RBI/DoS/2026-27/436 DoS.CO.ARG.30/08.91.021/2026-27 July 31, 2026

Reserve Bank of India (Urban Co-operative Banks – Concurrent 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 of Directors
• Chapter III - Guidelines for Concurrent Audit System
  • A. Scope of Concurrent Audit
  • B. Coverage of Business / Branches
  • C. Types of Activities to be Covered
  • D. Appointment and Remuneration of Concurrent Auditor
  • E. Reporting System
  • F. Other Instructions
  • G. Conclusion
• Chapter IV - Repeal and Other Provisions
  • A. Repeal and Saving
  • B. Application of Other Laws Not barred
  • C. Interpretations

Introduction

A High level Committee set up by the Reserve Bank of India at the instance of Government of India under the chairmanship of Shri A. Ghosh, the then Deputy Governor, to enquire into various aspects of frauds and malpractices in banks, had recommended in its report, submitted in June 1992 that a system of Concurrent Audit should be introduced at large and exceptionally large branches to serve as administrative support to branches, help in adherence to prescribed systems and procedures and timely detection of lapses / irregularities. An informal group set up by the Reserve Bank of India comprising senior officers of some large commercial banks and the representatives from the Institute of Chartered Accountants of India examined the various aspects connected with the system.

Accordingly, Concurrent Audit was introduced in all scheduled and other Primary (Urban) Co-operative Banks with deposits over ₹50 crore and was subsequently extended to all UCBs based on the recommendations of the Joint Parliamentary Committee (JPC), which enquired into stock market scam and matters relating thereto.

The concurrent audit system is to be regarded as part of a UCB's early warning system to ensure timely detection of irregularities and lapses, which helps in preventing fraudulent transactions. It is, therefore, necessary for the Urban Co-operative Banks (UCBs) management to bestow serious attention to the implementation of various aspects of the system such as selection of branches, coverage of business operations, appointment of auditors, appropriate reporting procedures, follow-up / rectification processes and utilisation of the feed-back from the system for appropriate and quick management decisions.

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, read with Section 56 of the BR Act (AACS), 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 (Urban Co-operative Banks – Concurrent Audit) Directions, 2026.

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

B. Applicability

3. These Directions shall be applicable to Urban Co-operative Banks (hereinafter collectively referred to as ‘UCBs’ and individually as a ‘UCB’).

For the purpose of these Directions, ’Urban Co-operative Banks’ shall mean Primary Co-operative Banks as defined under Section 5(ccv) read with Section 56 of the Banking Regulation Act, 1949.

C. Definitions

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

(1) ‘Audit Firm’ shall mean a Proprietorship Firm or Partnership Firm or Limited Liability Partnership (LLP).

5. All expressions used in these Directions shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1934, 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 of Directors

6. The Board shall, once in a year, review the effectiveness of the Concurrent Audit system and take necessary measures to correct the lacunae in the system.

7. The Audit Committee of the Board (ACB) shall review the action taken on concurrent audit report and its compliance.

Chapter III - Guidelines for Concurrent Audit System

8. The UCB’s management shall decide the details of the concurrent audit system. These Directions broadly define the concept and scope of concurrent audit, such as coverage of business / branches, types of activities to be covered during the audit and reporting system.

A. Scope of Concurrent Audit

9. Concurrent audit is an examination, which is contemporaneous with the occurrence of transactions or is carried out as near thereto as possible. It attempts to shorten the interval between a transaction and its examination by an independent person not involved in its documentation. The concurrent audit process emphasises on substantive checking in key areas rather than test checking.

10. A concurrent auditor may not sit in judgement of the decision taken by the UCB. However, the concurrent auditor will necessarily have to see whether the transactions or decisions are within the policy parameters laid down by the Head Office (HO) / Board, they do not violate the instructions or policy prescriptions of RBI and that they are within the delegated authority and in compliance with the terms and conditions for exercise of delegated authority.

B. Coverage of Business / Branches

11. The coverage may be as under:

(1) The UCB shall subject the Departments / Divisions at the HO dealing with treasury functions viz. investments, funds management including inter-bank borrowings, bill rediscount, in stock invest scheme, credit card system and foreign exchange business to concurrent audit. In addition, the UCB may subject all branch offices undertaking such business, as also large branches and dealing rooms, to continuous audit.

(2) The concurrent audit may cover the problem branches, which are continuously getting poor or very poor rating in the UCB’s annual inspection / audit and where the housekeeping is extremely poor.

(3) The UCB may also include additional branches at its discretion on the basis of need, as per its professional judgement about the overall functioning of the branches.

C. Types of Activities to be Covered

12. The main role of the concurrent audit is to supplement the efforts of the UCB in carrying out simultaneous internal check of the transactions and other verifications and compliance with the procedures laid down. In particular, the concurrent auditor should ensure that that the transactions are properly recorded / documented and vouched. The concurrent auditors may broadly cover the following items:

(1) Cash (i) Daily cash transactions with particular reference to any abnormal receipts and payments. (ii) Proper accounting of inward and outward cash remittances. (iii) Proper accounting of currency chest transactions (if any) and its prompt reporting to RBI. (iv) Expenses incurred by cash payment involving sizeable amount.

(2) Investments (i) Ensure that in respect of purchase and sale of securities, the branch has acted within its delegated power having regard to its HO instructions. (ii) Ensure that the securities held in the books of the branch are physically held by it. (iii) Ensure that the branch is complying with RBI / HO / Board guidelines regarding delivery of scrips, documentation and accounting. (iv) Ensure that the sale or purchase transactions are done at rates beneficial to the UCB.

(3) Deposits (i) Check the transactions about deposits received and repaid. (ii) Percentage check of interest paid on deposits may be made, including calculation of interest on large deposits. (iii) Check new accounts opened. Operations in new current / savings accounts may be verified in the initial period itself to see whether there are any unusual operations. Also examine whether the formalities connected with the opening of new accounts have been followed as per RBI instructions.