RBI Strictness! NBFCs and UCBs to conduct internal audit to prevent financial irregularities

new Delhi. The Reserve Bank of India (RBI) has ordered that an internal audit of non-banking financial companies (NBFCs) and urban co-operative banks (UCBs) coming under the ambit of risk be conducted. Also clarified that all those NBFCs will come under the scope of risk, whose size (NBFC Size) is more than Rs. 5,000 crores. At the same time, urban public sector banks with a size of Rs 500 crore will also be audited. In other words, urban cooperative banks and NBFCs of lesser size will remain outside the scope of the audit.

RBI ordered formation of senior executive committee
According to the circular issued by the Reserve Bank, in this audit the focus will be on the independence, rights, resources and professional competence of the company. It is believed that this step of RBI will curb the financial disturbances of non-banking financial companies. Let us know that in recent times, there have been many cases of financial irregularities in NBFCs. RBI has said that NBFCs and Urban Co-operative Banks should form a committee of senior executives. These committee will see progress report of issues of board and senior management. In case of any problem, this committee will also find a solution.

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Board of NBFC and UCB will conduct internal audit

As per RBI directive, the board of NBFC and UCB will conduct internal audit. The board itself will also ensure that internal audit is processed within the stipulated time. Also, senior management will be responsible for creating independent audit function. This will also include promoting accountability and transparency. The internal audit function has to see that it improves governance and applies it to business decisions. RBI has said that the internal audit function should have full authority.

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