1.01 Reserve Bank of India (RBI) vide its circular dated April 27, 2021, has issued fresh guidelines for appointment of Statutory Auditors (SAs), thereby superseding earlier guidelines issued. Further, RBI on June 11, 2021 published certain clarifications to its circular dated April 27, 2021 in the form of Frequently Asked Questions (FAQs). Accordingly, Axis Finance Limited (the Company) has prepared the policy for appointment of SAs in line with norms applicable to NBFCs.

2.01 To define the policy for appointment of SAs in conformation with the extant norms of RBI and applicable provisions of Companies Act, 2013.

• “Audit Committee” means the Audit Committee of the Board.
• “Board” means Board of Directors of the Company.
• “Asset size” means total assets of the Company.
• “Statutory Auditors (SAs)” mean auditors appointed as per the policy to conduct statutory audit of the Company.
• “RBI circular” means RBI circular RBI/2021-22/25 Ref No. DOS.CO.ARG/ SEC.01/ 08.91.001/ 2021-22. dated April 27, 2021
• “Group entities” shall mean two or more entities related to each other through any of the following relationships, viz. Subsidiary – parent (defined in terms of IND AS 110), Joint venture (defined in terms of IND AS 31), Associate (defined in terms of IND AS 28), Promoter-promotee [as provided in the SEBI (Acquisition of Shares and Takeover) Regulations, 1997] for listed companies, a related party (defined in terms of IND AS 24), Common brand name, and investment in equity shares of 20% and above. [Note: “AS” means Accounting Standard notified under Companies Act, 2013]
• “MD & CEO” means the Managing Director and Chief Executive Officer of the Company.
• “CFO” means the Chief Financial Officer of the Bank.
• “Promoter” has the same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and includes a member of the promoter group.
• Promoter group” includes, inter alia,
  • a subsidiary or holding company of a promoter;
  • any body corporate in which the promoter holds twenty per cent or more of the equity share capital; and/or any body corporate which holds twenty per cent or more of the equity share capital of the promoter;
  • any body corporate in which a group of individuals or companies or combinations thereof acting in concert, which hold twenty per cent. or more of the equity share capital in that body corporate and such group of individuals or companies or combinations thereof also holds twenty per cent or more of the equity share capital of the issuer and are also acting in concert
• Potential Conflict of Interest – Potential Conflict of Interest, with reference to a firm that is being considered for appointment as SA, may arise, in any of the following circumstances:
  • The firm is engaged with audit/non-audit works for Axis Group Entity which is not regulated by RBI.
  • The audit firm was engaged with audit/non-audit works for a Group Entity which is not regulated by RBI, and not more than one year has elapsed since the completion/ relinquishment of such engagement
  • A partner of the firm is a director in any of the Group Entities which are not regulated by RBI

4.01 This policy will be applicable for Financial Year 2021-22 onwards.

5.01 The Company shall intimate to RBI at Department of Supervision, RBI, Mumbai w.r.t. appointment/ reappointment of SAs on annual basis by way of a certificate inForm Aattached as Annexure I to this Policy within one month of such appointment

6.01 Minimum number of SAs to be appointed by the Company shall be one as the Company’s asset size as on March 31 of previous year is less than Rs.15,000 crore.

6.02 Minimum number of SAs to be appointed by the Company shall be two if the Company’s asset size as on March 31 of any previous year is Rs.15,000 crore or more in future. In that case the Company shall ensure that joint auditors of the Entity do not have any common partners and they are not under the same network of audit firms. The Company shall finalize the work allocation among SAs, before the commencement of the statutory audit, in consultation with their SAs.

6.03 The number of SAs to be appointed for a financial year shall be decided, inter alia, taking into account the relevant factors such as the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, availability of other independent audit inputs, identified risks in financial reporting, etc. The actual number of SAs to be appointed shall be decided by Board subject to the following limits:

The Company shall ensure adherence to the provisions of Section 143(8) of the Companies Act, 2013 regarding audit of accounts of all branches, if applicable.

7.01 The minimum standards and eligibility norms for audit firms to be appointed as SAs shall be, as given below:

Note 1:There should be at least one-year continuous association of partners with the firm as on the date of shortlisting for considering them as full time partners. Further, at least two partners of the firm shall have continuous association with the firm for at least 10 years. The full-time partner’s association with the firm would mean exclusive association. The definition of ‘exclusive association’ will be based on the following criteria:

• The full-time partner should not be a partner in other firm/s.
• She / He should not be employed full time / part time elsewhere.
• She / He should not be practicing in her/his own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.
• ACB shall examine and ensure that the income of the partner from the firm/LLP is adequate for considering them as full-time exclusively associated partners, which will ensure the capability of the firm for the purpose.

