Advanced Auditing, Assurance and Professional Ethics · Special Features of Audit of Banks & Non-Banking Financial Companies

Auditor's Powers and Duties under Section 45MA (RBI Act) for NBFCs

Updated 5 October 2026 · Fact-checked

Section 45MA of the RBI Act, 1934 permits the RBI to direct a special audit of an NBFC's accounts by a chartered accountant when it thinks this is needed in public interest or depositors' interest. That auditor has a company auditor's powers, reports to the RBI, and the NBFC must comply and bear the expenses the RBI fixes.

Understand Auditor's Powers and Duties under Section 45MA

An NBFC has two layers of audit. The first is the normal statutory audit under the Companies Act, 2013. The second is a regulatory layer from the RBI, which supervises NBFCs under the RBI Act, 1934. Section 45MA belongs to the second layer.

Under section 45MA(1), the RBI may direct, at any time, a special audit of an NBFC's accounts for any period or periods it specifies, by a chartered accountant. It does this when it is satisfied that the audit is necessary in the public interest or in the interest of the depositors. The NBFC must comply with the direction.

Under section 45MA, the chartered accountant for this audit may be the NBFC's own statutory auditor or another chartered accountant. That chartered accountant has the powers, functions and duties of an auditor under the Companies Act, 2013, such as access to books, records and vouchers, and the right to ask for information and explanations. The report goes to the RBI, not only to the shareholders. The expenses of, and incidental to, the special audit, including the auditor's remuneration, are determined by the RBI and borne by the NBFC.

Separately, the statutory auditor of an NBFC has reporting duties under RBI directions on the auditor's report. The auditor reports to the Board on matters such as whether the company holds a valid Certificate of Registration, whether it meets the minimum net owned fund requirement, and whether it complies with prudential norms and the rules on accepting public deposits. Where the auditor finds non-compliance with the matters specified in the directions, the auditor reports it to the RBI as those directions provide. Check the current directions in your study material for the exact list and format.

Do not mix up three things. Special audit under 45MA is directed by the RBI. Directions-based reporting is a duty of the statutory auditor. Fraud reporting under section 143(12) of the Companies Act is a duty of the auditors of companies generally (statutory auditor, and also cost auditor and secretarial auditor). The process is set by Rule 13 of the Companies (Audit and Auditors) Rules, 2014:

Fraud of ₹1 crore or more: the auditor first reports to the Board or Audit Committee within 2 days of knowing of the fraud, and asks for the Board's reply within 45 days. The auditor then reports to the Central Government within 15 days of receiving the Board's reply, or within 15 days after the 45 days lapse if there is no reply.
Fraud below ₹1 crore: the auditor reports to the Audit Committee or the Board within 2 days of knowing of the fraud, and the company (not the auditor) discloses the details in the Board's report under section 134(3)(ca). There is no separate report to the Central Government.

Exam questions often test whether you can tell which one applies.

Key rules to remember

Trigger for special audit (section 45MA(1)): RBI satisfied it is necessary in public interest or depositors' interest → RBI may at any time direct special audit, for the period or periods it specifies, by a chartered accountant; The power belongs to the RBI. The NBFC must comply with the direction.
Who audits (section 45MA): Chartered accountant for the special audit → may be the NBFC's own statutory auditor or another chartered accountant; The CA need not be a stranger to the company, but the RBI, not management, directs the audit.
Powers, duties and report (section 45MA): Chartered accountant → powers, functions and duties of an auditor under the Companies Act, 2013; report to the RBI; Reporting to the RBI is the key difference from a normal statutory audit report.
Cost of special audit (section 45MA): Expenses of, and incidental to, the special audit (including auditor's remuneration) determined by the RBI → borne by the NBFC; The auditor's fee is not negotiated with management.
Statutory auditor's directions-based reporting: Report to Board on CoR, net owned fund, prudential norms and deposit rules; report non-compliance on specified matters to RBI as the directions provide; Learn this as a separate duty from section 45MA.
Fraud reporting under section 143(12) (Rule 13): Fraud of ₹1 crore or more → Board or Audit Committee within 2 days of knowledge (reply sought within 45 days), then Central Government within 15 days of the Board's reply or of the 45 days lapsing; below ₹1 crore → Audit Committee or Board within 2 days of knowledge, and the company (not the auditor) discloses the details in the Board's report under section 134(3)(ca); A Companies Act duty of the auditors, separate from RBI reporting.
Answer structure: Provision → Facts → Conclusion; Use this for every audit question in the case MCQ and written parts.

