RBI Extends Risk Based Internal Audit System to HFCs

The Reserve Bank on Friday extended the risk-based internal audit (RBIA) system to select housing finance companies to enhance the quality and effectiveness of their internal audit system.

In February this year, the RBI had issued a circular mandating the RBIA framework for select non-banking financial companies (NBFCs) and urban co-operative banks by March 31, 2022.

On Friday, the RBI, through a circular, extended the provisions issued for NBFCs to housing finance companies (HFCs) also.

The provisions will apply to all deposit-taking HFCs, irrespective of their size, as well as non-deposit-taking HFCs with asset size of Rs 5,000 crore and above, the central bank said.

Such HFCs have been asked to put in place an RBIA framework by June 30, 2022.

An effective RBIA is an audit methodology that links an organisation’s overall risk management framework and provides an assurance to the Board of Directors and the senior management on the quality and effectiveness of the organisation’s internal controls, risk management and governance-related systems and processes.

As per the RBI’s February 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.

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