RBI Master Direction on Concurrent Audit System in Commercial Banks, RBI Master Circular on IRAC Norms & Banking Regulation Act, 1949

Concurrent & Bank Audit

Real-time concurrent auditing, bank branch inspections, and transactional verification services conducted under RBI Master Directions, IRAC prudential norms, and ICAI banking guidelines to safeguard loan quality and prevent NPA degradation.

CA Due Diligence

Official Portal Filing

State Stamp Advisory

Concurrent & Bank Audit Statutory Advisory

Statutory Filing

MCA & Tax Practice

Relevant RegulatorReserve Bank of India, Government of India

Reserve Bank of India (RBI) & CERSAI Portals

The official Government of India portal for RBI Master Directions on banking governance, asset classification (IRAC norms), and the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (cersai.org.in).

Visit Official Website

STATUTORY OVERVIEW

Real-Time Transactional Auditing & Banking Compliance Assurance

A Concurrent Audit is a timely, systematic examination of financial transactions executed on an ongoing, parallel basis to verify that banking and commercial operations strictly adhere to prescribed credit policies, statutory guidelines, and regulatory frameworks. Mandated under the Reserve Bank of India (RBI) Master Direction on Concurrent Audit System in Commercial Banks, concurrent auditing intercepts documentation deficiencies, compliance lapses, and credit risks at the point of origin rather than post-facto. Our Chartered Accountants deliver rigorous transactional monitoring that protects asset quality, verifies collateral perfection, and prevents revenue leakage.

Statutory & Practice Summary • At-A-Glance

ICAI UDIN Authentication Mandate

Governing Framework

RBI Master Direction on Concurrent Audit System in Commercial Banks, RBI Master Circular on IRAC Norms & Banking Regulation Act, 1949

Regulatory Authority

Reserve Bank of India (RBI) & The Institute of Chartered Accountants of India (ICAI) - Banking & Insurance Committee

Professional Assurance

Chartered Accountants Attestation under ICAI Standards & Code of Ethics

DOCUMENTATION MATRIX

Mandatory Documents Checklist

Self-attested scanned copies required

1. Promoters / Partners / Directors KYC

✓Borrower entity Master Data, PAN, Aadhaar, and Director KYC documents
✓Sanction Letter issued by the competent credit approval authority with all terms and conditions
✓Board Resolution of the borrowing company accepting credit terms and executing security documents

2. Registered Office & Premises Proof

✓Physical factory / unit address inspection report and verified business location records
✓Mortgage deed / leasehold property records registered with the jurisdictional Sub-Registrar

3. Specific Statutory Declarations & Enclosures

•Primary and Collateral Security Documents: Hypothecation deeds, guarantee agreements, and title deeds
•CERSAI security interest registration certificates filed within the statutory 30-day timeline
•ROC Charge Creation Certificate in Form CHG-1 under Section 77 of the Companies Act, 2013
•Monthly Stock and Book Debt Statements submitted by the borrower for Drawing Power (DP) calculations
•Comprehensive insurance policies covering hypothecated inventory and mortgaged plant & machinery with bank clause
•End-use certificates, disbursement invoices, and contractor bills proving non-diversion of funds

PROCEDURAL ROADMAP

Step-by-Step Filing & Approval Process

Structured execution roadmap managed by our Chartered Accountants from pre-filing due diligence to certificate allotment.

01Daily / On Arrival

Mandate Scrutiny & Sanction Terms Review

Scrutinizing loan proposals, sanction covenants, authority limits, and verifying that pre-disbursement conditions are fulfilled prior to funds release.

02Days 1 - 7

Collateral Perfection & CERSAI Verification

Verifying charge creation with ROC (Form CHG-1), CERSAI registration, title search reports, independent valuation reports, and valid insurance coverage.

03Continuous / Weekly

IRAC Norms & SMA Account Surveillance

Tracking SMA-0, SMA-1, and SMA-2 overdue accounts under RBI IRAC norms, checking drawing power limits, and flagging early warning signals (EWS) of stress.

04Monthly by 10th

Monthly Audit Report & ACB Escalation

Compiling comprehensive monthly concurrent audit reports, highlighting high-risk credit deviations, and reporting directly to the Zonal Office and Audit Committee of the Board (ACB).

Credit Appraisal, Sanction Terms & Collateral Security Verification

Practice Scope & Statutory Guidance

We verify credit disbursements against sanctioned terms, examining end-use of funds, mortgage registrations, hypothecation deeds, charge creation with the Registrar of Companies (ROC) under Section 77 of the Companies Act, 2013, CERSAI filings, and periodic Drawing Power (DP) calculations. Our team audits security perfection, primary and collateral valuations, insurance coverage renewals, and compliance with statutory loan covenants.

Early Warning Signals (EWS), SMA Tracking & RBI IRAC Norms

Practice Scope & Statutory Guidance

In strict accordance with RBI Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRAC Norms), we monitor Special Mention Accounts—SMA-0 (overdue 1-30 days), SMA-1 (overdue 31-60 days), and SMA-2 (overdue 61-90 days)—to identify early warning signals of distress. We verify timely servicing of interest and principal, monitor turnover in operative accounts, and alert branch and zonal management to potential non-performing asset (NPA) slips before the 90-day threshold.

