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Ban on Batliboi not fair, EY tells RBI

The firm has made representations to the RBI about the unfairness of such a ban and sought a relaxation of its stance, one of the people cited above said.

, ET Bureau|
Jun 12, 2019, 11.36 PM IST
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SR Batliboi had ceased to be the auditor of Yes Bank from the fiscal ended March 2016 as part of the mandatory auditor rotation.
MUMBAI: After the Reserve Bank of India banned EY member firm SR Batliboi & Co for one year from auditing the books of accounts of commercial banks, EY has now written to the banking regulator objecting to the ban, two people aware with the development told ET.

The firm has made representations to the RBI about the unfairness of such a ban and sought a relaxation of its stance, one of the people cited above said.

“It is quite unfair that the regulator has taken such a tough stand on the auditor but the bank in question has just got a slap on the hand,” one of the people in the know said.

“The auditor may also consider to take further action if the regulator decides not to soften their stand.”

RBI and EY did not respond to ET’s query. ET in its edition on June 4 had reported that the central bank’s action was linked to the audit of private sector Yes Bank’s financial statement for the fiscal year ended March 2016 which had thrown up a big divergence in the non performing assets (NPAs) of the bank.

An RBI assessment for the fiscal ended March 2016, pegged the total bank NPAs at Rs 4,925.68 crore as against the Rs 748.98 crore gross NPAs reported by Yes Bank, leading to a divergence of Rs 4,176.70 crore. This divergence further increased to Rs 6,335 crore in the fiscal ended March 2017 and was considered the main reason the former CEO Rana Kapoor’s tenure was curtailed last year by the central bank.

SR Batliboi had ceased to be the auditor of Yes Bank from the fiscal ended March 2016 as part of the mandatory auditor rotation. BSR & Associates, a KPMG affiliate, took over as the auditor of Yes Bank thereafter.

RBI had said that Batliboi has been banned due to “lapses identified in a statutory audit assignment carried out by the firm,” without giving any details. The Indian audit industry is staring at an upheaval due to the government’s demand to ban Deloitte Haskins & Sells and BSR & Co, part of the KPMG network, for their alleged role in concealing bad loans at IL&FS.

Another Big Four — PwC — is already serving a ban for its alleged role in the Satyam Computer Services fraud, although that ends next year.

SR Batliboi also audits over 150 companies including Reliance Industries, Tata Power, Voltas, Vodafone Idea, Tata Communications and Vedanta.

The market capitalisation of companies audited by EY group through its affiliate firms was about 24.1% of the total market value of all listed NSE companies in 2018-19.

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