Rbi Calls Amendment Of Banking Regulation Act

The Reserve Bank of India (RBI) has sought powers from the government to be able to issue directions to the auditors of a banking company in regard to balance sheet, profit & loss account, disclosure of liability in the books of accounts via an amendment to Section 30 of the Banking Regulation Act, 1949 (BR Act).

The need to amend the Act has arisen due to the fact that except where the regulator directs a special audit to be conducted under Section 30 (1B), it does not have any power or authority over such auditors.

At present, sub-section (1A) of Section 30 of the BR Act requires every banking company to obtain previous approval of the RBI before appointing/ reappointing or removing any auditor of such a company while sub-section (1B) empowers the regulator to direct a special audit of the company's accounts and the auditors are bound to comply with such directions and submit such audit reports to the RBI.

Further, the banking regulator has proposed a new sub-section (4) to be inserted in Section 30 that will require auditors of a banking company to state in their audit report whether or not the company has complied with the provisions of the Act or directions or notifications issued.

Once the BR Act is amended and these two provisions are inserted, then non-compliance of such directions issued by the RBI and non-fulfillment of the statutory obligation by the auditors will render banking companies liable for penalty under sub-section (4) of Section 46 of the Act.