Audit Of Nbfc Flashcards
Infrastructure finance companies
75% of the total assets should be deployed in infrastructure loans
Net owned funds of 300 crores or more
Minimum credit rating A or equivalent of CRISIL,ICRA,CARE,FITCH or minimum rating by accredited rating agencies
CRAR of 15%
What is the minimum total assets of a core investment company to be called a systematically important core investment company
100 crores
NBFC micro finance institution
85% of its total assets must be qualifying assets fulfilling the following criteria
Rural household annual income - 100000
Urban household annual income - 160000
Without collateral
Loans amount does not exceed 50000 in first cycle and 100000 in second cycle
Total indebtness does not exceed 100000
Tenure should not be less than 24 months for loan amount exceeding 15000 with prepayment without penalty
Loan is repaid weekly, fort nightly, monthly at the choice of the borrower
Aggregate amount of loan given for income generation should not be less 50% of the total loans
Provisioning requirement given by RBI and banks
Standard assets - 0.40% Substandard asset - 10% Doubtful assets - SECURED Upto a year - 20% One to three years - 30% More than three years - 50% UNSECURED - 100%
LOSS ASSETS - 100%
Matters to be reported in Cases of all NBFC
Whether the company has obtained certificate of registration from RBI
In case company is holding COR whether the company is entitled to hold such in terms of its principle business criteria
Whether the NBFC is meeting required net owned funds requirement
Matters to be reported in case of NBFC accepting public deposits
Within the limits If excess whether regularised Grade rating is adequate CRAR within limits Credit rating scheme wise is applicable Whether deposit exceed the limit allowed by the rating agency Default in repayment of deposits Compliance with prudential norms Quarterly return on prudential norms
Matters to be reported in case NBFC not accepting public deposits
Whether bod passed a resolution for no acceptance of public deposits
Whether any public deposits accepted
Compliance with prudence norms
NDFC is being correctly classified
Audit procedures for reporting on reporting under CARO para 3(xvi)
Examine the transactions with relation to activities covered under rbi act and direction to determine company is engaged in financial activity
Should examine FS to determine whether 50-50 test is being passed
Ascertain the net owned funds and compare that with the requirement
Whether company obtained registration as NBFC
Applicability of INDAS on NBFC
From 1 April 2018 - net worth of 500 crores or more (as on 31/03/2016) - on the whole GROUP of companies
From April 2019 - network more than 250 crores (as on 31/03/2016)- on the WHOLE group of companies
Reporting where fraud in NBFC involves 1 lakhs or above
If fraud is due to following reasons then you have to submit s report - misrepresentation, breach of trust, manipulation of books of accounts, fraudulent encashment of FD
The report along with RBI will also be submitted to central investigating agencies
Also quarter wise case analysis report (progress report) in FMR 3 shall also be submitted to regional office of DNBS within 15 days of end of quarter
Also to submit report of fraud by JV and affliates
If fraud less than 1 crore then submit FMR 1 to Regional office on DNBS from 21 days of detection of fraud
Fraud committed by unscrupulous borrowers
Borrower includes every type of entity
Methods includes - fraudulent discounting of instrument, disposing the pledged asset or inflating value for excess finance
Diversion of fund outside borrowing unit
Lack of interest or failure of mangt due to which companies become sick unit
Reporting of fraud involving 1 crore or above in NBFC
From 1 week from detection by means of DO letter to
central chief general manager in charge of DBS (RBI)
Fraud monitoring cell (central office Bangalore)
Chief general manager in charge of DNBS (RBI)
From 3 weeks of detection to-
The central fraud monitoring cell of department of banking supervision
Regional office of DNBS
How to report the cases of attempted fraud
Only when 25 lakhs or more
To the audit committee of NBFC ( modus operandi, how it did not materialize, measures taken and new system introduced )
Yearly consolidation review of such cases within 3 months from the end of FY
