RBI asks auditors to tighten reporting norms for NBFCs
September, 22nd 2007
The non-banking finance companies (NBFCs) are set to face stringent reporting norms by the Reserve Bank of India. The apex banking authority has asked the statutory auditors of NBFCs to improve their reporting. The department of non-banking supervision of RBI has communicated to the Institute of Chartered Accountants of India (ICAI) for stringent reporting of NBFCs.
The move comes soon after RBI came out with new directives of reporting for the monitoring of NBFC frauds early this month. As per the new set of directives, NBFCs are supposed to nominate an official of the rank of general manager for regular reporting of fraud by their customers.
According to RBI statistics, NBFCs have over Rs 26,000 crore of public deposits. RBI is attempting to improve the practices of NBFCs where the deposits are neither insured nor guaranteed.
RBI has issued a list of irregularities in NBFCs, required to be reported by the statutory auditors. The apex banking authority has observed that the statutory auditors are not reporting as per the requirements. It wants the statutory auditors to follow the framework of reporting as per the NBFC Auditors Report (Reserve Bank) Directions, 1998. The directions include a number of reporting responsibilities, including making of exception reports, for the statutory auditors of NBFCs.
We have communicated to the ICAI regarding reporting standards for NBFC to improve their governance, a senior RBI executive said. ICAI has requested its members to take note of RBIs specifications while auditing and reporting the books of NBFC.
It was learnt that RBI, in its communication to ICAI, has noted that the net-owned funds below the minimum required level are not being reported by NBFCs. RBI said it was not receiving reports on acceptance of deposit by the NBFCs in excess of the quantum of deposits permitted in terms of NBFC Acceptance of Public Deposits (Reserve Bank) Directions, 1998.