Note 2:CISA/ISA Qualification: There should be at least one-year continuous association of Paid CAs with CISA/ISA qualification with the firm as on the date of shortlisting for considering them as Paid CAs with CISA/ISA qualification for the purpose.

Note 3:Audit Experience: Audit experience shall mean experience of the audit firm as Statutory Central/Branch Auditor of Commercial Banks (excluding RRBs)/ AIFIs. In case of merger and demerger of audit firms, merger effect will be given after 2 years of merger while demerger will be effected immediately for this purpose.

Note 4:Professional Staff: Professional staff includes audit and article clerks with knowledge of bookkeeping and accountancy and who are engaged in on-site audits but excludes typists/stenos/computer operators/ secretaries/subordinate staff, etc. There should be at least oneyear continuous association of professional staff with the firm as on the date of shortlisting for considering them as professional staff for the purpose.

7.02 General eligibility norms for Auditors

• The audit firm, proposed to be appointed as SAs, should be duly qualified for appointment as auditor of a company in terms of Section 141 of the Companies Act, 2013.
• The audit firm should not be under debarment by any Government Agency, National Financial Reporting Authority (NFRA), the Institute of Chartered Accountants of India (ICAI), RBI or Other Financial Regulators.
• The appointment of SAs is in line with the ICAI’s Code of Ethics/any other such standards adopted and does not give rise to any conflict of interest.
• If any partner of a Chartered Accountant firm is a director in any entity, the said firm shall not be appointed as SCA/SA of any of the group entities of that entity. The Company, as part of the process for selection of firms for appointment as SAs, obtain appropriate disclosures in this regard, including details of directorships in Group Entities that are not regulated by RBI.
• If the asset size of the Company is above ₹1,000 crore, SAs should preferably have capability and experience in deploying Computer Assisted Audit Tools and Techniques (CAATTs) and Generalized Audit Software (GAS), commensurate with the degree/ complexity of computer environment of the Entities where the accounting and business data reside in order to achieve audit objectives.
• The auditors should preferably have the capability and experience in dealing with both debt and equity capital market issuances (domestic and offshore).

7.03 Continued Compliance with basic eligibility criteria

In case any audit firm (after appointment) does not comply with any of the eligibility norms (on account of resignation, death etc. of any of the partners, employees, action by Government Agencies, NFRA, ICAI, RBI, other Financial Regulators, etc.), it shall promptly approach the Company with full details. Further, the audit firm shall take all necessary steps to become eligible within a reasonable time and in any case, the audit firm should be complying with the above norms before commencement of Annual Statutory Audit for Financial Year ending 31st March and till the completion of annual audit. 8 In case of any extraordinary circumstance after the commencement of audit, like death of one or more partners, employees, etc., which makes the firm ineligible with respect to any of the eligibility norms, the Company may approach RBI, to allow the concerned audit firm to complete the audit, as a special case

8.01 The Audit Committee of the Board (ACB) shall monitor and assess the independence of the auditors and conflict of interest position in terms of relevant regulatory provisions, standards and best practices. Any concerns in this regard may be flagged by the ACB to the Board of Directors and concerned Senior Supervisory Manager (SSM)/Regional Office (RO) of RBI.

8.02 Concurrent auditors of the Company will not be considered for appointment as SAs. The audit of the Company and any entity with large exposure (As defined in RBI instructions on ‘Large Exposures Framework’) to the Company for the same reference year should also be explicitly factored in while assessing independence of the auditor.

8.03 The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments, etc.) by the SAs for the Company or any audit/non-audit works for Axis group entities should be at least one year, before or after its appointment as SAs. However, during the tenure as SA, an audit firm may provide such services to the Company which may not normally result in a conflict of interest, and the Company will take a decision in this regard, in consultation with the ACB. A conflict would not normally be created in the case of the following special assignments (indicative list):

• Tax audit, tax representation and advice on taxation maters,
• Audit of interim financial statements.
• Certificates required to be issued by the statutory auditor in compliance with statutory or regulatory requirements.
• Reporting on financial information or segments thereof

However, if an audit firm is involved in any non-audit work with the Company and/or any audit/nonaudit work in other RBI Regulated Group Entities and completes or relinquishes the said assignment prior to the date of appointment as SA of the Company for FY 2021-22, the said audit firm would be eligible for appointment as SA of the Company for FY2021-22.

8.04 The restrictions as detailed in para 8.02 and 8.03 above, will also apply to an audit firm under the same network (As defined in Rule 6(3) of the Companies (Audit & Auditors) Rules, 2014) of audit firms or any other audit firm having common partners.

9.01 The SAs shall be strictly guided by the relevant professional standards in discharge of their audit responsibilities with highest diligence.

