What changed
RBI issued a consolidated version of the Non-Banking Financial Companies Auditor's Report (Reserve Bank) Directions, 2008, incorporating amendments up to June 30, 2010. The updated notification supersedes the 1998 directions and is available on the RBI website. It requires auditors to provide an additional report to the board beyond the standard Companies Act report.
What it means for you
Banks and lenders dealing with NBFCs must ensure their auditors comply with these updated reporting requirements. The additional auditor report will enhance transparency on NBFC registration, asset/income patterns, and classification accuracy. This helps lenders assess NBFC health more reliably.
What you must do
- Review the updated NBFC Auditor Report Directions 2008 on RBI website for full compliance details.
- Ensure your NBFC auditors submit the separate report to the board covering registration, asset/income pattern, and AFC classification.
- Update internal audit checklists to include these additional reporting requirements for NBFC clients.
- Train audit teams on the specific matters to be reported under paragraphs 3 and 4 of the directions.
Who it affects
All NBFCs except residuary non-banking companies and miscellaneous non-banking companies, Auditors of NBFCs
What is the key change in the updated NBFC Auditor Report Directions?
The directions consolidate all amendments up to June 30, 2010, and require auditors to submit a separate report to the board on registration status, asset/income pattern compliance, and correct classification as Asset Finance Company.
Which NBFCs are covered under these directions?
All non-banking financial companies as defined in Section 45 I(f) of the RBI Act, 1934, except residuary non-banking companies and miscellaneous non-banking companies.
What must auditors report regarding Asset Finance Company classification?
Auditors must state whether the NBFC has been correctly classified as an Asset Finance Company based on criteria set in RBI circular DNBS.PD. CC No. 85/03.02.089/2006-07 dated December 6, 2006.