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RBI's Concurrent Audit Master Direction requires daily 100% verification of suspense, nostro, clearing, settlement, and NACH return-file reconciliations at high-risk branches and NBFCs in Scale Based Regulation upper and middle layers. Items aged beyond 6 months must be reported to the Audit Committee with 100% IRAC provisioning past 1 year.
Daily reconciliation runs at T-morning: previous day's closing position is matched to current day's opening for every clearing, nostro, and suspense account. Nostro balances are matched to SWIFT MT940 :62F: closing. NACH return files (received T+1 to T+2 from NPCI) are matched against presentation file by UMRN, with return codes classified (01 retry, 20 NPA risk, 25 collections escalation).
Daily cut-off scheduler, UMRN-keyed NACH matcher with return-code classifier, suspense aging buckets (7, 30, 90 days), and SBR-tier NBFC scope extension.
Daily concurrent-audit memo on reconciliation completeness, aging list of suspense items for branch head escalation, nostro confirmation aligned to MT940, and 100% IRAC provisioning evidence for items past 1 year.
A public sector bank branch handling ₹800 crore in daily settlements runs a concurrent audit desk in an adjacent room. The auditor does not wait for month-end. By 11 AM each day, a report sits on the branch manager’s desk listing every suspense account entry that aged past 7 days, every nostro position that did not match the SWIFT confirmation, and every NACH return that did not reconcile to the previous day’s batch. This guide covers what concurrent audit of reconciliation looks like in Indian banks and larger NBFCs.
What Concurrent Audit Is
Concurrent audit is a continuous audit conducted substantially at the time of the transaction, not after it. The RBI Master Direction on Concurrent Audit System in Commercial Banks, first issued in 1993 and periodically updated, defines the scope for banks. The Scale Based Regulation for NBFCs (October 2022) extended similar requirements to NBFCs in the upper and middle layers.
For reconciliation purposes, concurrent audit focuses on accounts where delayed detection of errors creates systemic risk: inter-office accounts, suspense and sundry accounts, nostro and vostro balances, clearing and settlement accounts, and for NBFCs, NACH return files and loan disbursement accounts. The concurrent auditor signs off on reconciliation completeness daily rather than monthly.
The Daily Concurrent Audit Reconciliation Workflow
Morning Position Check
By 10 AM, the concurrent auditor reviews the previous day’s closing positions against the current day’s opening — for every clearing account, nostro account, and suspense account. Any variance triggers an immediate query to the operations team. For treasury branches, nostro balances are matched against the SWIFT MT940 statement received overnight, using the :62F: closing balance tag.
Mid-Day Transaction Sample
Between 1 PM and 3 PM, the auditor selects a risk-weighted sample of the day’s transactions: all entries above the branch’s materiality threshold (typically ₹5 lakh for a medium-sized branch), every foreign exchange transaction, every suspense account credit, and every inter-office debit. For NBFCs, this extends to every NACH return received that day and every disbursement request approved.
End-of-Day Reconciliation Sign-Off
By 6 PM, the auditor prepares the daily reconciliation status report. Categories include: cleared and reconciled, pending documentation (up to 7 days allowed), aged items requiring escalation (over 30 days), and high-risk items requiring immediate branch head attention (over 90 days or suspected fraud). This report is annexed to the daily branch MIS.
Concurrent Audit Reconciliation Reference
| Account Type | Reconciliation Frequency | Aging Trigger | Escalation |
|---|---|---|---|
| Clearing and settlement | Daily | Any variance at day-close | Branch operations head |
| Suspense account | Daily position, weekly aging review | Over 30 days | Branch head |
| Inter-office account | Daily | Over 7 days | Zonal inspecting official |
| Nostro account | Daily vs SWIFT MT940 | Any unmatched settlement | Treasury and foreign exchange head |
| NACH return file (NBFC) | T+1 matching | Return not matched within 48 hours | Collections head and audit committee |
| Loan disbursement | Daily | Bank debit not matched to sanction | Credit operations head |
| IRAC provisioning | Monthly (based on daily feeds) | Item unresolved over 1 year | 100% provisioning, report to ACB |
NACH and Settlement Reconciliation in NBFC Concurrent Audit
NBFCs in the upper and middle layers under the RBI Scale Based Regulation run significant NACH volumes — typically 50,000 to 200,000 monthly debit presentations for mid-size lenders and 2 to 10 million for large housing finance and microfinance entities. The concurrent auditor verifies three files each day: the presentation file sent to the sponsor bank, the return file received from NPCI (T+1 or T+2), and the settlement file showing funds credited to the NBFC’s collection account.
Return code classification drives the daily risk report. NACH return codes like 01 (funds insufficient) are retriable; codes 25 (mandate cancelled by account holder) and 20 (account closed) are non-retriable and trigger collections and NPA risk workflows. Unmatched returns — where the UMRN in the return file does not correspond to a presentation in the system — are investigated within 48 hours because they typically indicate a sponsor bank error or a file transmission gap.
For concurrent auditors managing this volume, manual verification through spreadsheets is infeasible. NACH batch reconciliation as part of a broader reconciliation software India deployment gives the concurrent auditor a real-time exception queue with return code classification, aging, and resolution tracking. The RBI concurrent audit framework and applicable IRAC norms are published on the Reserve Bank of India website.
The FAQs below cover the most common scope and threshold questions that come up during concurrent audit engagement setup for banks and upper-layer NBFCs.