Every attempt the same question lands in my inbox by the hundred: “Sir, amendments kya hain? Jo padha hai woh chalega ya nahi?” And every attempt the same thing happens — students revise the whole syllabus properly, then lose four or five marks because they wrote the old position on a topic that ICAI quietly changed in the RTP.
For Nov 2026 CA Final Audit, the RTP carries amendments in two places: Professional Ethics and NBFC Audit. The Professional Ethics ones are small and straightforward — three of them, and two are carry-forwards. The NBFC ones are not small. They sit exactly where MCQs and numerical questions come from.
This page is the complete written version of both. Nothing held back for a paid batch.
Watch it, or read it — your choice
If you would rather listen than read, here are both videos. Professional Ethics first:
And NBFC Audit — this one is longer, because the amendment touches registration, capital adequacy, risk weights and provisioning all at once:
If you would rather read — everything from both videos is written out below, in the same order, with the tables. You do not need to play the videos to get the full content.
Part 1 — Professional Ethics: three amendments
I will be honest with you. I was expecting a lot here and there is not a lot. Three amendments, of which two are carry-forwards that were already in an earlier RTP, and one is the real change. Do not spend a week on this section.
Amendment 1 — First Schedule, Part I, Clause 9 (cosmetic)
Clause 9 says a Chartered Accountant in practice, when offered a company audit, must first satisfy himself that his own appointment is in order and that the removal of the previous auditor is in order, before going ahead.
What changed: earlier the clause referred only to the sections of the Companies Act, 1956. Now the corresponding sections of the Companies Act, 2013 — Section 139 for appointment and Section 140 for removal — are referred to as well.
That is it. This is a cosmetic, already-understood change with no real impact on how you answer a question. It was in an earlier RTP too.
Amendment 2 — Second Schedule, Part II, Clause 5 (carry-forward)
A clause providing that any Chartered Accountant, whether in practice or not, who fails to comply with the provisions of the Companies Act while conducting an audit, is guilty under Second Schedule, Part II, Clause 5.
Also not new. But it creates the one confusion students actually have.
The clarification students need: Clause 9 or Clause 5?
Very few decided cases exist on this, so let me give you the simple working rule I use in class.
| Situation | Which clause | Why |
|---|---|---|
| Auditor did not verify whether his appointment and the previous auditor’s removal were in order | First Schedule, Part I, Clause 9 | Straight case of Clause 9 |
| Anything else going wrong in the appointment or removal itself | First Schedule, Part I, Clause 9 | Once you are inside Clause 9, all the appointment and removal sections come along with it |
| Auditor becomes disqualified after appointment under Section 141 but continues to audit | Second Schedule, Part II, Clause 5 | Contravention of the Companies Act after appointment |
| Audit report not drawn up as required by Section 143 | Second Schedule, Part II, Clause 5 | Same — post-appointment failure |
| Renders prohibited services under Section 144 | Second Schedule, Part II, Clause 5 | Same |
| Fails to discharge his responsibility at the AGM under Section 146 | Second Schedule, Part II, Clause 5 | Same |
One line to remember: anything to do with appointment and removal → Clause 9. Anything the auditor does wrong after he is validly appointed → Clause 5.
Amendment 3 — Tax audit limit (this is the real one)
The limit itself has not moved. It is still 60. What has changed is how those 60 are counted — and the change is significant enough that it reverses the position I told you to write in the last attempt.
What changed
Earlier: one partner could use another partner’s limit. Three partners in a firm meant 3 × 60 = 180, and one partner could sign all 180 while the others signed nothing.
Now: every member uses his own limit. The limit belongs to the member, not to the firm, and it cannot be distributed or pooled. The firm’s total may still be 180, but it must be 60 + 60 + 60.
The reason this is now enforceable is the UDIN portal. Once you have signed 60 tax audit reports in a financial year, the 61st simply will not register a UDIN. The system aggregates every tax audit UDIN generated by a member — in his individual capacity and as a partner across all firms.
The counting rules — where marks are actually lost
| Rule | Position |
|---|---|
| Basis of counting | Signature based, and per financial year (e.g. 1 April 2026 to 31 March 2027) |
| Which assessment year the report relates to | Irrelevant. Sign a belated report for an earlier year this year — it counts this year |
| Accepted last year, signed this year | Counts this year |
| Accepted this year, signed next year | Counts next year |
| Two reports of the same client for two different years, both signed this year | Counted as two |
| Revised tax audit report | Not counted |
| Assessees under Section 44AD / 44ADA / 44AE | Not counted (unchanged) |
| Head office and branch audited separately | Counted as one (unchanged) |
| Several branches of the same entity | Counted as one (unchanged) |
| Individual capacity plus all firms | Aggregated — the total must not cross 60 |
The RTP-style illustration
A member signs, in FY 2026-27:
- 52 tax audit reports for AY 2026-27
- 9 belated reports relating to AY 2024-25
- 3 revised reports
Count = 52 + 9 = 61. The revised three are excluded. 61 exceeds 60, so this is not allowed. Similarly, a member who accepts and signs 68 tax audit reports in a financial year is not allowed.
