RBI bans audit firm Haribhakti & Co for two years

Haribhakti & Co was the auditor of Srei Infrastructure Finance, whose board was superseded by the RBI and against which insolvency proceedings were initiated last week.

The Reserve Bank of India (RBI) on Tuesday banned chartered accountant firm Haribhakti & Co from undertaking any type of audit assignments for regulated entities for a period of two years, starting April 1, 2022.

The action was taken for the firm’s failure to comply with a specific direction issued by the RBI with respect to its statutory audit of a systemically important non-banking financial company (NBFC), the central bank said in a statement.

This is the first time the RBI has taken such action against an auditor of a systemically important NBFC.

“The RBI has by an order dated September 23, 2021, debarred Haribhakti & Co from undertaking any type of audit assignment/s in any of the entities regulated by RBI for a period of two years with effect from April 1, 2022,” the statement said.

The action has been taken under Section 45 MAA of the RBI Act, which allows the banking regulator to act against auditors. The ban will not impact audit the firm’s assignments in RBI-regulated entities for the financial year 2021-22, the statement said.

In 2019, the RBI had imposed a one-year ban on SR Batliboi & Co, an affiliate of global auditing firm EY, after it found lapses in the audit report of a bank.

Haribhakti & Co was the auditor of Srei Infrastructure Finance, whose board was superseded by the RBI and against which insolvency proceedings were initiated last week.

The Kolkata Bench of the National Company Law Tribunal on October 8 gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly owned subsidiary Srei Equipment Finance after the RBI filed insolvency applications.

According to rating reports of March 6, 2021, by CARE Ratings, Srei Infrastructure Finance owed banks loans worth Rs 11,117.71 crore, apart from outstanding bonds and NCDs worth Rs 710.63 crore.

Srei Equipment Finance had outstanding bank loans worth Rs 16,912.21 crore and other debt instruments worth Rs 499.45 crore. All these facilities and instruments were rated ‘D’, or default grade, in March.