Policy on Appointment of Statutory Auditors

Version: 1.0

Sr. No. Document Title Appointment of Statutory Auditor
1 Version 1.0
2 Date of Preparation 01-04-2022
3 Date of Modification Nil
4 Validity As and when deemed necessary
5 Document Owner Ashish Kothiyal – Head-Compliance


Action Name & Designation Date
Approved by Mohit Chhajer – Director
Reviewed by Ashish Kothiyal – Head Compliance
Prepared by Gigyasa Agrawal – Company Secretary 01-04-2022


          Change Log:

Version No. Date of Change Change Description
V 1.0 01-04-2022 New policy in place

Policy for Appointment of Statutory Auditors


The objective of the policy is to establish procedure for the appointment/re-appointment of Statutory Auditors and to conform with the extant norms of Reserve Bank of India and applicable provisions of Companies Act, 2013 and the rules made thereunder.


 The Reserve Bank of India vide its circular RBI/2021-22/25 Ref No. DOS.CO.ARG/ SEC.01/ 08.91.001/2021-22dated April 27, 2021 (“RBI Circular”), has introduced guidelines for the appointment/re-appointment of Statutory Auditors (“SAs”) for Non-Banking Financial Companies (“NBFC”) for Financial Year 2021-22 and onwards. However, non-deposit taking NBFCs with asset size2 below ₹1,000 crore have the option to continue with their extant procedure.

Nahar Credits Private Ltd (the “Company”) is a NBFC-ND-NSI (Non-Banking Financial Company- Non-Deposit Taking- Non-Systemically Important) registered with Reserve Bank of India with asset size below INR 1000 Cores. Accordingly,  the Company has prepared the policy on appointment of Statutory Auditors in conformity to all relevant statutory/regulatory guidelines in addition to the RBI guidelines.


The policy will be applicable for the appointment/re-appointment of Statutory Auditors for the Financial Year 2022-23 and onwards.


  • Definitions:

“Act” means the Companies Act, 2013.

“ACB” means the Audit Committee of the Board .

“Board” means the Board of Directors of the Company.

“ICAI” means the Institute of Chartered Accountants of India.

“RBI” means the Reserve Bank of India.

“RBI Circular” means RBI circular RBI/2021-22/25 Ref No. DOS.CO.ARG/ SEC.01/ 08.91.001/2021-22. dated April 27, 2021, on the ‘guidelines for appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks, (Urban) Co-operative Banks (“UCBs”) and Non-Banking Finance Companies (NBFCs) (Including Housing Finance Companies “HFCs”.

“NFRA” means the National Financial Reporting Authority.

“large exposure” as defined in RBI instructions on ‘Large Exposure Framework’.

“Nahar Credits Private Limited” means the Company.

“SAs” means the Statutory Auditor as required to be appointed under the provisions of

Companies Act, 2013 and eligible as per RBI Circular, to conduct statutory audit of the Company, from time to time.


No prior approval of RBI is required for appointment of SAs by the Company. However, necessary intimation shall be given to RBI regarding appointment of SAs within the prescribed time limits.


  • The minimum standards and eligibility norms for audit firms to be appointed by the Company as SAs shall be as under:
Asset size of the Company as   on 31st March of the previous year Minimum No. of Full-Time partners (FTPs)

associated with the firm for a period of at least three (3) years


Note 1

Out of total FTPs,

Minimum No. of Fellow Chartered Accountant (FCA)

Partners associated with the firm for a period of at least

three (3)


Minimum No. of Full Time Partners/ Paid CAs with CISA/ISA


Note 2

Minimum No. of years of Audit Experience of the firm


Note 3

Minimum No. of Professional staff


Note 4

Up to ₹ 1,000



2 1 1* 6 8


* Not mandatory for UCBs/NBFCs with asset size of upto ₹ 1,000 crore.

  • There should be at least one-year continuous association of partners with the firm as on the date of shortlisting for considering them as full-time partners. Further, at least two partners of the firm shall have continuous association with the firm for at least 10 years.
  • The full-time partner’s association with the firm would mean exclusive association. The definition of ‘exclusive association’ will be based on the following criteria:
  1. The full-time partner should not be a partner in other firm/s.
  2. She / He should not be employed full time / part time elsewhere.
  3. She / He should not be practicing in her/his own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.
  4. ACB shall examine and ensure that the income of the partner from the firm/LLP is adequate for considering them as full-time exclusively associated partners, which will ensure the capability of the firm for the purpose
  • For NBFCs with asset size upto ₹ 1,000 crore, there is no minimum requirement in this regard. However, such Entities may give priority to firms with full time partners or full time CAs having CISA/ISA qualification. There should be at least one-year continuous association of Paid CAs with CISA/ISA qualification with the firm for considering them as Paid CAs with CISA/ISA qualification for the purpose.
  • Audit experience shall mean experience of the audit firm as Statutory Auditor of NBFCs. In case of merger and demerger of audit firms, merger effect will be given after 2 years of merger while demerger will be affected immediately for this purpose.
  • Professional staff includes audit and article clerks with knowledge of book- keeping and accountancy and who are engaged in on-site audits but excludes typists/stenos/computer operators/ secretaries/subordinate staff, etc. There should be at least one-year continuous association of professional staff with the firm as on the date of shortlisting for considering them as professional staff for the purpose.

