RBI extends Risk Based Internal Audit Rules to Housing Finance Companies - (11 Jun 2021)

Banking

Reserve Bank of India extends provisions of Risk Based Internal Audit Rules to all deposit taking Housing Finance Companies (HFCs), irrespective of their size and Non-deposit taking HFCs with asset size of Rs. 5,000 crore and above Housing Finance Companies (HFCs) also. The introduction of Risk-Based Internal Audit (RBIA) system was mandated for all Scheduled Commercial Banks (except Regional Rural Banks) on 27th December, vide a Circular.

An independent and effective internal audit function in a financial entity provides vital assurance to the Board and its senior management regarding the quality and effectiveness of the entity’s internal control, risk management and governance framework. The essential requirement for a robust internal audit function includes sufficient authority, proper stature, independence, adequate resources and professional competence.

Historically, the internal audit system in NBFCs/UCBs has generally been concentrating on transaction testing, testing of accuracy and reliability of accounting records and financial reports, adherence to legal and regulatory requirements, etc. However, in the changing scenario, such testing by itself might not be sufficient. Therefore, Supervised Entities (SEs) will have to move towards a framework which will include, in addition to selective transaction testing, an evaluation of the risk management systems and control procedures in various areas of operations. This will also help in anticipating areas of potential risks and mitigating such risks.

Tags : RULES EXTENSION HFCS