MINISTRY OF FINANCE

Reserve Bank of India (Local Area Banks – Statutory Audit) Directions, 2026

By TEAM CIRCULAR EXPRESS • 31 Jul 2026

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These directions establish the regulatory framework for the appointment and reappointment of Statutory Central Auditors (SCAs) and Statutory Auditors (SAs) for Local Area Banks. The circular outlines eligibility criteria, tenure, rotation policies, and the scope of the Long Form Audit Report (LFAR) to be submitted by auditors. It emphasizes the independence of auditors and mandates that banks obtain prior approval from the RBI for auditor appointments. The document also provides specific formats for eligibility certificates and audit reporting. These directions come into effect immediately upon issuance.

purpose of issuance

To provide comprehensive directions for the appointment and statutory audit of Local Area Banks by Statutory Central Auditors and Statutory Branch Auditors.

Most Important Details

The circular mandates joint audits for banks with asset sizes of u20b915,000 crore and above, sets specific eligibility criteria for audit firms based on asset size, and defines the scope and coverage of the Long Form Audit Report (LFAR). It also establishes a tenure of three years for auditors with a mandatory cooling-off period of six years after completion of tenure.

is it guidelines or office order, or office memorandum

Guidelines

purpose of issue

To ensure transparency, objectivity, and effective oversight in the statutory audit process of Local Area Banks.

is it guidelines or circular or for some action

Guidelines