The Reserve Bank of India (Local Area Banks – Statutory Audit) Directions, 2026, issued on July 31, 2026, provide a comprehensive framework for the appointment, eligibility, independence, tenure, and rotation of Statutory Auditors of Local Area Banks. The Directions strengthen Board and Audit Committee oversight, prescribe eligibility criteria for audit firms, require joint audits for banks with assets of ₹15,000 crore and above, and lay down procedures for RBI approval of auditor appointments. The Directions also introduce a detailed Long Form Audit Report (LFAR) framework covering key areas such as credit risk, governance, fraud management, KYC/AML, IT and cybersecurity, capital adequacy, liquidity, and regulatory compliance. They repeal earlier statutory audit instructions, creating a uniform,
transparent, and risk-based statutory audit framework for Local Area Banks.
