RBI extends Risk Based Internal Audit rules to HFCs

Reserve Bank of India (RBI) has extended Risk-Based Internal Audit (RBIA) rules to all deposit-taking and non-deposit taking HFCs (Housing Finance Companies) who are having assets above Rs 5,000 crore. These rules will be effective from June 30, 2022.

Highlights

Earlier on February 3, RBI had made these rules applicable to other entities as well. After internal audit rules extended to HFCs, share price of HFCs took a beating.  Share price of LIC Housing Finance fell down by 1.5% to Rs 519 per piece.

What are the new rules?

• RBI’s new guidelines are important with respect of rising instances of financial regularities and governance issues in banks and NBFCs.
• It will ensure smooth transition from existing system of internal audit to constitution of committee comprising of senior executives with responsibility to formulate plans for RBIA, NBFCs and UCBs concerned.
• Committee will address transitional and change management issues and will report progress periodically to Board and senior management.
• Boards of NBFCs and UCBs are primarily responsible to oversee their internal audit functions.

Risk-based internal audit (RBIA)

RBIA is an internal methodology, primarily focused on inherent risk involved with activities or system. It provides assurance regarding the management of risk within defined risk appetite level.  It is a risk management framework of management which seeks to reinforce responsibility of management and BOD (Board of Directors) for managing risk at every stage.

Month: Current Affairs - June, 2021