Forex, Treasury & FEMA Compliance Audits

Practice Scope & Statutory Guidance

Our concurrent audit procedures scrutinize foreign exchange (Forex) transactions, Letters of Credit (LC), Bank Guarantees (BG), trade remittances, and high-value treasury operations under the Foreign Exchange Management Act, 1999 (FEMA) and RBI Master Directions. We perform comprehensive audits of KYC/AML compliance, daily cash retention limits, clearing reconciliations, and fee/interest rate system configurations to eliminate institutional revenue leakages.

STATUTORY MATRIX

Statutory Provisions & Regulatory Comparative Matrix

Comparative analysis of governing sections under the new framework alongside legacy statutory references.

Banking Parameter / Asset Category	Governing RBI Prudential Guideline	Statutory Classification & Audit Safeguard
Standard Asset Surveillance (SMA-0)	RBI Master Circular on IRAC Norms	Principal or interest payment not overdue for more than 30 days, but exhibiting symptoms of financial stress.
Special Mention Account - SMA-1	RBI Master Circular on IRAC Norms	Principal or interest payment overdue between 31 to 60 days. Requires immediate operational review and branch escalation.
Special Mention Account - SMA-2	RBI Master Circular on IRAC Norms	Principal or interest payment overdue between 61 to 90 days. Critical pre-NPA stage requiring credit review and recovery action.
Non-Performing Asset (NPA) Classification	Section 21 & 35A of Banking Regulation Act, 1949	Interest or installment of principal remains overdue for a period of more than 90 days in respect of a term loan.
Out of Order Working Capital (Cash Credit / OD)	RBI Master Circular on IRAC Norms	Outstanding balance remains continuously in excess of sanctioned limit/drawing power for 90 days, or credits insufficient to cover interest.
CERSAI Charge Registration Mandate	Chapter IV of SARFAESI Act, 2002	Mandatory filing of security interest on equitable mortgage, hypothecation, and intangible assets within 30 days.

ONGOING GOVERNANCE

Mandatory Post-Registration Compliances

Failing to complete statutory post-incorporation actions carries steep daily penalties. Our CA firm manages continuous compliance:

Standardized RBI Audit FormatOn or before 10th of following month

Monthly Concurrent Audit Report Submission

Mandatory submission of the audit report to the Branch Manager, Zonal Inspection Department, and Audit Committee of the Board.

CERSAI Portal FilingStrictly within 30 days of charge creation

CERSAI Registration (SARFAESI Act)

Mandatory registration of security interest on the central portal to maintain legal priority over other creditors in recovery proceedings.

Bank DP RegisterQuarterly based on verified stock

Quarterly Drawing Power Recalculation

Re-computing Drawing Power after deducting unpaid stocks (creditors) and obsolete inventory from declared stock balances.

ICAI LFAR QuestionnairePart of Annual Statutory Bank Audit

Annual LFAR (Long Form Audit Report)

Exhaustive responses to the Reserve Bank of India questionnaire regarding branch internal controls, credit appraisal, and forex operations.

FREQUENTLY ASKED QUESTIONS

Statutory FAQs & Practical Guidance

Frequently asked questions and procedural guidance regarding Concurrent & Bank Audit.

What is the core difference between a Statutory Bank Audit and a Concurrent Bank Audit?

A Statutory Bank Audit is an annual, post-facto audit conducted after the close of the financial year to certify the true and fair view of the branch balance sheet and P&L. A Concurrent Audit is an ongoing, real-time audit conducted on a daily or monthly basis throughout the year to examine transactions as they occur, identify procedural lapses, verify security perfection, and prevent accounts from slipping into NPA.

How is Drawing Power (DP) calculated for working capital cash credit facilities?

Drawing Power is calculated as: [Total Eligible Paid Stock (Gross Stock less Creditors for purchases) + Eligible Book Debts (within sanctioned age limit, usually 90 days)] minus the prescribed Bank Margin (typically 25% on stock and 30-40% on debtors). Drawing Power must not exceed the sanctioned limit.

What triggers an account to be classified as Non-Performing Asset (NPA)?

Under RBI IRAC norms, a term loan account is classified as an NPA if interest and/or installment of principal remains overdue for more than 90 days. A cash credit/overdraft account is classified as NPA if the account remains 'out of order'—where the balance continuously exceeds the limit/DP for 90 days, or where there are no credits for 90 days, or credits are insufficient to cover interest debited during the period.

Why is CERSAI registration mandatory for commercial bank advances?

Under the SARFAESI Act, 2002, registration of transactions of securitisation, asset reconstruction, and creation of security interest with CERSAI within 30 days is legally mandatory. Failure to register deprives the lender of statutory rights to enforce security under SARFAESI and forfeits priority over other competing lenders or statutory tax attachments.

STATUTORY ADVISORY DESK • PRACTICE INQUIRIES

Statutory Inquiries & Practice Advisory

Information on Concurrent & Bank Audit is provided for general reference. Office addresses and contact details are listed on the Contact page.

Contact Practice Office +91 99140-14949