Explained: How RBI's tough new rules impact the audit companies

The central bank's tough new rules spell major changes in the competitive landscape for financial services audits

Irrespective of whether the Reserve Bank of India (RBI) agrees to suggestions by large audit firms, banks and non-banking financial companies (NBFCs) to defer and dilute some of its new audit rules, the competitive landscape for financial services audit is in for some churn.

On April 27, the RBI set new ground rules for financial services audit, involving commercial banks, both private and public, and NBFCs, including housing finance companies, beyond a certain threshold (see table: What the RBI circular says).  

These plans have been brewing for some time. Over the past couple of years, issues around auditor independence and