Reserve Bank of India (Non-Banking Financial Companies - Statutory Audit) Directions, 2026

RBI/DoS/2026-27/465
DoS.CO.ARG.59/08.91.001/2026-27
July 31, 2026

Reserve Bank of India (Non-Banking Financial Companies - Statutory Audit) Directions, 2026

Table of Contents

Chapter I - Preliminary
A. Short Title and Commencement
B. Applicability
C. Definitions
Chapter II - Governance and Oversight
A. Role of the Board and Senior Management
Chapter III - Guidelines for Appointment
A. Number of Statutory Central Auditors / Statutory Auditors and Branch Coverage
B. Eligibility Criteria of Auditors
C. Independence of Auditors
D. Professional Standards
E. Tenure and Rotation
F. Audit Fees and Expenses
G. Appointment Procedure
Chapter IV - Repeal and Other Provisions
A. Repeal and Saving
B. Application of Other Laws Not Barred
C. Interpretations
Annex I
Annex II

In exercise of powers conferred by Sections 45JA, 45K, 45L and 45M of the Reserve Bank of India Act, 1934, Sections 29A, 30A and 32 of National Housing Bank Act, 1987, Sections 3 (read with section 31A) and 6 of Factoring Regulation Act, 2011 and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.

Chapter I - Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Non-Banking Financial Companies - Statutory Audit) Directions, 2026.

2. These Directions shall come into effect immediately upon issuance.

B. Applicability

3. These Directions shall be applicable to the Non-Banking Financial Companies [including Housing Finance Companies] (hereinafter collectively referred to as ‘NBFCs’ and individually as a ‘NBFC’) in respect of appointment / reappointment of their Statutory Central Auditors (SCAs) / Statutory Auditors (SAs). However, non-deposit taking NBFCs with asset size below ₹1,000 crore have the option to continue with their extant procedure.

For the purpose of these Directions, ‘Non-Banking Financial Companies’ shall mean such entities as defined in the Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Directions, 2025.

For the purpose of these Directions, the term SCAs is applicable to NBFCs which appoint separate Statutory Branch Auditors (SBAs) whereas in all other cases, the term SAs shall be applicable.

C. Definitions

4. In these Directions, unless the context states otherwise, the terms herein shall bear the meaning assigned to them below.

• (1) ‘All India Financial Institutions’ shall mean National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), National Housing Bank (NHB), Export-Import Bank of India (EXIM Bank) and National Bank for Financing Infrastructure and Development (NaBFID) as established under their respective statutes, (hereinafter collectively referred to as ‘AIFIs’).
• (2) ‘Audit Firm’ shall mean a partnership firm or Limited Liability Partnership (LLP).
• (3) ‘Central Co-operative Bank (CCB)’ shall be as defined under Sub-Section (d) of Section 2 of National Bank for Agriculture and Rural Development Act, 1981.
• (4) ‘Commercial Banks’ means banking companies (including Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949.
• (5) ‘Group Entities’ shall mean two or more entities related to each other through any of the following relationships, viz. Subsidiary - parent [defined in terms of Accounting Standards (AS) 21], Joint venture (defined in terms of AS 27), Associate (defined in terms of AS 23), Promoter - Promotee [as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed companies, a related party (defined in terms of AS 18), Common brand name, and investment in equity shares of 20 per cent and above.
• (6) “Large Exposure” or “LE” shall have the same meaning as defined in the Reserve Bank of India (Non-Banking Financial Companies – Concentration Risk Management) Directions, 2025.
• (7) ‘Primary (Urban) Co-operative Banks (UCBs)’ (individually as a ‘UCB’) shall mean entities as defined in Section 5 (ccv) read with Section 56 of the Banking Regulation Act, 1949.
• (8) ‘Public Sector Banks (PSBs)’ (individually as a ‘PSB’) shall refer to State Bank of India and corresponding new banks collectively.
• (9) ‘State Bank of India’ shall mean State Bank of India as defined in Section 5 (nc) of the Banking Regulation Act, 1949.
• (10) ‘State Co-operative Bank (StCB)’ shall be as defined under Sub-Section (u) of Section 2 of National Bank for Agriculture and Rural Development Act, 1981.

5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the Companies Act, 2013, or any statutory modification or re-enactment thereto or other regulations issued by RBI or the Glossary of Terms published by RBI or as used in commercial parlance, as the case may be.

Chapter II - Governance and Oversight

A. Role of the Board and Senior Management

6. The NBFC shall decide on the number of SCAs / SAs based on a Board approved policy, inter alia, taking into account the relevant factors such as the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerisation, availability of other independent audit inputs, identified risks in financial reporting and any other relevant factors.

7. For the NBFCs which are required to constitute an Audit Committee of the Board (ACB) in terms of Reserve Bank of India (Non-Banking Financial Companies - Governance) Directions, 2025 to be read with Section 177 of the Companies Act, 2013, the ACB shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards, and best practices. Any concerns in this regard shall be flagged by the ACB to the Board of Directors of the NBFC and concerned Senior Supervisory Manager (SSM), Department of Supervision (DoS), RBI. For remaining NBFCs, the Board of Directors shall monitor and assess the independence of the auditors. Any concerns in this regard shall be flagged by the Board of the NBFC to the concerned SSM DoS, RBI.

8. The Board / ACB of the NBFC shall review the performance of SCAs / SAs on an annual basis. The NBFC shall report any serious lapses / negligence in audit responsibilities or conduct issues on part of the SCAs / SAs or any other matter considered as relevant to DoS, RBI within two months from completion of the annual audit. The NBFC shall send such reports with the approval / recommendation of the Board / ACB, along with the full details of the audit firm. Board shall review the performance of SCAs / SAs in case ACB is non- existent in the NBFC.

9. The Board / ACB of the NBFC shall make recommendations to the competent authority as per the relevant statutory / regulatory instructions for fixing of audit fees of SCAs / SAs.

10. The NBFC shall formulate a Board approved policy to be hosted on its official website / public domain and formulate necessary procedure thereunder to be followed for appointment of SCAs / SAs. Apart from conforming to all relevant statutory / regulatory requirements in addition to these instructions, this should afford necessary transparency and objectivity for most key aspects of this important assurance function.

Chapter III - Guidelines for Appointment

A. Number of Statutory Central Auditors / Statutory Auditors and Branch Coverage

11. The NBFCs with asset size of ₹15,000 crore and above as at the end of previous year, shall ensure to get their statutory audit conducted under joint audit by a minimum of two audit firms. For the purpose of the Directions, asset size means total assets. All other NBFCs should appoint a minimum of one audit firm for conducting statutory audit. The NBFC shall ensure that the joint auditors of the NBFC do not have any common partners, and they are not under the same network of audit firms as defined in Rule 6(3) of the Companies (Audit and Auditors) Rules, 2014. Further, the NBFC shall finalise the work allocation among SCAs / SAs, before the commencement of the statutory audit, in consultation with their SCAs / SAs.

12. Considering the above factors and the requirements of the NBFC, the Board shall decide the actual number of SCAs / SAs to be appointed, subject to the following limits: