Articles

Non-Banking Financial Companies Audit Checklist

by Enterslice ITES Pvt. Ltd. Start and Manage Business

The term NBFC is the abbreviation for Non-Banking Financial Company which is registered under the Companies Act 1956/2013. The main business activity of NBFC is to give loans and advances, assets financing, investing in shares, debentures and other marketable securities. It also provides working capital loans and credit facilities.

 

NBFC Classification


a. Deposit accepting NBFC.

b. Non-Deposit accepting NBFC.

 

Non-Banking financial companies have been a subject of focus and attention. NBFCs are creating a gap between the banks, with a mere exception of issuance of a cheque. The RBI is sole regularity authority to look after the working of NBFC. The RBI Amendment Act 1997 provides for compulsory NBFC Registration with Reserve bank of India.

 

NBFCs (Non-Banking Financial Companies) as the name suggests, are nonbanking companies. They do not rely on CASA (Current Account Savings Account) deposits for raising funds. As CASA deposits are only meant for banks, wherein the banks are provided with licenses by the RBI in order to accept monies from the public.

 

NBFCs do not have those luxuries, it means, the NBFCs needs to look for alternate sources of the money supply, which are higher than the deposits taken by banks, where the interest rate offered is between 4%-6%.

 

Audit Approach toward the Entity


  • Understanding the entity and its business model
  • Compliance with different laws and regulations
  • Assessment of Financials of the company
  • Monitoring the Financing, Borrowing and Investing activity
  • Disclosure requirement with different government departments

 

NBFC Checklist


  • To check whether the NBFC registered has validity with RBI
  •  Auditor have to check from time to time the minimum capital adequacy
  • Compliance with Preputial norms on income recognition, asset classification, and provisioning
  • Compliance with RBI guidelines
  • Compliance with credit policy for sanction of loans
  • Detail verification of complete documentation based on nature of the transaction and legal status of the borrower
  •  Internal control on cash receipts
  • Correct computation of interest and finance charges
  • Restructuring of loans
  • Review of Internal control over borrowings
  • Review of Minutes of Board / Audit committee
  • Review of disclosure of Borrowings
  • Investment should be in the name of the company
  • Investment policy should be framed by the board as guided by the RBI
  • Appropriate disclosure for investment pledged
  • Report regarding registration of charge with ROC.
  •  Inspection of Physical assets of the company and framework required to inspect such policies.
  • Understanding of audit system of the company with regards to system audit and internal
  • Compliance with the direct and Indirect law

 

Source by: http://www.sooperarticles.com/business-articles/licensing-articles/non-banking-financial-companies-audit-checklist-1645536.html


Sponsor Ads


About Enterslice ITES Pvt. Ltd. Committed     Start and Manage Business

378 connections, 7 recommendations, 1,025 honor points.
Joined APSense since, March 3rd, 2017, From Noida, India.

Created on Mar 26th 2018 08:03. Viewed 619 times.

Comments

No comment, be the first to comment.
Please sign in before you comment.