RBI fiat on penalties makes auditors see red; banks may have to pay more

The RBI's June 29 circular said it would take punitive action against auditors, mainly in case of divergence in provisioning norms and asset classification

The recent Reserve Bank of India (RBI) circular invoking penalties against bank auditors is likely to push up auditing cost for lenders and could also hurt banks' functioning as the audit process might seem endless.

Auditors said the proposals had not been well thought out. Audit fees have fallen 30-40 per cent in recent years. As complexities are increasing, these rules will lead to a jump in audit fees, they added.

"The fees will be very high for banks now if auditors have to assume so many responsibilities in a restrictive environment," said a senior partner at a firm.

The central bank's June