capital — but RBI did not approve the proposal as there were concerns related to the source of funds.

Since the bank was not in a position to make up for its losses, the RBI had imposed a three-month moratorium on the ground of misleading financial disclosures.

The bank was merged with Oriental Bank of Commerce within two days.