{"id":6712,"date":"2021-07-07T09:35:19","date_gmt":"2021-07-07T09:35:19","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=6712"},"modified":"2021-07-07T09:35:22","modified_gmt":"2021-07-07T09:35:22","slug":"rbi-provides-the-risk-based-internal-audit-rules-to-hfcs","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/","title":{"rendered":"RBI Provides the Risk Based Internal Audit Rules to HFCs"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Reserve Bank of India has issued a notification concerning the extension of risk based Internal Audit Rules to all non-deposit taking and deposit-taking Housing Finance Companies with assets not less than rupees 5000 crores with effect from 30<sup>th<\/sup> June 2022. In this blog, we shall discuss this notification of RBI (Reserve Bank of India) regarding the Risk Based Internal Audit Rules to Housing Finance Companies.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a557041c8d70\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a557041c8d70\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/#Risk_Based_Internal_Audit_Rules_%E2%80%93_Background\" title=\"Risk Based Internal Audit Rules \u2013 Background \">Risk Based Internal Audit Rules \u2013 Background <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/#Meaning_of_Risk_Based_Internal_Audit_Rules\" title=\"Meaning\nof Risk Based Internal Audit Rules\">Meaning\nof Risk Based Internal Audit Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/#What_do_the_New_Rules_Say\" title=\"What do\nthe New Rules Say?\">What do\nthe New Rules Say?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/rbi-provides-the-risk-based-internal-audit-rules-to-hfcs\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risk_Based_Internal_Audit_Rules_%E2%80%93_Background\"><\/span>Risk Based Internal Audit Rules \u2013 Background <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>On\nFebruary 03, 2021, the RBI (Reserve Bank of India) has made such rules\napplicable to other companies. The share price of HFCs (Housing Finance\nCompanies) took a beating after the Reserve Bank of India released the circular\nconcerning extending internal based audit rules to Housing Finance Companies.\nThe share price of the Life Insurance Corporation or LIC Housing Finance fell\nto a low of Rs. 519 per piece, down 1.5% from the earlier close.<\/p>\n\n\n\n<p>While\nannouncing the risk based internal audit rules for Non-Banking Financial\nCompanies (NBFCs) and urban co-operative banks on February 03, 2021, the\nReserve Bank of India stated that the circular is appropriate to the NBFCs\n(Non-Banking Financial Companies) with an asset size of Rs. 5000 crores &amp;\nabove and all crucial urban co-operative banks with an asset size of rupees 500\ncrores and above.<\/p>\n\n\n\n<p>Moreover,\nthe Reserve Bank of India said that the circular aims to furnish vital\nnecessities for a robust internal audit function which comprises enough\nstature, authority, resource, professional capability and independence in order\nto align such necessities in huge Non-Banking Financial Companies or Urban\nCo-operative Banks with those that are stipulated for scheduled commercial\nbanks.<\/p>\n\n\n\n<p>The\nReserve Bank of India expects that the adoption of risk based internal audit rules\nby such companies can boost the effectiveness and quality of their internal\naudit systems.<\/p>\n\n\n\n<p>In\nthe <strong><em>Statement\non Development &amp; Regulatory Policies<\/em><\/strong> announced as a part of the <strong><em>Monetary\nPolicy Statement<\/em><\/strong> dates Dec 04, 2020, the Reserve Bank of India pointed\nout that appropriate guidelines will be provided to large Urban Co-operative\nBanks and Non-Banking Financial Companies for the adoption of Risk Based\nInternal Audit to enhanced the internal audit function, which performs as a\nthird line of protection.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Risk_Based_Internal_Audit_Rules\"><\/span>Meaning\nof Risk Based Internal Audit Rules<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The HFCs or <strong><a href=\"https:\/\/swaritadvisors.com\/housing-finance-company-registration\" class=\"text-primary\">Housing Finance Companies<\/a><\/strong> must put in place of an RBIA (Risk Based Internal Audit framework by 30<sup>th<\/sup> June 2022. Thus what is RBIA? An efficient RBIA is an audit method that connects an organisation overall risk management framework and furnishes an assurance to the directors and senior management on efficiency and quality of an organisation internal control risk management and supremacy concerning systems as well as processes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_do_the_New_Rules_Say\"><\/span>What do\nthe New Rules Say?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nnew rules of the Reserve Bank of India are vital in the background of\nincreasing cases of financial regulations and governance issues in banks and\nNon-Banking Financial Companies in past years. In order to make sure an even\ntransition from the existing system of internal audit to Risk Based Internal Audit,\nthe Non-Banking Financial Companies and Urban Co-operative Banks concerned will\nhave to create a committee of senior executives with the task of formulating an\nappropriate action plan.<\/p>\n\n\n\n<p>The\nRBI (Reserve Bank of India) said that the committee might deal with\ntransitional &amp; change management problems and should report progress regularly\nto the board and senior management.<\/p>\n\n\n\n<p>According\nto the new rules of the Reserve Bank of India, the Non-Banking Financial Companies\nand Urban Co-operative Banks boards are majorly accountable for overseeing\ntheir internal audit uses.<\/p>\n\n\n\n<p>The RBI (Reserve Bank of India) said that the <strong>RBIA Policy<\/strong><sup><a href=\"https:\/\/www.rbi.org.in\/Scripts\/NotificationUser.aspx?Id=12018&amp;Mode=0\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup> would be formulated with the approval of boards and disseminated extensively within the organisation. The policy must properly document the authority, purpose and responsibility of the activity of internal audit with a clear separation of the role and expectations from the risk management function and risk-based internal audit function.<\/p>\n\n\n\n<p>Further,\nthe Reserve Bank of India said that the senior management of such companies or\nfirms are accountable for ensuring faithfulness to the risk based internal\naudit rules approved by the board and the development of an efficient internal\ncontrol function that measures, identifies, monitors, and reports all risk\nfaced.<\/p>\n\n\n\n<p>Further,\nit stated that it would ensure that suitable action is taken on the internal\naudit outcomes within the prescribed timelines and status on the closure of\naudit reports is placed before the ACB\/Board.<\/p>\n\n\n\n<p>Also,\nthe senior management must establish a complete and independent internal audit\ntask must assess and make suitable recommendations to improve the governance\nprocess on business risk management and control, decision making, promote\nsuitable values and ethics within the organisation and make sure effective\nperformance management and staff responsibility etc.<\/p>\n\n\n\n<p>The\nRBI (Reserve Bank of India), in order to make sure effectiveness, said that the\ninternal audit function must have sufficient authority, independence,\nresources, and stature, thus enabling internal auditors to perform their\nassignments correctly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The RBI (Reserve Bank of India) said that all deposit-taking Housing Finance Companies (HFCs), despite their size and the non-deposit taking Housing Finance Companies with an asset size of Rs. 5000 crores and above will come under the Risk Based Internal Audit Rules. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/rbi-states-maximum-dividend-payout-ratio-for-nbfcs\/\">The RBI States Maximum Dividend Payout Ratio for NBFCs \u2013 An Overview<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Reserve Bank of India has issued a notification concerning the extension of risk based Internal Audit Rules to all non-deposit taking and deposit-taking Housing Finance Companies with assets not less than rupees 5000 crores with effect from 30th June 2022. In this blog, we shall discuss this notification of RBI (Reserve Bank of India) [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":6713,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58],"tags":[740],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6712"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=6712"}],"version-history":[{"count":5,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6712\/revisions"}],"predecessor-version":[{"id":6719,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/6712\/revisions\/6719"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/6713"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=6712"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=6712"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=6712"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}