The Reserve Bank of India (RBI) on Friday extended risk-based internal audit (RBIA) system for housing finance companies to enhance quality and effectiveness of their internal audit system. The provisions will apply to all deposit-taking housing finance companies irrespective of their size, as well as non-deposit-taking housing finance companies with asset size of Rs 5,000 crore and above, the RBI said in a statement.
The housing finance companies have been asked to put in place a RBIA framework by June 30, 2022. An effective RBIA is an audit methodology that links an organisation's overall risk management framework and provides an assurance to the board of directors and senior management on quality and effectiveness of an organisation's internal controls, risk management and governance-related systems and processes.
The RBI says an internal audit function should broadly assess and contribute to overall improvement of an organisation's governance, risk management and control processes by using a systematic and disciplined approach. The function is an integral part of sound corporate governance and considered as third line of defence.