Additional Consideration

  1.  The audit firm, proposed to be appointed as SAs, should be duly qualified for appointment as auditor in terms of Section 141 of the Companies Act, 2013.
  2. The audit firm should not be under debarment by any Government Agency, NFRA, ICAI, RBI or Other Financial Regulators.
  3. The Company shall ensure that appointment of SAs is in line with the ICAI’s Code of Ethics/any other such standards adopted and does not give rise to any conflict of interest.
  4. If any partner of a Chartered Accountant firm is a director in any Company, the said firm shall not be appointed as SAs of any of the group entities of that Company

Continued Compliance with basic eligibility criteria

 In case any audit firm (after appointment) does not comply with any of the eligibility norms (on account of resignation, death etc. of any of the partners, employees, action by Government Agencies, NFRA, ICAI, RBI, other Financial Regulators, etc.), it shall promptly approach the Company with full details. Further, the audit firm shall take all necessary steps to become eligible within a reasonable time and in any case, the audit firm should be complying with the above norms before commencement of Annual Statutory Audit for Financial Year ending 31st March and till the completion of annual audit.

In case of any extraordinary circumstance after the commencement of audit, like death of one or more partners, employees, etc., which makes the firm ineligible with respect to any of the eligibility norms, the Company may approach RBI, to allow the concerned audit firm to complete the audit, as a special case.


The ACB of the Board shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards, and best practices. Any concerns in this regard may be flagged by the ACB to the Board of Directors of the Company and concerned Senior Supervisory Manager (SSM)/ Regional Office (RO) of RBI.

In case of any concern with the Management of the Company such as non-availability of information/non-cooperation by the Management, which may hamper the audit process, the SAs shall approach the Audit Committee of the Entity, under intimation to the concerned SSM/RO of RBI.

Concurrent auditors of the Company shall not be considered for appointment as SAs. The audit of the Company and any entity with large exposure to the Company for the same reference year should also be explicitly factored in while assessing independence of the auditor.

The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) by the SAs for the Company or any audit/non-audit works for its  fellow subsidiaries should be at least one year, before or after its appointment as SAs. However, during the tenure as SA, an audit firm may provide such services to the Company which may not normally result in a conflict of interest, and the Company shall take a decision in this regard, in consultation with the ACB.

The restrictions as detailed above, shall also apply to an audit firm under the same network (As defined in Rule 6(3) of the Companies (Audit & Auditors) Rules, 2014) of audit firms or any other audit firm having common partners.


The SAs shall be strictly guided by the relevant professional standards in discharge of their audit  

responsibilities with highest diligence.

The ACB shall review the performance of SAs on an annual basis. Any serious lapses/negligence in audit responsibilities or conduct issues on part of the SAs or any other matter considered as relevant shall be reported to RBI within two months from completion of the annual audit. Such reports shall be sent with the approval/recommendation of the ACB with the full details of the audit firm.

In the event of lapses in carrying out audit assignments resulting in misstatement of financial statements, and any violations/lapses vis-à-vis the RBI’s directions/guidelines regarding the role and responsibilities of the SAs in relation to the Company, the SAs would be liable to be dealt with suitably under the relevant statutory/regulatory framework.


In order to protect the independence of the auditors/audit firms, the Company shall appoint the SA for a continuous period of five years as per Section 139 of the Companies Act 2013.

SAs can be removed before the completion of five years tenure and shall inform concerned RO at RBI about it, along with reasons/justification for the same, within a month of such a decision being taken.

An audit firm would not be eligible for reappointment for six years (two tenures) after completion of full or part of one term of the audit tenure.

An audit firm proposed to be appointed as SA of the Company, can concurrently take up statutory audit of a maximum of four Commercial Banks [including not more than one PSB or one All India Financial Institution (NABARD, SIDBI, NHB, EXIM Bank) or RBI], eight UCBs and eight NBFCs during a particular year. A group of audit firms having common partners and/or under the same network, will be considered as one entity. Shared/Sub-contracted audit by any other/associate audit firm under the same network of audit firms is not permissible. The incoming audit firm shall not be eligible if such audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.


The audit fees for SAs shall be decided in terms of the relevant statutory/regulatory provisions

The audit fees for SAs shall be reasonable and commensurate with the scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting, etc.

The ACB shall make recommendation to the Board/Shareholders for approval as per the applicable statutory/regulatory instructions for fixing audit fees of SAs.


The Company shall shortlist a minimum of 2 audit firms for every vacancy of SAs so that even if firm at first preference is found to be ineligible/refuses appointment, the firm at second preference can be appointed and the process of appointment of SAs does not get delayed.

The Company shall obtain a certificate, along with relevant information in such format, as may be prescribed, from the audit firm(s) proposed to be appointed as SAs to the effect that the audit firm(s) complies with all the eligibility norms prescribed by RBI for the purpose. Such certificate shall be signed by the main partner/s of the audit firm proposed for appointment of SAs under the seal of the audit firm.

In addition to the above, prior to such appointment, the written consent of the auditor to such appointment and a certificate in compliance with applicable provisions of the Companies Act, 2013 and the rules made thereunder, shall be obtained from the SAs.

The ACB will review the independence, eligibility norms, terms of appointment and remuneration of the audit firm proposed to be appointed as SAs and recommend the appointment of the audit firm for approval of the Board. The Board will approve the appointment of SAs subject to approval of the shareholders in the ensuing Annual General Meeting.

The Company shall file a Form ADT 1 of such appointment with the Registrar of Companies within 15 days of the meeting in which the auditor is appointed.

The Company shall inform the concerned Regional Office of RBI about the appointment/ re-appointment of SAs for each year by way of a certificate in Form A within one month of such appointment/re-appointment. 


The policy shall be approved by the Board and hosted on the official website of  the Company.

The Policy shall be reviewed on an annual basis or as and when deem necessary by the ACB and Board in the context of changing regulation and guidelines.

In case there are any regulatory changes requiring modifications to the Policy, the Policy shall be reviewed and amended at the next possible opportunity. However, the amended regulatory requirements will supersede the Policy till the time Policy is suitably amended. 

RBI Circular: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI258A67AD30976F44929FA2AB2B41DC805D.PDF