The Reserve Bank of India (RBI) on Tuesday said it has debarred chartered accounting firm Haribhakti & Co from undertaking any type of audit assignments in any of the entities regulated by the central bank. The ban will be imposed for a period of two years with effect from April 1, 2022.

The action was taken for the firm’s failure to comply with a specific direction issued by the RBI with respect to its statutory audit of a systemically important non-banking financial company (NBFC), the central bank said in a statement.

In a notifiation, it says - ""The Reserve Bank in exercise of the powers vested under section 45MAA of the Reserve Bank of India Act, 1934, has, by an order dated September 23, 2021, debarred M/s Haribhakti & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 103523W / W100048), from undertaking any type of audit assignment/s in any of the entities regulated by RBI for a period of two years with effect from April 1, 2022," it stated in a notification."

However, the Reserve Bank mentioned that the order "will not impact audit assignments of Haribhakti & Co for the financial year 2021-22 (FY22)."

This is the first debarment done since the RBI put in place a framework to take action against erring auditors for lapses during audits in 2018.

Additional Background

Haribhakti & Co was the auditor of Srei Infrastructure Finance, whose board was superseded by the RBI and against which insolvency proceedings were initiated last week.

The Kolkata Bench of the National Company Law Tribunal on October 8 gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly owned subsidiary Srei Equipment Finance after the RBI filed insolvency applications.

According to rating reports of March 6, 2021, by CARE Ratings, Srei Infrastructure Finance owed banks loans worth Rs 11,117.71 crore, apart from outstanding bonds and NCDs worth Rs 710.63 crore.

Srei Equipment Finance had outstanding bank loans worth Rs 16,912.21 crore and other debt instruments worth Rs 499.45 crore. All these facilities and instruments were rated ‘D’, or default grade, in March.