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RBI Extends Risk-Based Internal Audit To Housing Finance Companies
The RBI in order to enhance the effectiveness and quality of the internal audit system of housing finance companies, extended the Risk Based Internal Audit (RBIA) rules to them. Earlier in February this year, the RBI had issued a circular requiring the framework on RBIA for selected non-banking financial companies (NBFCs) and urban co-operative banks by March 31, 2022. On Friday (June 11,2021) the Central bank through a circular, extended those provisions to apply to all deposit taking and non-deposit taking Housing Finance Companies with assets above Rs 5,000 crore. By the June 30, 2022 Housing Finance Companies are to put in place the RBIA framework in consonance with the rules.
As per the circular, the internal audit function should broadly assess and contribute to the overall improvement of the organisation's governance, risk management, and control processes using a systematic and disciplined approach. The audit function is an integral part of sound corporate governance and is considered as the third line of defence. It is a shift to a framework that focuses on the evaluating the risk management systems and control procedures in various areas of operations and transaction testing, to help in anticipating areas of potential risks and mitigating such risks.