The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Rural Co-operative Banks – Statutory Audit) Directions, 2026, with immediate effect, prescribing a comprehensive framework for the appointment, re-appointment, removal, independence, tenure, rotation, performance review, and eligibility of Statutory Auditors (SAs) for Rural Co-operative Banks (RCBs), comprising State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). The Directions have been issued under the Banking Regulation Act, 1949 and are applicable to all Rural Co-operative Banks in respect of statutory auditor appointments.
The Directions require banks to adopt a Board-approved policy governing the appointment and oversight of Statutory Auditors, ensure auditor independence, monitor conflicts of interest, conduct annual performance reviews, and report any serious lapses or negligence by auditors to NABARD. They also prescribe detailed norms for auditor appointment, including eligibility criteria, tenure and rotation, audit fees, appointment procedures, and branch selection, with audit coverage of at least 70% of total advances and mandatory inclusion of the largest branches based on outstanding advances.
The Directions further consolidate the statutory audit framework for Rural Co-operative Banks by laying down governance standards and detailed procedures for selecting and supervising Statutory Auditors, thereby strengthening audit quality, transparency, and regulatory oversight.
[Notification No. RBI/DoS/2026-27/452]