How to solve Auditor's Powers and Duties under Section 45MA questions

Use this method for any question on NBFC auditor duties, special audit or reporting to the RBI.

1Identify who the auditor is in the question: the company's statutory auditor or a CA directed by the RBI for special audit.
2Identify the trigger: an RBI direction for special audit, or a regular year-end reporting duty under RBI directions.
3State the provision in plain words: section 45MA for special audit, RBI directions for the statutory auditor's report.
4Apply the facts: note the period, the non-compliance found (CoR, net owned fund, prudential norms, deposits) and what the auditor has done so far.
5Decide to whom the report goes: the RBI, the Board, shareholders, or, for fraud under section 143(12), the Board or Audit Committee within 2 days of knowledge. For ₹1 crore or more, the Central Government follows within 15 days of the Board's reply or of the 45-day period lapsing. Below ₹1 crore, the Audit Committee or Board only; the company, not the auditor, discloses the details in the Board's report under section 134(3)(ca).
6Check cost and powers: the special auditor has a company auditor's powers, functions and duties under section 143, and the NBFC bears the expenses determined by the RBI.
7Write a clear conclusion that says what the auditor must do next, in one or two lines.

Quickest way: Three-question filter

When to use it: Use this for case-scenario MCQs where you have about a minute per question.

Who directed the audit? An RBI direction means section 45MA special audit. No direction means the normal statutory duty.
Who gets the report? RBI means a 45MA report or a directions-based exception report. Members mean the normal report under the Companies Act.
What is the issue? Registration, net owned fund, prudential norms or deposits means the RBI directions. Fraud means section 143(12).
Eliminate any option that gives the NBFC the right to refuse the audit or to fix the special auditor's fee.

Common mistakes in Auditor's Powers and Duties under Section 45MA

Saying the NBFC's management appoints the special auditor under section 45MA.
Students link all auditor appointments to the Companies Act.
Fix: Remember that the RBI directs the special audit by a chartered accountant. Management does not choose the special auditor.
Sending the special audit report only to the shareholders.
Students copy the normal statutory report pattern.
Fix: The special audit report is submitted to the RBI.
Confusing section 45MA with fraud reporting under section 143(12).
Both involve an auditor reporting outside the company.
Fix: Section 45MA is an RBI power for special audit. Section 143(12) is a Companies Act duty of auditors to report fraud. For ₹1 crore or more, report to the Board or Audit Committee within 2 days and then to the Central Government within 15 days of the Board's reply or of the 45 days lapsing. Below ₹1 crore, report to the Audit Committee or Board within 2 days, and the company (not the auditor) discloses the details in the Board's report under section 134(3)(ca).
Reporting a fraud of ₹1 crore or more straight to the Central Government without first reporting to the Board or Audit Committee.
Students remember only the ₹1 crore threshold and not the steps and time limits in Rule 13.
Fix: Report to the Board or Audit Committee within 2 days of knowledge first and seek its reply within 45 days. Then report to the Central Government within 15 days of the reply, or of the 45 days lapsing.
Thinking the statutory auditor's reporting duty to the RBI only arises when the RBI directs an audit.
Students merge the special audit and the directions-based report.
Fix: The statutory auditor has an independent duty under RBI directions. Report as the directions require without waiting for an RBI direction.
Writing an answer with no provision and no conclusion.
Students describe the topic instead of applying it to the case.
Fix: Use provision, facts, conclusion. Name section 45MA or the RBI directions, tie in the case facts, and end with the auditor's action.
Quoting section numbers or limits from memory that you are not sure of.
Students try to look precise.
Fix: Write the rule in words if you are not sure of the number. A correct rule without a number scores better than a wrong number.

Worked examples

Example 1

The RBI has reason to believe that the accounts of Sunrise Finance Ltd, a deposit-taking NBFC, may not show the true position, and that depositors may be at risk. It directs a special audit of the company's accounts for the periods specified in its direction by CA Mehta, who is not the company's statutory auditor. The management objects that the RBI appointed CA Mehta without its consent and says it will not pay the fees. Advise.