9.02 The ACB shall review the performance of SAs on an annual basis. Any serious lapses / negligence in audit responsibilities or conduct issues on part of the SAs or any other matter considered as relevant shall be reported to RBI within two months from completion of the annual audit. Such reports shall be sent with the approval / recommendation of the ACB, with the full details of the audit firm.

9.03 In the event of lapses in carrying out audit assignments resulting in misstatement of financial statements, and any violations/lapses vis-à-vis the RBI’s directions/guidelines regarding the role and responsibilities of the SAs in relation to Company, the SAs would be liable to be dealt with suitably under the relevant statutory/regulatory framework.

10.01 In order to protect the independence of the auditors/audit firms, Company shall appoint the SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year.

10.02 The Company can remove the SAs before completion of 3 years tenure / during the above period subject to the due compliance of Section 140 of the Companies Act, 2013 and will intimate the same to concerned SSM/RO at RBI within 1 month of such a decision being taken along with reasons for the same.

10.03 An audit firm would not be eligible for reappointment for six years (two tenures) after completion of full or part of one term of the audit tenure. (In case an audit firm has conducted audit of the Company for part-tenure (1 year or 2 years) and then not appointed for remainder tenure, they also would not be eligible for reappointment in the Company for six years from completion of part-tenure.)

10.04 An audit firm proposed to be appointed as SA of the Company, can concurrently take up 10 statutory audit of a maximum of four Commercial Banks [including not more than one PSB or one All India Financial Institution (NABARD, SIDBI, NHB, EXIM Bank) or RBI], eight UCBs and eight NBFCs during a particular year, A group of audit firms having common partners and/or under the same network, will be considered as one entity. Shared/Sub-contracted audit by any other/associate audit firm under the same network of audit firms is not permissible. The incoming audit firm shall not be eligible if such audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.

11.01 The audit fees for SAs shall be decided in terms of the relevant statutory/regulatory provisions

11.02 The audit fees for SAs shall be reasonable and commensurate with the scope and coverage of audit, size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, identified risks in financial reporting, etc.

11.03 The Board/ACB shall make recommendation to the competent authority (To the members in AGM) as per the relevant statutory/regulatory instructions for fixing audit fees of SAs.

12.01 Process for reappointment of existing Auditors:

First preference will be given to existing SAs for their re-appointment subject to compliance of eligibility norms. The Company shall obtain the willingness from the existing SAs for re-appointment. In case such consent is not received from any of the existing SAs, Company shall follow the process for appointment of New SA to fill that vacancy as detailed below.

12.02 Process for appointment of New firm as SAs:

12.02.01 Applications will be invited from the eligible Audit firms subject to fulfilling the eligibility criteria as per para 7 above.

12.02.02 The Finance & Accounts team of the Company in consultation with the CFO shall evaluate the applications received considering various parameters including but not limited to expertise, experience, qualifications, reputation, availability of qualified CAs, sufficient trained personnel with the firm and such other factors as the Company may deem fit for its requirements.

12.02.03 Post scrutiny of the said applications and concurrence of the MD & CEO, the CFO shall 11 submit summary of the applications received; together with comments/views and final recommendation for consideration to the ACB

12.02.04 Based on recommendations made by the management, the ACB is empowered to decide on the SAs to be engaged taking into account the relevant factors such as the size and spread of assets, accounting and administrative units, complexity of transactions, level of computerization, availability of other independent audit inputs, identified risks in financial reporting, etc

12.02.05 Thereafter, Company will approach the audit firms to obtain their irrevocable consent in writing strictly in order of preference. If the approached audit firm does not give consent, the Company will approach the next audit firm in order of preference for obtaining consent till the time the number of audit firms who have given the consent equals to number of vacancies for the particular year.

12.03 General process to be followed:

12.03.01 The Company shall obtain a certificate, along with relevant information as per Form B ( Annexure II), from the audit firm(s) proposed to be appointed/ reappointed as SAs, to the effect that the audit firm(s) complies with all the eligibility norms prescribed by RBI for the purpose. Such certificate should be signed by the main partner/s of the audit firm proposed for appointment/ reappointment of SAs of the Company, under the seal of the said audit firm.

12.03.02 the list of approved SAs shall be put to Board for recommendation to the Members for their approval at the next Annual General Meeting.

12.03.03 Once the appointment is made as per the Regulatory Requirements, Company shall Intimate the appointment/ re-appointment of SAs to RBI at the concerned SSM / RO.

The ACB will review the policy and recommend the same to the Board annually or earlier as and when it deems necessary.

In case there are any regulatory changes requiring modifications to the Policy, the Policy shall be reviewed and amended at the next possible opportunity. However, the amended regulatory requirements will supersede the Policy till the time Policy is suitably amended.

The Board approved Policy will be hosted on Company’s official website.