RBI firm on its auditor stand, won’t ease norms

NEW DELHI: The RBI is unlikely to ease its new norms for bank audit, despite a volley of protest from industry lobby groups, arguing that the rules are meant to avoid any conflict of interest and make the process more transparent.
Sources said 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. The change in rules come after a series of problems in the financial sector, starting with the collapse of IL&FS and the crises at Yes Bank, DHFL and PMC Bank.
At the heart 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, sources told TOI that the idea was to usher in 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 Wednesday, chartered accountants’ associations from across the country, including Mumbai, Chennai, Ahmedabad and Lucknow, among others, backed the RBI position.