Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Audit, Disclosures and Reporting of Banks

Updated 11 October 2026

Banking companies must prepare accounts in the Third Schedule forms (Section 29) and get them audited by a qualified statutory auditor whose appointment needs the RBI's prior approval (Section 30). The accounts and auditor's report are then published and furnished as returns to the RBI within three months (Section 31). The RBI also prescribes disclosures, and the audit includes a long form audit report to the bank's board and the RBI.

Understand Audit, Disclosures and Reporting of Banks

A bank holds public money. So the law does not leave its accounts to the general company law alone. The Banking Regulation Act, 1949 adds extra rules on how accounts are prepared, audited and published. The Companies Act, 2013 applies to banking companies by its own terms, and the BR Act's provisions are in addition to it. Where the two are inconsistent, the BR Act prevails to that extent. Do not confuse this with Part V of the BR Act (Section 56), which applies the BR Act to co-operative banks with modifications.

Preparation of accounts (Section 29). At the end of each financial year, a banking company incorporated in India prepares a balance sheet and a profit and loss account. It uses the forms set out in the Third Schedule, or forms as near to them as the circumstances allow. Banks incorporated outside India prepare their accounts in respect of Indian business.

Audit (Section 30). The balance sheet and profit and loss account are audited by a person qualified to be an auditor of companies. The company appoints its auditor through the Companies Act process, but under Section 30(1A) the appointment, reappointment or removal needs the RBI's previous approval. Under Section 30(1B), the RBI can direct a special audit in the public interest or in the interest of depositors. The RBI also lays down the auditor's functions and can require additional matters to be reported. Under Section 30(3), the auditor's report states whether the information and explanations needed were obtained, whether the bank's transactions are within its powers, whether the returns from branches are adequate, and whether the accounts agree with the books and returns. It also gives the auditor's opinion on whether the balance sheet gives a true and fair view.

Publication and submission (Section 31). After the audit, the accounts and the auditor's report are published. Under Section 31 they are furnished as returns to the RBI within three months of the end of the period to which they relate. The RBI can extend this period. Filing with the Registrar is governed by the Companies Act, which applies to banking companies alongside the BR Act, not by Section 31. Do not attribute these submissions to Section 29.

Long form audit report (LFAR). Beyond the short opinion, the auditor of a bank gives a detailed report on specific areas as the RBI requires. It covers items such as the quality of advances, asset classification, provisioning, internal controls and compliance. It goes to the board or its Audit Committee and is shared with the RBI. It is a supervisory tool, not a public document.

Disclosures and publication. The RBI directs banks to disclose more than the schedules show. These are given as notes to accounts and include capital adequacy, asset quality, NPAs, provisions, concentration of deposits and advances, liquidity, and related items. Banks publish their accounts and the auditor's report as required, so that depositors and investors can judge the bank's health. Always check the current RBI Master Direction for the exact disclosure list.

Key rules to remember

Section 29 - Accounts: Balance sheet + profit and loss account, as at end of each financial year, in Third Schedule forms; Section 29 deals with preparation of the accounts in the prescribed forms. Publication and submission to the RBI are under Section 31.
Section 30 - Audit: Audit by a person qualified as company auditor, with RBI's previous approval of appointment under Section 30(1A); Under Section 30(1B), the RBI may order a special audit in public or depositors' interest. It may also require additional matters in the report.
Section 31 - Publication and submission: Accounts + auditor's report published and furnished as returns to the RBI within three months of the year end; The RBI can extend the period. Filing with the Registrar follows the Companies Act, which applies to banking companies alongside the BR Act. It is not under Section 31, and Section 56 does not govern it.
Section 30(3) - Auditor's report must state: Information needed obtained + transactions within powers + adequate branch returns + accounts agree with books and returns; Also whether the balance sheet gives a true and fair view. Add any qualification.
Reporting layers: Short-form opinion (public) + LFAR (board and RBI); LFAR is supervisory and detailed. The public opinion is in the published accounts.
Disclosure: Schedules + notes to accounts + RBI-prescribed disclosures; Includes capital adequacy, asset quality, NPAs, provisions and concentration.

How to solve Audit, Disclosures and Reporting of Banks questions

Audit and disclosure questions are case-based. Use a fixed structure so you do not miss marks.

1Identify the type of bank and the issue: accounts, audit, appointment of auditor, report content or disclosure.
2Name the governing provision: Section 29 for accounts, Section 30 for audit, RBI directions for disclosures and LFAR.
3State the rule in plain words with its conditions, such as RBI approval or Third Schedule forms.
4Apply it to the facts: what did the bank or auditor do or fail to do?
5Note the interaction with the Companies Act, 2013 where relevant, and the rule that banking provisions prevail for banking companies.
6Conclude clearly: compliant or not, and what the bank, auditor or Company Secretary should do.
7Add a practical point: filing with the Registrar and the RBI, board or Audit Committee review, and publication.

Quickest way: Four-line audit answer

When to use it: Short-answer questions or when time is under pressure.

Line 1: Who must do it (bank) and under which provision (Section 29 or 30).
Line 2: What the rule requires, including RBI approval or forms.
Line 3: Apply to the facts in one sentence.
Line 4: Conclude and give the compliance step.

