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RBI bars Srei Infrastructure auditor Haribhakti & Co for two years

The audit firm, which is also a regular auditor of important banks, including state-owned banks, has been debarred under section 45MAA of the Reserve Bank of India Act

Reserve Bank of India

Anup Roy  |  Mumbai 


The (RBI) on Tuesday debarred audit firm Haribhakti & Co from undertaking audit assignments in any of the banking and non-banking financial companies (NBFC) for two years starting April 1, 2022, for failing to comply with its direction.

Haribhakti was the auditor of SREI Infrastructure Fina­nce, a listed firm, for 2019-20. The RBI superseded the boards of SIFL and Srei Equ­ipment on October 4 over governance concerns and payment defaults. “This action has been taken on account of the failure on the part of the audit firm to comply with a specific direction issued by the RBI with respect to its statutory audit of a systemically important non-banking financial company,” a RBI statement said.

The audit firm, which is also a regular auditor of important banks, has been debarred under section 45MAA of the Act.

The Act 2019, enacted after the fiasco related to IL&FS, gave the RBI sweeping powers over NBFCs. The amendment gave power to the RBI to remove directors, sup­ersede the board, take action against auditors, and frame schemes of arrangement.

Specifically, for auditors of NBFCs, the Section 45MAA says where an auditor fails to comply with any direction or order issued by the RBI under section 45MA, the central bank may remove or debar the auditor from exercising duties as auditor from any RBI-regulated entities, for a maximum period of three years at a time, according to legal firm Shardul Amarchand Mangaldas.


This is the first time that any auditor has been implicated under section 45MAA. Section 45MA of the RBI Act lists the duties of an auditor of an NBFC. It says an auditor of an NBFC would be duty-bound to inquire whether the firm being audited has furnished all the details on its deposits, assets, and liabilities, profit-and-loss account, etc. to the RBI that would form the basis of disclosure related instructions, or even special audit on the firm.

The RBI’s communication suggests the audit firm failed to do so, leading to the two-year debarment. However, the action will not affect Haribhakti’s assignments for FY22, the RBI said.

The RBI has been tightening its rules on NBFC auditors to improve accountability. On April 27, the RBI said and NBFCs, excluding those that don’t take deposits and have a sub-Rs 1,000-crore asset base, must bring in new auditors from the second half of the fiscal year.

and NBFCs, having an asset size of Rs 15,000 crore or more, were asked to appoint joint auditors. Crucially, there was a retrospective applicability of the extended eligibility criteria for auditors, including those relating to the provision of audit and non-audit services.

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First Published: Tue, October 12 2021. 12:35 IST