MCQ for the day- NBB Ltd is a non-banking financial company on which provisions of “Non-Banking Fina

MCQ for the day-

NBB Ltd is a non-banking financial company on which provisions of “Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016” are applicable.
The company has been accepting as well as holding the public deposits. During the financial year
ended 31 March 2017, the company obtained specified credit rating for its fixed deposits from
CRISIL. However, during the financial year ended 31 March 2018, the company obtained minimum
investment grade for its fixed deposits from ICRA Ltd. During the financial year ended 31 March
2019, no such grade/ rating was obtained. The reports of the statutory auditors for the past years
have always been clean.
The statutory auditors of NBB Ltd have completed their audit for the financial year ended 31March
2019 as well and finalizing their audit report. The auditors discussed with the management that for
the financial year ended 31 March 2019, they would have to include matter regarding acceptance
of public deposits by the company without obtained required specified credit rating during the year
ended 31 March 2019. The auditors further explained that even during the year ended 31 March
2018, instead of specified credit rating, the management obtained minimum investment grade
which was ignored by them, but it cannot continue for 2 years. The management is of the view that
this requirement was fulfilled as the same was obtained in the previous year and for one year if
that is not taken then it should be fine. Please advise how to deal with this matter.


a) It would have been fine if the rating was obtained in the financial year ended 31 March 2018
instead of minimum investment grade. Hence the auditor should report this matter.

b) It does not make any difference whether rating or grade was obtained. Moreover, the same
should have been obtained in the current year also and hence the auditor should report this
matter.

c) It does not make any difference whether rating or grade was obtained. And hence
management is correct that only up to last year it was obtained and hence no reporting is
required by the auditor on this matter.

d) If the rating was not obtained in the previous year, it requires that NBFC obtains rating in the
current year twice i.e., every half year. Accordingly, it should be reported by the auditor.