Concurrent Audit

Concurrent audit of banks is governed by RBI's circular RBI/2019-20/64, DBS.CO.ARS.No.BC.01/08.91.021/2019-20 dated 18 September 2019 ("Concurrent Audit System in Commercial Banks — Revision"), applicable to all Scheduled Commercial Banks (excluding Regional Rural Banks), Small Finance Banks, Payments Banks and Local Area Banks. Unlike statutory audit, concurrent audit is an internal control mechanism appointed by the bank itself (not by shareholders), intended to supplement, not replace, the bank's regular internal audit through near-real-time transaction-level checking.

The circular requires concurrent audit to cover a minimum of 50% of a bank's total advances and 50% of its total deposits, with the specific branches, business segments and periodicity of coverage left to the discretion of the bank's Audit Committee of the Board (or Local Management Committee for foreign banks), subject to a prescribed minimum area list — cash transactions and physical verification of cash, safeguarding of securities against loans and advances, delegation-of-powers compliance for sanctions, end-use verification of borrowed funds, monitoring of accounts showing irregular/excess drawings, and treasury and foreign exchange operations. Urban Cooperative Banks are separately covered under RBI's Master Circular on Inspection & Audit Systems in Primary (Urban) Cooperative Banks, which similarly mandates concurrent audit coverage calibrated to deposit size.

Concurrent auditors may be the bank's own inspection staff or external chartered accountant firms engaged for the purpose; RBI leaves fee structures and firm rotation to the bank's own board-approved policy, distinguishing this engagement from the RBI-regulated statutory branch/central audit appointment process.

Concurrent audit is a continuous, transaction-level audit conducted simultaneously with the operations it examines — most commonly for banks, where the RBI's supervisory framework requires concurrent audit of branches above specified thresholds as part of the internal audit machinery. Unlike the annual statutory audit, which examines the year's accounts after the fact, a concurrent audit checks transactions as they happen: advances sanctioned, cash movements, revenue accruals, and adherence to the bank's own instructions and the regulator's norms.

The value of concurrent audit is that errors are caught while they can still be fixed. A loan disbursed against inadequate security, an income item booked before it was realised, a statutory requirement missed in the month's operations — each is identified in the same period it occurs, reported to the audit committee, and corrected. The audit operates under the framework of the Banking Regulation Act 1949 and the RBI's directions to banks, which are the standards the auditor tests against.

Skipping or weakening concurrent audit is how small deviations become large ones. The reports feed the bank's own audit committee and the regulator's inspection; a branch whose concurrent audit findings accumulate is a branch the regulator will look at. For a bank, a weak internal audit layer is a supervisory finding in itself — the RBI's inspection framework treats the quality of internal audit as a governance indicator.

This service is for banks and financial institutions that need concurrent audit coverage for their branches and functions — under the RBI's internal audit framework and the Banking Regulation Act 1949. We deploy audit teams on a continuous cycle, test transactions against the bank's instructions and the regulatory norms, report findings in the prescribed formats, and follow up so that the findings close — not just accumulate.