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NBFC Audits

Non-Banking Financial Company (NBFC) primarily provides loans, investments, leasing, and hire-purchase finance.<br><br>Regulated by the Reserve Bank of India (RBI) under the RBI Act, 1934.<br><br>Key role: Serve sectors underserved by traditional banks, including small businesses and rural finance.

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NBFC Audits

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  1. NBFC Audit Service: Navigating the New Regulatory Landscape in 2025 Welcome to our presentation on the evolving landscape of NBFC audits. In an environment of heightened scrutiny, understanding and adapting to new regulatory requirements is crucial for sustained success and growth.

  2. Why NBFC Audits Matter More Than Ever Increased Scrutiny Intensified Oversight Risk Mitigation RBI cancelled 3,110 NBFC registrations between FY15-FY22 due to non-compliance, highlighting a strict regulatory stance. Over 9,500 NBFCs face intensified regulatory audits to ensure financial stability and protect the broader economy. Audits are vital for protecting against critical risks such as Non-Performing Assets (NPAs), fraud, governance lapses, and systemic threats.

  3. RBI9s Expanded Audit Scope: Beyond the NBFC Boundary Since April 2025, RBI has broadened the audit mandate to include all material outsourced service providers. This ensures a holistic view of the NBFC's operational integrity. Audits now encompass IT vendors, cloud providers, loan recovery agents, and digital lending platforms. NBFCs are held directly accountable for failures or non-compliance within these third-party services. The focus includes robust cybersecurity measures, stringent data privacy protocols, and efficient customer grievance redressal mechanisms.

  4. NBFC Audits Services - Enterslice

  5. Types of NBFC Audits Explained Statutory Audit Process Audit Annual mandatory audit performed by qualified Chartered Accountants to ensure financial statements comply with regulations. Verifies adherence to established regulatory guidelines and internal operational process standards, ensuring efficiency and compliance. Product Audit System Audit Checks the compliance and quality of specific financial products and services offered, from conception to delivery. Evaluates the overall management systems and risk controls implemented at an organizational level to safeguard operations.

  6. Key RBI Audit Compliance Requirements for NBFCs 01 02 Audit Charter Updates Vendor Audit Trails Ensure audit charters are updated to specifically include vendor oversight and a clear classification of associated risks. Maintain meticulous vendor-wise audit trails and clear Service Level Agreements (SLAs) for all outsourced activities. 03 04 Lapse Reporting CFSS Implementation Mandate immediate reporting of any audit lapses or irregularities directly to the RBI, fostering transparency. Middle & Upper Layer NBFCs must implement a Core Financial Services Solution (CFSS) by September 2025 to streamline operations.

  7. Statutory Audit Checklist Highlights Verify loans and investments comply with prudential norms (e.g., max 15% funds to single borrower). Ensure proper appraisal, sanction, and diligent follow-up of all advances. Confirm no loans are issued against the NBFC9s own shares, preventing conflicts of interest. Confirm subsidiary and group company investments adhere to AS 13 accounting standards. Validate provisioning for bad debts and ensure asset classification accuracy per RBI guidelines. Scrutinize the overall financial health and operational integrity of the NBFC. These checks are critical for maintaining financial health and regulatory adherence.

  8. Real-World Impact: RBI9s Direct Engagement with Fintech Partners The RBI now directly inspects Loan Service Providers (LSPs), with a keen focus on robust KYC procedures, secure data handling practices, and complete transparency in operations. There is a significant concern over concentration risks, where over-reliance on a few LSPs could potentially trigger systemic vulnerabilities across the financial sector. Cybersecurity breaches on third-party platforms represent major regulatory red flags, leading to severe penalties and reputational damage.

  9. Preparing Your NBFC for Successful Audits Vendor Due Diligence Integrate Findings Conduct comprehensive due diligence and regular risk assessments for all third-party vendors. Integrate audit findings seamlessly into your existing governance and compliance frameworks. Team Training Leverage Technology Train internal teams rigorously on new digital lending guidelines and effective grievance redressal protocols. Utilize advanced technology solutions like AutoCloud Enterprise for end-to-end loan lifecycle management and superior audit readiness.

  10. Conclusion: Embrace Audit as a Strategic Advantage RBI9s expanded audit regime is a clear call to action: strengthen transparency, enhance risk management, and build unwavering customer trust. Proactive compliance not only safeguards your NBFC9s license but also reinforces its reputation in the market. Invest in robust audit processes today to thrive in tomorrow9s increasingly regulated financial ecosystem. Let the audit be your most powerful tool for sustainable growth and long-term resilience.

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