Master Circular - “Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008.” - આરબીઆઈ - Reserve Bank of India
Master Circular - “Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008.”
RBI/2009-10/4 July 1, 2009 To Dear Sir, Master Circular – “Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008.” As you are aware, in order to have all current instructions on the subject at one place, the Reserve Bank of India had issued a Master Circular No. 118 on the captioned subject updating the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 1998. The above Directions superceded by Notification No.201 dated September 18, 2008 is now updated up to 30th June 2009. The Master Circular has also been placed on the RBI web-site (http://www.rbi.org.in). A copy of the revised Master Circular is enclosed.
Notification No. DNBS. 201 /DG(VL)-2008 dated September 18, 2008. The Reserve Bank of India (hereinafter referred to as "the Bank"), having considered it necessary in the public interest and for the purpose of proper assessment of books of accounts of NBFCs, in exercise of the powers conferred by sub-section (1A) of Section 45MA of the Reserve Bank of India Act, 1934 (Act 2 of 1934) and of all the powers enabling it in this behalf, and in supersession of the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 1998, issues to every auditor of every non-banking financial company, the Directions hereinafter specified. 1. Short title, application and commencement of the Directions (i) These Directions shall be known as “Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008.” (ii) These Directions shall apply to every auditor of a non-banking financial company as defined in Section 45 I(f) of the Reserve Bank of India Act, 1934 (2 of 1934) hereinafter referred to as non-banking financial company. (iii) These Directions shall come into force with immediate effect. 2. Auditors to submit additional Report to the Board of Directors In addition to the Report made by the auditor under Section 227 of the Companies Act, 1956 (1 of 1956) on the accounts of a non-banking financial company examined for every financial year ending on any day on or after the commencement of these Directions, the auditor shall also make a separate report to the Board of Directors of the Company on the matters specified in paragraphs 3 and 4 below. 3. Matters to be included in the auditor’s report The auditor’s report on the accounts of a non-banking financial company shall include a statement on the following matters, namely: - (A) In the case of all non-banking financial companies I. Whether the company is engaged in the business of non-banking financial institution and whether it has obtained a Certificate of Registration (CoR) from the Bank (B) In the case of a non-banking financial company accepting/holding public deposits Apart from the matters enumerated in (A) above, the auditor shall include a statement on the following matters, namely:- (i) Whether the public deposits accepted by the company together with other borrowings indicated below viz; (a) from public by issue of unsecured non-convertible debentures/bonds; (b) from its shareholders (if it is a public limited company) and (ii) Whether the public deposits held by the company in excess of the quantum of such deposits permissible to it under the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 are regularised in the manner provided in the said Directions; (iii) Whether an Asset Finance Company having Capital to Risk Assets Ratio (CRAR) less than 15% or an Investment Company or a Loan Company as defined in paragraph 2(1)(ia), (vi) and (viii) respectively of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 is accepting "public deposit” without minimum investment grade credit rating from an approved credit rating agency; (iv) In respect of NBFCs referred to in clause (iii) above, whether the credit rating, for each of the fixed deposits schemes that has been assigned by one of the Credit Rating Agencies listed in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 (vi) Whether the company has defaulted in paying to its depositors the interest and /or principal amount of the deposits after such interest and/or principal became due; (vii) Whether the company has complied with the prudential norms on income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts, and concentration of credit/investments as specified in the Directions issued by the Reserve Bank of India in terms of the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. (viii) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank in terms of the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 has been correctly determined and whether such ratio is in compliance with the minimum CRAR prescribed therein; (ix) Whether the company has complied with the liquid assets requirement as prescribed by the Bank in exercise of powers under section 45-IB of the RBI Act and whether the details of the designated bank in which the approved securities are held is communicated to the office concerned of the Bank in terms of NOTIFICATION NO.DNBS.172/CGM(OPA)-2003 dated July 31, 2003; (xi) Whether the company has furnished to the Bank within the stipulated period the half-yearly return on prudential norms as specified in the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; (xii) Whether, in the case of opening of new branches or offices to collect deposits or in the case of closure of existing branches/offices or in the case of appointment of agent, the company has complied with the requirements contained in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. (C) In the case of a non-banking financial company not accepting public deposits Apart from the aspects enumerated in (A) above, the auditor shall include a statement on the following matters, namely: - (i) Whether the Board of Directors has passed a resolution for non- acceptance of any public deposits whether the capital adequacy ratio as disclosed in the return submitted to the Bank in form NBS- 7, has been correctly arrived at and whether such ratio is in compliance with the minimum CRAR prescribed by the Bank; (D) In the case of a company engaged in the business of non-banking financial institution not required to hold CoR subject to certain conditions Apart from the matters enumerated in (A)(I) above, the auditor shall include a statement on the following matters, namely: Where a Company has obtained a specific advice from the Bank that it is not required to hold CoR from the Bank whether the company is complying with the conditions stipulated as advised by the Bank. 4. Reasons to be stated for unfavourable or qualified statements Where, in the auditor’s report, the statement regarding any of the items referred to in paragraph 3 above is unfavourable or qualified, the auditor’s report shall also state the reasons for such unfavourable or qualified statement, as the case may be. Where the auditor is unable to express any opinion on any of the items referred to in paragraph 3 above, his report shall indicate such fact together with reasons therefor. 5. Obligation of auditor to submit an exception report to the Bank (I) Where, in the case of a non-banking financial company, the statement regarding any of the items referred to in paragraph 3 above, is unfavourable or qualified, or in the opinion of the auditor the company has not complied with: the provisions of Chapter III B of Reserve Bank of India Act, 1934 (Act 2 of 1934); or it shall be the obligation of the auditor to make a report containing the details of such unfavourable or qualified statements and/or about the non-compliance, as the case may be, in respect of the company to the concerned Regional Office of the Department of Non-Banking Supervision of the Bank under whose jurisdiction the registered office of the company is located as per Second Schedule to the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. (II) The duty of the Auditor under sub-paragraph (I) shall be to report only the contraventions of the provisions of RBI Act, 1934, and Directions, Guidelines, instructions referred to in sub-paragraph (1) and such report shall not contain any statement with respect to compliance of any of those provisions. 6. Repeal and saving Notwithstanding such repeal, (a) any action taken, purported to have been taken or initiated under the Directions hereby repealed shall, continue to be governed by the provisions of said Directions
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