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In the wake of recent developments involving IndusInd Bank, regulatory authorities are considering new norms for concerning the appointment and functioning of statutory auditors in public sector banks.
According to sources, a high-level meeting was held in the first week of April, involving the Reserve Bank of India (RBI), the Department of Financial Services (DFS), and the Comptroller and Auditor General (CAG). The agenda of the meeting focused primarily on the current statutory auditor appointment process for public sector banks, and the need for a more centralised and stringent framework.
In the meeting, mainly three main agendas were discussed, starting with the appointment of statutory auditor in PSBs. DFS and the CAG expressed concerns over the existing system, proposing that they jointly manage the appointments of statutory auditors for public sector banks, instead of leaving it entirely to the discretion of the banks. This move is seen as an attempt to bring greater transparency, accountability, and consistency to the audit process.
Another key issue discussed during the meeting was the implementation of a mandatory “cooling-off” period for statutory auditors. The idea behind this is to prevent conflicts of interest and maintain the integrity of the audit process. The authorities are considering policies that would restrict auditors from taking on successive engagements with the banking space without cooling off period.
"The discussion also on the potential conflict of interest when a statutory auditor simultaneously offers tax advisory or consultancy services to the same bank. The RBI, DFS, and CAG are reportedly of the view that such dual roles could compromise the objectivity and independence of the audit process,” sources told Zee Business.
DFS and RBI declined to respond to Zee Business’s queries regarding the meeting and its outcomes.
The regulatory discussion following the IndusInd Bank issue signals a broader move towards tightening governance and oversight mechanisms within India’s banking sector.
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