Note the change from last attempt. For May 2026 I told students to treat pooling of one partner’s limit by another as allowed, because the change had not yet reached the ICAI RTP and Study Material. For Nov 2026 it is in the RTP. Write the new position.
Part 2 — NBFC Audit: the amendments that matter
These are important precisely because NBFC is where the MCQs and the numerical questions come from. Some parts of the syllabus had small changes scattered through them, so in my notes I have restated the entire portion rather than only the changed lines — that is why the PDF looks long. If you work through the section below and the illustrations, you do not need to open the concept book or the FADU chart book for these topics.
Amendment A — Exemption from registration (the big one)
The old position
A company satisfying the 50-50 test — more than 50% of assets are financial assets and more than 50% of income is financial income — is an NBFC and had to register. There was no exemption from registration itself. Entities regulated by other regulators (insurance companies under IRDAI, merchant bankers under SEBI) were outside RBI’s net anyway, but that is a different point.
The new position
You can now satisfy the 50-50 test and still not need registration with RBI, if all three of these hold:
| # | Condition |
|---|---|
| 1 | Does not access public funds, directly or indirectly |
| 2 | Has no customer interface |
| 3 | Asset size below ₹1,000 crore as per the last audited balance sheet |
Break any one of the three and registration becomes compulsory again.
What the exemption actually gives you
If you are exempt, you are outside Section 45-IA and Section 45-IC of the RBI Act, 1934. So:
- No Certificate of Registration required
- No minimum Net Owned Fund to maintain
- No 20% annual transfer to the reserve fund
It is not automatic — you have to surrender
This is the part students miss. An existing registered NBFC that now qualifies does not lose its registration automatically. It must apply to surrender its Certificate of Registration, and the window to do so runs up to 31 December 2026. After deregistration it is treated as an Unregistered Type I NBFC. If it later breaches any of the three conditions, it must register again.
Type I and Type II — understand it once
This is not the Type 1 / Type 2 of SA 402. In 2016 RBI wanted to simplify the registration process for NBFCs not accepting public deposits, and split them into two.
| Type I | Type II | |
|---|---|---|
| Public deposits | Does not accept | Does not accept |
| Public funds | Does not access — no bank finance, no inter-corporate deposits | Accesses public funds |
| Customer interface | None — deals only with its holding company, subsidiaries and group companies | Has customer interface, or intends to have one |
| Registration process | Simplified — nothing raised from outside | Normal |
Public deposits versus public funds — do not mix these up
Public deposits is the narrow term: taking deposits directly from people.
Public funds is the broader term. It includes public deposits, and also money raised through commercial paper, debentures, inter-corporate deposits (including from group companies), and any finance taken from a bank — because ultimately that too is the public’s money reaching you indirectly.
Exclusion: public funds do not include money raised by issuing instruments compulsorily convertible into equity shares within 10 years of issue. Such money is as good as owners’ money, so it is not treated as public funds.
Base Layer conditions are NOT the same as the exemption conditions
Another common mix-up. Base Layer requires only two things: does not accept public deposits, and asset size below ₹1,000 crore. The registration exemption is stricter — it additionally requires no public funds and no customer interface. So a small number of Base Layer NBFCs will now also be exempt from registration, but most Base Layer NBFCs will not be.
Who this is really for — and the exam trap
The relief is aimed at small NBFCs that are effectively private investment vehicles: holding companies, single family offices, group treasury companies that hold investments and deal only with their own group. They cross the 50-50 test purely because their business is finance.
The trap you will see in the exam: “Assets ₹600 crore. No customer interface. Took an inter-corporate deposit.” Assets are below ₹1,000 crore and there is no customer interface, so it looks exempt — but an inter-corporate deposit is access to public funds. That makes it Type II. Registration is required.
Amendment B — Microfinance institutions (carry-forward)
To call itself an NBFC-MFI and get the associated exemptions, at least 60% of total assets (net of intangible assets) must be in microfinance loans. This was 75% earlier. The relaxation lets these companies park some money in other instruments to hedge risk without losing their status.
And RBI has added a cushion: if qualifying assets fall below 60% for four consecutive quarters, the status is not lost automatically — the NBFC must approach RBI with a remediation plan showing how it will get back above 60%.
Not really a new amendment, but know it.
