**Summary:**
This Reserve Bank of India (RBI) circular, reference number DBS.ARS.BC.0408.91.001/2017-18 dated July 27, 2017, addresses the appointment of Statutory Central Auditors (SCAs) for all Indian Private Sector Banks and Foreign Banks operating in India. The circular modifies the existing rest period policy for audit firms.
Previously, an audit firm could serve as the SCA for a bank for four years, followed by a mandatory two-year rest period before being eligible for reappointment. The RBI observed instances where the same audit firms were being reappointed cyclically after the two-year rest, effectively limiting the audit responsibility to only two firms.
To ensure a fresh perspective in audit functions and to prevent potential compromises due to long-standing relationships between auditors and auditees, the RBI has revised the rest period policy. Effective immediately, an audit firm, after completing a four-year tenure as SCA for a particular private/foreign bank, will now be ineligible for reappointment as SCA of the same bank for a period of six years.
This guideline aims to ensure adherence to the rest and rotation policy in both letter and spirit.
For further information, contact the Department of Banking Supervision, Central Office, World Trade Centre 1, Cuffe Parade, Colaba, Mumbai – 400005, India. Telephone: 91 22 22189131, Fax: 022 22180157, Email: cgmicdbscorbi.org.in. The issuing General Manager is Prabhakar Jha.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
All Indian Private Sector Banks: Refers to all privately owned banks operating within India.
All Foreign Banks operating in India: Refers to all banks with foreign ownership that are operating within India.
Statutory Central Auditors: Independent auditing firms appointed to conduct statutory audits of banks.
DBS.No.ARS.BC.808.91.00120002001 dated January 30, 2001: Reference to a previous circular issued by the Reserve Bank of India regarding the appointment of Statutory Central Auditors.
Rest and Rotation Policy: A policy implemented by the Reserve Bank of India to ensure the independence and objectivity of Statutory Central Auditors by mandating periodic rotation of audit firms.
Department of Banking Supervision: A department of the Reserve Bank of India.
Mumbai, Maharashtra: A city in India where the central office of the Department of Banking Supervision is located.
भारतीय �रजव र् बक�
_________________ RESERVE BANK OF INDIA_________________
www.rbi.org.in
RBI/2017-18/29
DBS.ARS.BC.04/08.91.001/2017-18 July 27, 2017
The Chief Executive Officers
All Indian Private Sector Banks/ All Foreign Banks operating in India
Dear Sir/Madam,
Appointment of Statutory Central Auditors (SCAs) – modification of rest period
Please refer to DBS.No.ARS.BC.8/08.91.001/2000-2001 dated January 30, 2001
addressed to private sector banks in terms of which, inter alia, an audit firm, subject
to its fulfilling the prescribed eligibility norms will be allowed to continue as the SCA
for a particular bank for a period of four years and, thereafter, the said firm will be
compulsorily rested for a period of two years.
2. It has been observed in a review of the appointment of statutory auditors in private
sector/foreign banks that, in some cases, the same audit firm was reappointed after
a gap of two years’ rest. In a few other private sector/foreign banks, the immediately
preceding statutory auditor firm was appointed on completion of the four year tenure
of the current statutory auditor. The statutory central audit responsibility in such
banks thus remained confined to two audit firms which were appointed on a cyclical
basis.
3. The Rest and Rotation Policy in appointment of SCAs for banks has been
mandated in order that audit functions are looked at afresh, as a new team is likely to
examine the issues in a bank from a different perspective. The policy also aims to
deter the auditors and auditee from establishing a comfortable relationship that may
lead to compromise in strict adherence to audit principles.
ब��कग पयवर् े�ण �वभाग, क�द्र�य कायार्लय, वल्ड र् ट्रेड सेन्टर, सेन्टर 1, कफ परेड ,कोलाबा मुम्बई 400005
टे�लफोन 022 22180157 e-mail- cgmicdbsco@rbi.org.in
Department of Banking Supervision, Central Office, World Trade Centre 1,Cuffe Parade, Colaba, Mumbai - 400
005, INDIA
Tele: (9122) 22189131 Fax: 022 22180157 e-mail: cgmicdbsco@rbi.org.in
�हदं � आसान है, इसका प्रयोग बढाइए4. To address the above and ensure that rest and rotation policy is followed in letter
and spirit, it has been decided that, henceforth, an audit firm, after completing its four
year tenure in a particular private/foreign bank, will not be eligible for appointment as
SCA of the same bank for a period of six years.
5. The above guidelines are also applicable to foreign banks.
Yours faithfully
(Prabhakar Jha)
General Manager
ब��कग पयवर् े�ण �वभाग, क�द्र�य कायार्लय, वल्ड र् ट्रेड सेन्टर, सेन्टर 1, कफ परेड ,कोलाबा मुम्बई
400005 टे�लफोन 022 22180157 e-mail- cgmicdbsco@rbi.org.in
Department of Banking Supervision, Central Office, World Trade Centre 1,Cuffe Parade, Colaba, Mumbai - 400
005, INDIA
Tele: (9122) 22189131 Fax: 022 22180157 e-mail: cgmicdbsco@rbi.org.in
�हदं � आसान है, इसका प्रयोग बढाइए