Now lets us discuss the Directions given by RBI related to Auditors Report. W.e.f. January 31, 1998, RBI has given directions to statutory auditors report, which is applicable to all auditors of NBFCs. The main requirements of the directions are as described below.
Matters Included in Auditor’s Report : In addition to the normal auditors report u/s 277 of the Companies Act, on the financial statements of NBFCs to the shareholders, the auditors should also make a separate report to the Board of Directors of the NBFCs containing statements on matters of supervisory concern to the RBI detailed below.
In case of All NBFCs : The auditors have to report whether the NBFC :
Has applied for registration with the RBI
Is incorporated before January 9, 1997.
Has received any communication about grant/refusal of COR and
Has obtained a COR of incorporation on/after January 9, 1997.
In case of NBFCs Accepting / Holding Public Deposits : The directors are directed to include a statement on the following :
The public deposits accepted by the NBFC together with other borrowings, namely, issue of unsecured non-convertible debentures/bonds to public, from shareholders and any other deposit not excluded from the definition of the NBFCs Acceptance of Public Deposits Directions, 1998 are within the limits admissible under the provisions of these directions.
The credit rating for fixed deposits assigned by the rating agency on the specified date is in force, and the aggregate amount of the outstanding deposits at any point of time during the year has exceeded the limit specified by the rating agency.
The NBFC has defaulted in paying to its depositors the interest and/or principal amount of the deposits after such interest and/or principal became due.
The NBFC 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 by the NBFCs Prudential Norms Directions, 1998.
The CAR as disclosed in the return submitted to the RBI in terms of RBI Prudential Norms Directions, 1998 has been correctly determined and such ratio is in conformity / compliance with the minimum CRAR prescribed by the RBI.
The NBFC has complied with the liquidity requirements and kept the approved securities with a designated bank.
The NBFC has furnished to the RBI within the stipulated period the half yearly return on the specified prudential norms and
The NBFC has furnished to the RBI within the stipulated period the return on deposits as specified in the first schedule to the NBFC Acceptance of Public Deposit Directions, 1998.
In Case of NBFC not Accepting Public Deposits : The auditor’s report should also include a statement as to whether (i) The board of directors of the NBFC has passed a resolution for the non-acceptance of any public deposits (ii) the NBFC has accepted any public deposits during the period and (iii) the NBFC has complied with the prudential norms relating to income recognition, accounting standards, asset classification and provisioning for bad and doubtful debts as applicable to it.