Common mistakes in Audit, Disclosures and Reporting of Banks

Saying the bank's auditor is appointed only under the Companies Act, 2013.
Students treat a bank like any other company.
Fix: State that the company appoints the auditor, but under Section 30(1A) of the BR Act the appointment needs the RBI's previous approval. The RBI directions apply alongside the Companies Act.
Confusing Section 29 with Section 30.
Both deal with accounts and look similar.
Fix: Remember: 29 is preparation of accounts and forms, 30 is audit. Publication and submission of returns to the RBI come under Section 31. Filing with the Registrar follows the Companies Act.
Treating the long form audit report as a public document.
Students link it with the published auditor's report.
Fix: The LFAR goes to the board or Audit Committee and the RBI. The public report is the short opinion.
Ignoring disclosures beyond the schedules.
Students focus on the balance sheet forms only.
Fix: Add that RBI directions require notes and extra disclosures on capital adequacy, NPAs, provisions and concentration.
Forgetting the RBI's power of special audit.
Students remember only the routine audit.
Fix: State that under Section 30(1B) the RBI can order a special audit in the public interest or in the interest of depositors.

Worked examples

Example 1

A banking company appoints a chartered accountant firm as statutory auditor at its annual general meeting. The firm is qualified under the Companies Act, 2013, but no approval has been taken from the RBI. Advise the bank.

Show the solution

Provision: Section 30 of the Banking Regulation Act, 1949 requires the accounts of a banking company to be audited by a qualified auditor. Under Section 30(1A), the appointment needs the previous approval of the RBI.
Facts: The firm is qualified, and the general meeting has appointed it, but the RBI approval is missing.
Analysis: Qualification under company law is not enough. RBI approval is a separate condition for a banking company.
Conclusion: The appointment is ineffective without the RBI's approval. The bank should seek the RBI's approval and then ratify the appointment, or make a fresh appointment with approval.

Answer: The appointment is ineffective until the RBI approves it. The bank should apply for approval and ratify the appointment, or re-make it with approval, before the audit proceeds under it.

Example 2

Explain how a bank's accounts are prepared, audited and made available to the public and the regulator, and distinguish the auditor's report from the long form audit report.

Show the solution

Preparation: Under Section 29, the bank prepares a balance sheet and profit and loss account at the end of each financial year in the Third Schedule forms.
Audit: Under Section 30, a qualified auditor, appointed with the RBI's previous approval under Section 30(1A), audits the accounts. Under Section 30(1B), the RBI may order a special audit where public or depositors' interest requires it.
Publication and submission: Under Section 31, the accounts and the auditor's report are published and furnished as returns to the RBI within three months of the year end (extendable by the RBI). Filing with the Registrar follows the Companies Act, which applies to banking companies alongside the BR Act.
Auditor's report: Under Section 30(3), it gives an opinion on true and fair view and states matters such as whether transactions are within the bank's powers and whether the accounts agree with the books and returns. It is published with the accounts.
Long form audit report: It is a detailed report on areas the RBI specifies, such as advances, asset classification, provisioning and internal controls. It goes to the board or Audit Committee and the RBI, and it is not published.
Disclosure: The bank also gives the notes and extra disclosures that RBI directions require.

Answer: Accounts are prepared under Section 29 and audited under Section 30. Under Section 31 they are published with the auditor's report and furnished to the RBI within three months of the year end, and the Registrar filing follows the Companies Act. The auditor's report is a public opinion. The LFAR is a detailed supervisory report to the board and the RBI.

Exam tips

Write the section number with the action: 29 for accounts, 30 for audit.
Always mention RBI approval when you discuss the auditor's appointment.
Separate public reports from supervisory reports in one line. It earns easy marks.
In case questions, end with a compliance step such as filing with the Registrar and the RBI.
Do not quote disclosure percentages or limits from memory. Name the category and refer to RBI directions.

Practice questions from Analysis of Financial Statements of Banks

Audit, Disclosures and Reporting of Banks: frequently asked questions

What does Section 29 of the Banking Regulation Act say?

It requires a banking company to prepare a balance sheet and profit and loss account at the end of each financial year in the forms of the Third Schedule. Publication of the accounts and their submission to the RBI with the auditor's report fall under Section 31. Filing with the Registrar follows the Companies Act.

What does Section 30 deal with?

It deals with the audit of the accounts. The audit must be done by a qualified auditor, and under Section 30(1A) the appointment needs the RBI's previous approval. Under Section 30(1B), the RBI may also order a special audit in the public or depositors' interest. Section 30(3) sets out what the auditor's report must state.

What is a long form audit report of a bank?

It is a detailed report by the bank's auditor on areas the RBI specifies, such as advances, asset classification, provisioning and internal controls. It is submitted to the board or Audit Committee and shared with the RBI. It is not a public document.

Do banks need to disclose more than the balance sheet and profit and loss account?

Yes. RBI directions require notes to accounts and additional disclosures such as capital adequacy, asset quality and concentration. Check the current RBI Master Direction for the full list.