Show the solution

Provision: under section 45MA(1) of the RBI Act, 1934, the RBI may at any time direct a special audit of an NBFC's accounts for any period or periods by a chartered accountant, if it is satisfied that this is necessary in public interest or depositors' interest.
Facts: the RBI has a concern about depositors and has directed a special audit by CA Mehta for the periods it specified.
Application on consent: the power rests with the RBI. The NBFC's consent is not required. Section 45MA lets the chartered accountant be the company's own auditor or another CA, so it does not require CA Mehta to be the existing statutory auditor.
Powers and report: under section 45MA, CA Mehta has the powers, functions and duties of an auditor under the Companies Act, 2013, and may call for books, records and explanations. CA Mehta submits the report to the RBI.
Application on fees: under section 45MA, the expenses of, and incidental to, the special audit, including the remuneration, are determined by the RBI and borne by the NBFC.

Answer: The management's objections are not valid. The special audit and the choice of CA Mehta are within the RBI's power under section 45MA. CA Mehta has an auditor's powers, functions and duties under the Companies Act and reports to the RBI. The NBFC must comply and bear the expenses determined by the RBI.

Example 2

You are the statutory auditor of Gold Star Finance Ltd, a non-deposit-taking NBFC, for the year just ended. The RBI has not directed any special audit. During the audit you find that the company's net owned fund is below the minimum prescribed by the RBI, and management plans to say nothing in the Board report. Advise what you must do.

Show the solution

Provision: the statutory auditor of an NBFC has reporting duties under RBI directions on the auditor's report, which cover matters such as the Certificate of Registration, net owned fund, prudential norms and deposits. This duty applies without an RBI direction, so section 45MA is not needed.
Facts: net owned fund is below the prescribed minimum, which is a regulatory non-compliance on a specified matter. Management does not intend to disclose it.
Application: you must report this finding on the matters the directions require. Management's silence does not change your duty.
Escalation: under the applicable RBI directions, the non-compliance is also reported to the RBI. Confirm the exact provision, format and timelines in the current directions in your study material.
Separate point: if you also suspected fraud, you would consider section 143(12) separately.

Answer: You must report the net owned fund shortfall in your report, and under the applicable RBI directions report the non-compliance to the RBI. Confirm the exact provision in the current directions. Management's refusal to disclose it does not remove your duty, and no RBI direction under section 45MA is needed for this.

Exam tips

Start every answer with the trigger: RBI special audit direction or regular statutory reporting.
Quote section 45MA only for special audit. Use the RBI directions language for the statutory auditor's report.
In case MCQs, watch for options that give management control over appointment, fees or the report. These are usually wrong.
Keep section 143(12) in a separate box in your mind so that you never merge it with RBI reporting. Remember the ₹1 crore line: at or above it, report to the Board or Audit Committee within 2 days, then to the Central Government within 15 days of the Board's reply or of the 45-day period lapsing. Below it, report to the Audit Committee or Board within 2 days; the company, not the auditor, discloses the details in the Board's report under section 134(3)(ca).
Close written answers with one line on the auditor's action. This earns the conclusion marks.

Practice questions from Special Features of Audit of Banks & Non-Banking Financial Companies

Auditor's Powers and Duties under Section 45MA in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Auditor's Powers and Duties under Section 45MA: frequently asked questions

What does section 45MA of the RBI Act deal with?

It permits the RBI to direct a special audit of an NBFC's accounts by a chartered accountant when it thinks this is necessary in public interest or depositors' interest. The NBFC must comply. The special auditor reports to the RBI.

Is the special auditor the same as the statutory auditor?

Not necessarily. The chartered accountant may be the statutory auditor or another CA. The appointee has the powers and duties of a company auditor for this audit.

Does the statutory auditor have to report to the RBI without being asked?

Yes, under the RBI directions on the auditor's report, the statutory auditor reports on specified matters and reports non-compliance to the RBI as the directions provide. Check the current directions in your study material for the exact list and format.

Who pays for a special audit under section 45MA?

The RBI fixes the expenses of the special audit, including the auditor's remuneration, and the NBFC bears them. Management cannot refuse on the ground that it did not choose the auditor.