RBI issues circular on risk-based internal audit for UCBs, NBFCs

The Reserve Bank of India (RBI) on February 3 issued a circular on risk-based internal audit for Non-banking finance companies (NBFCs) and Urban Cooperative Banks (UCBs) on risk-based internal audit.

The circular is applicable to NBFCs with asset size of Rs 5,000 crore and above and all Primary Urban Cooperative Banks (UCBs) with asset size of Rs 500 crore and above, the RBI said.

"The circular intends, inter alia, to provide the essential requirements for a robust internal audit function, which include sufficient authority, stature, independence, resources and professional competence, so as to align these requirements in larger NBFCs/UCBs with those stipulated for Scheduled Commercial Banks," the RBI said.

It is expected that the adoption of RBIA by such entities would help to enhance the quality and effectiveness of their internal audit system, the RBI said.

RBI had announced in the 'Statement on Developmental and Regulatory Policies' issued as part of the Monetary Policy Statement dated December 4, 2020 that with a view to strengthen the Internal Audit Function, which works as a third line of defense, suitable guidelines will be issued to large UCBs and NBFCs on adoption of Risk Based Internal Audit (RBIA).