The Indian Banks’ Association (IBA), through its advisory dated 15 September 2026, has recommended measures for optimising statutory audit costs and accelerating the adoption of centralised audit frameworks in Public Sector Banks (PSBs). The advisory refers to the Banking Laws (Amendment) Act, 2025, notified on 15 April 2025, which, according to the IBA, empowers public sector banks and the State Bank of India to offer remuneration to statutory auditors. It further records that the Reserve Bank of India (RBI), through its letter dated 17 April 2026, withdrew its legacy instructions concerning auditor fee structures. Auditor remuneration is to remain reasonable and commensurate with the scope and coverage of audit, the size and spread of assets, accounting and administrative units, and the complexity of banking operations.
Following requests from member banks regarding remuneration of Statutory Central Auditors (SCAs) and Statutory Branch Auditors (SBAs), the matter was considered by internal committees and reviewed at the IBA Managing Committee meeting on 21 August 2026. The Committee emphasised the need to accelerate centralised audit arrangements, drawing upon cost-efficient models adopted by private sector banks.
The advisory recommends that audit remuneration for FY 2026-27 remain unchanged at existing levels in accordance with RBI instructions dated 1 March 2023. It also advises member banks to strengthen centralised audit frameworks and target physical statutory branch audit coverage of 50% of total business, apart from centralised treasury audits and related activities. Implementation should remain aligned with applicable SEBI (LODR) Regulations, RBI guidelines and board-approved policies to maintain comprehensive risk oversight while improving audit cost efficiency.
Indian Banks’ Association
Corporate & International Banking
CIB-II/PSBs-SBAs Auditfees/2026-27/
September 15, 2026
ADVISORY
The Chairman, State Bank of India
&
MD & CEOs of All Public Sector Banks
Dear Sir/Madam,
IBA Advisory: Optimization of Statutory Branch Auditors (SBAs) Costs and Acceleration of Centralized Audit Frameworks
We invite your attention to the Banking Laws (Amendment) Act, 2025, notified on 15th April 2025, which now empowers Public Sector Banks (PSBs) and SBI to offer remuneration to statutory auditors, facilitating the engagement of high-quality audit professionals and enhancing audit standards. Necessary Gazette notifications for this have also been issued by the GoI. Amendments have also been made to the State Bank of India Act, 1955.
2. Consequently, RBI has officially withdrawn its legacy instructions regarding auditor fee structures with immediate effect vide its letter dated April 17, 2026, issued to the Chairman-SBI and MD&CEOs of all nationalised Banks.
The RBI letter states that the remunerations/fees shall be kept reasonable and commensurate with, including but not limited to,
- the scope and coverage of audit
- the size and spread of assets, accounting and administrative units
- the complexity of the business, financial and technology landscape of the bank etc
3. Following requests from member banks to review the pay structure for Statutory Central Auditors (SCAs) and Statutory Branch Auditors (SBAs) at PSBs, the matter was deliberated by Internal Committees and further reviewed during the IBA Managing Committee meeting on August 21, 2026. Drawing from the low-cost centralised audit models of peer private banks, the Committee highlighted that PSBs need to expedite the roadmap for a centralised audit framework to ensure seamless transition, robust digital oversight, and enhanced cost efficiency in subsequent financial years. This would help in reducing overall costs.
4. In line with the Committee’s directives, Member Banks are advised to consider implementing the following structural and policy measures:
a) Audit Remuneration for FY 2027: In accordance with RBI instructions dated March 1, 2023, the audit remuneration for FY 2026-27 will remain unchanged and be maintained at current levels.
b) Reduction in Statutorybranch audits: Member banks should target to enhance the centralised Audit framework and target a reduction in the coverage of physical statutory branch auditsto cover 50% of total business apart from centralised treasury audits etc due to the continuing digitisation achieved and planned going forward. This would help Member Banks reduce overall audit costs, which was felt to be extremely high.
c) Alignment with Regulatory Standards: Audit coverage must be strategically aligned with SEBI (Listing Obligations and Disclosure Requirements-LODR) Regulations and RBI guidelines issued from time to time. This alignment will substantially optimize audit fees while maintaining comprehensive risk oversight.
d) Adherence to Board Policies and RBI Mandates: Based on the advisory, a final, Board approved policy may be formulated by Member Banks to expedite the centralized audit roadmap, strictly aligning with extant SEBI (LODR) and RBI regulations issued from time to time.
5. This advisory is issued for necessary information and guidance, please.
Yours faithfully,
Gopal Murli Bhagat
Deputy Chief Executive
