Informist, Tuesday, Oct 12, 2021

--RBI debars Haribhakti & Co from undertaking audit of regulated entities 

--Haribhakti barred from auditing regulated cos for 2 yrs from Apr 

--Acted against Haribhakti & Co for lacunae in 1 large NBFC audit 
--Action against Haribhakti & Co not to impact FY22 audits of cos 

MUMBAI – The Reserve Bank of India today debarred Haribhakti & Co LLP from undertaking any type of audit assignments in any of the entities regulated by the central bank for a period of two years from Apr 1.

The action was taken due to the audit firm's failure to comply with a specific direction by the RBI with respect to the statutory audit of a systemically important non-banking financial company, the central bank said in a release. 

However, the action will not impact the audit assignments of Haribhakti & Co in the regulated entities for 2021-22 (Apr-Mar).  

Industry officials suggested that the action against Haribhakti & Co came in the backdrop of irregularities found in the books of Srei Infrastructure Finance and its subsidiary Srei Equipment Finance. 

Haribhakti & Co LLP was the statutory auditor of the Srei Group till September 2020, after which the company appointed D. K. Chhajer & Co for five years. Srei Group had appointed Haribhakti & Co as their auditor for five years in an annual general meeting on Aug 1, 2015.

The RBI had identified certain parties as probable related companies in its inspection and risk assessment report for 2019-20 (Apr-Mar), the parent company had said in an exchange filing in July. 

Following this, Srei Group had said it was reassessing and renegotiating the terms of loans worth 85.8 bln rupees after the RBI flagged exposure to certain borrowers as part of its inspection. 

On Oct 4, the central bank superseded the board of the Kolkata-based company owing to governance concerns and default on meeting various payment obligations. The RBI appointed an administrator and three-member advisory committee to assist in the insolvency proceedings. 

On Friday, Informist reported quoting sources that the RBI decided to supersede the boards of Srei Infrastructure Finance and Srei Equipment Finance after its supervisory audits detected widespread evergreening of loans and related-party lending.

The central bank had also taken a similar action against S.R. Batliboi & Co. LLP in June 2019, barring the audit firm from carrying out statutory audit assignments in commercial banks for a year.  End

Reported by Shreejit Nair

Edited by Snigdha Kuttikat

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