Lenders urge RBI to revisit 'retrospective' audit norms

Change in auditors in the middle of the year will not be looked at favourably by the investors, CII says.

Banks and non-banking finance companies (NBFCs) have red-flagged a 'retrospective' central bank diktat on the appointment of statutory auditors as it requires many of them to get rid of auditors already appointed for this year and replace them with new firms, posing implementation challenges amid the pandemic. Last month, the Reserve Bank of India (RBI) introduced new norms for auditor appointments, requiring immediate rotation of audit firms if they had completed three years at a particular entity. Joint auditors have been mandated in case of banks and NBFCs with assets of ₹15,000 crore or more, and the eligibility criteria for auditors have been tightened with retrospective effect. “The circular, while issued on 27 April 2021, has been made applicable for the financial year 2021-22 itself, except that the NBFCs may implement it in the second half of the financial year. It is a widely accepted principle that, to reduce uncertainty and implementation challenges, such significant policy measures are not applied retrospectively and allow a reasonable transition period for a better understanding, planning and compliance,” the Confederation of Indian Industry (CII) said in a statement on Sunday.