Recently in Response to RTI (Right to information) query raised by an individual, RBI clarified that no Instruction for CA Certification for bank loan/KYC has been issued.
The applicant sought information under the RTI Act, 2005. The Department of Regulation at the Reserve Bank of India replied as follows.
Loan Project Reports and CA Certification:
The RBI stated that no specific circulars or notifications require commercial banks to demand CA certification for signing on Project Reports or Credit Monitoring Arrangement (CMA) Reports when advancing new or old loans.
Certification on Unaudited Balance Sheets and Income Tax Returns:
The RBI clarified that no specific circulars or notifications have been issued to commercial banks regarding the certification or signing of unaudited balance sheets and income tax returns of clients who do not fall under audit categories.
Policy for CA Certification of KYC:
The RBI responded that there are no specific instructions or policies drafted by the RBI for commercial banks to obtain a Certificate of Know Your Customer by a CA, based on the client’s acquaintance with the CA and the validity of such certification.
The RBI’s response emphasizes that credit-related matters are largely deregulated. Banks are advised to have documents such as investment policy, loan policy, and loan recovery policy prepared and vetted by their Boards of Directors. Credit-related decisions should align with Board-approved policies, as outlined in the Master Circular on “Loans and Advances – Statutory and Other Restrictions.”
Queries raised in RTI and response by RBI thereof.
1) Signing on Project Report for Loan Purposes with seal/ UDIN of CA thereon.
2) Giving certification/ Signing on Unaudited balance sheets and on Income Tax Returns of Clients (for those who don’t fall under the category of Audit Cases such as Income Tax, Company Act etc) and generating UDIN thereon.
Response by RBI: (1&2) –
We have not issued any specific instructions in this regard.
However, it may be noted that credit-related issues are mostly deregulated. The Reserve Bank of India has advised banks to have documents of investment policy, loan policy, loan recovery policy, etc. prepared and duly vetted by their Boards of Directors. Banks are required to take credit-related decisions based on Board approved policies subject to the instructions contained in our Master Circular on “Loans and Advances – Statutory and Other Restrictions” issued vide DBR.No.Dir.BC.10/13.03.00/2015-16 dated July 1, 2015, which is available on our official website under the head ‘Notifications’.
3) Is there any policy drafted by RBI with such Banks to get a Certificate of Know You customer by CA if the client is known to him and the validity of the same?
Response by RBI: (3) –
We have not issued any specific instructions in this regard.
In short, it can be said that there are no specific instructions or notifications by RBI, mandating CA certification for the mentioned scenarios.
