The weekly messenger | Edition 30.22

Auditing News

Updation of UDINs at e-filing portal – 10 October 2022

In pursuance of the announcement being issued by the Central Board of Direct Taxes (CBDT), wherein the last date for updation of the Unique Document Identification Number (UDINs) for the forms filed during the 1 April 2021 to 31 March 2022 has been extended till 30 November 2022, the ICAI has issued an announcement, thereby advising its members to validate their pending forms by linking them with appropriate UDINs.

For more information, click here.

Regulatory News

RBI releases list of NBFCs in the Upper Layer under Scale Based Regulation for NBFCs – 30 September 2022

In October 2021, the Reserve Bank of India (RBI) had issued the Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs (the framework) for the Non-Banking Financial Companies (NBFCs), thereby categorizing the NBFCs into 4 new categories i.e., Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL).

As per the said framework, the Upper Layer shall comprise of those NBFCs which are specifically identified by the RBI based on a set of parameters and scoring methodology as provided in the framework. The framework also envisages that top ten NBFCs in terms of their asset size shall always reside in the Upper Layer. Now, the RBI has released a list of the NBFCs which will be categorized as NBFC-UL under the aforesaid framework.

For more information, click here.

RBI (Unhedged Foreign Currency Exposure) Directions, 2022 – 11 October 2022

The RBI has amended and consolidated the guidelines on unhedged foreign currency exposures, which would be applicable to all the commercial banks excluding Payments Banks and Regional Rural Banks and to overseas branches / subsidiaries of banks incorporated in India subject to certain conditions.

These Directions shall come into force from 1 January 2023.

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RBI (Financial Statements - Presentation and Disclosures) Directions, 2021 - Disclosure of Divergence in Asset Classification and Provisioning – 11 October 2022

Earlier, the commercial banks (excluding Regional Rural Banks (RRBs)) were required to disclose the details of divergence in asset classification and provisioning where such divergence assessed by the RBI exceeds certain specified thresholds. Now, in order to strengthen compliance with income recognition, asset classification and provisioning norms, the RBI has introduced similar disclosure requirements for Primary (Urban) Co-operative Banks (UCBs) and revised the specified thresholds for commercial banks.

These instructions shall come into effect for disclosures in the notes to the annual financial statements of the year ending 31 March 2023 and onwards.

For more information, click here.

Multiple NBFCs in a Group: Classification in Middle Layer – 11 October 2022

As per the ‘Master Direction – Non-Banking Financial Company-Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016’, applicable NBFCs that are part of a common Group or are floated by a common set of promoters shall not be viewed on a standalone basis. In line with the existing policy on consolidation of assets of the NBFCs in a Group, the RBI has notified that the total assets of all the NBFCs forming part of a Group shall be consolidated to determine the threshold for their classification in the Middle Layer. Accordingly, if the consolidated asset size of the Group is ₹1000 crore and above, then each Investment and Credit Company (NBFC-ICC), Micro Finance Institution (NBFC-MFI), NBFC-Factor and Mortgage Guarantee Company (NBFC-MGC) lying in the Group shall be classified as an NBFC in the Middle Layer.

Further, the statutory auditors would also be required to certify the asset size as on 31 March of all the NBFCs in the Group every year, which would be furnished to the Department of Supervision of the RBI under whose jurisdiction the NBFCs are registered.

The aforesaid guidelines shall become effective from 1 October 2022.

For more information, click here.

Review of Regulatory Framework for Asset Reconstruction Companies – 11 October 2022

As part of the Statement on Developmental and Regulatory Policies released along with the Monetary Policy Statement on 7 April 2021, the RBI had set up a Committee to undertake a comprehensive review of the working of the Asset Reconstruction Companies (ARCs) and recommend suitable measures for enabling them to function in a more transparent and efficient manner.

Now, based on the Committee’s recommendations and feedback from the stakeholders, the RBI has amended the extant regulatory framework for ARCs.

The amended guidelines shall be effective immediately or as indicated otherwise in the revised framework.

For more information, click here.