Amendment C — Capital adequacy (restated in full, with two new ratios)
Capital is loss-absorbing capacity. The more capital a company holds, the more loss it can absorb before debenture holders and depositors get hurt. RBI measures this through the Capital to Risk Weighted Assets Ratio (CRAR) — capital in the numerator, assets multiplied by their risk weights in the denominator.
You already knew CRAR and Tier 1. The amendment adds two more: CET 1 (Common Equity Tier 1) — the purest slice of Tier 1 — and the Leverage Ratio, which is outside liabilities to owned funds.
The requirement table — learn this one
| Category | CRAR | Tier 1 | CET 1 | Leverage Ratio |
|---|---|---|---|---|
| NBFC lending against gold jewellery (such loans 50% or more) — whatever the layer | 15% | 12% | Not required | — |
| Base Layer (other than gold) | Not required | Not required | Not required | Must not exceed 7 |
| Middle Layer | 15% | 10% | Not required | — |
| Upper Layer | 15% | 10% | 9% | — |
| Top Layer | 15% | 10% | 9% plus higher capital charge as specified by RBI | — |
Read it as a ladder: the bigger the NBFC, the more it must hold. The smallest ones (Base Layer) are not asked for CRAR at all — they get the leverage ratio instead, which is genuinely new. Gold loan NBFCs sit outside the ladder and are stricter on Tier 1: 12% instead of 10%.
In every case, Tier 2 cannot exceed 100% of Tier 1.
The computation ladder — Own Funds to CET 1
Do this in order and it stops being confusing.
Step 1 — Own Funds
- Paid-up equity capital
- Add: preference shares compulsorily convertible into equity
- Add: securities premium
- Add: free reserves, statutory reserves, capital reserves
- Less: accumulated loss balance
- Less: deferred revenue expenditure not yet written off (e.g. preliminary expenses)
- Less: intangible assets
Step 2 — Net Owned Funds
From Own Funds, deduct investments in shares, debentures and bonds of other NBFCs, subsidiaries and group companies — but only to the extent they exceed 10% of Own Funds.
Example. Own Funds ₹100 crore. Investments in other NBFCs and group companies ₹14 crore. 10% of Own Funds is ₹10 crore. The excess over that tolerance is ₹4 crore, and only ₹4 crore is deducted. Net Owned Funds = ₹96 crore.
The logic: whatever the shareholders put in, less whatever has been diverted out beyond a tolerance of 10%. Always work the percentage on the Own Funds figure, and deduct only the excess — not the whole investment.
Step 3 — Tier 1 capital
Net Owned Funds plus Perpetual Debt Instruments (PDI), taken only up to 15% of aggregate Tier 1 capital as on 31 March of the previous financial year — previous year, because the current year’s figure is what you are computing. Base Layer is not eligible for PDI in Tier 1.
Step 4 — CET 1 capital
From Tier 1, deduct PDI (it is perpetual but it is still not the owners’ money) and specified deferred tax assets. Goodwill and other intangibles are already out at the Own Funds stage.
Tier 2 capital
| Item | How much is counted |
|---|---|
| Preference shares other than compulsorily convertible | Full |
| Revaluation reserves | 45% (discounted by 55%) |
| General provisions and loss reserves | Up to 1.25% of risk weighted assets |
| Hybrid debt capital instruments | Full |
| Subordinated debt | Discounted (see below), and capped at 50% of Tier 1 |
| Perpetual debt in excess of what Tier 1 could absorb | Comes here |
| Total Tier 2 cannot exceed 100% of Tier 1. | |
Discounting subordinated debt by remaining maturity
| Remaining maturity | Discount | Amount counted |
|---|---|---|
| Up to 1 year | 100% | Nil |
| More than 1 year, up to 2 years | 80% | 20% |
| More than 2 years, up to 3 years | 60% | 40% |
| More than 3 years, up to 4 years | 40% | 60% |
| More than 4 years, up to 5 years | 20% | 80% |
| More than 5 years | Nil | 100% |
The pattern is 20% more counted for each extra year. The longer the debt will stay with you, the more it behaves like capital.
Risk weights — clubbed so you can actually remember them
The RTP table is long. Club it by percentage and most of it is common sense.
| Risk weight | What sits here |
|---|---|
| 0% | Cash and bank balances; fixed deposits with banks; approved securities; investments in Government securities; claims on and guaranteed by the Central Government; interest due on Government securities; loans fully secured against the NBFC’s own deposits; advance tax and TDS |
| 20% | Bonds of public sector banks; claims guaranteed by a State Government where there is no default, or default not exceeding 90 days |
| 50% / 75% / 100% | Loans to high quality infrastructure projects, depending on repayment achieved — 5% or more repaid → 50%; 2% or more → 75%; below 2% → 100% |
| 100% | State Government guaranteed claims in default for more than 90 days; deposits and certificates of deposit with financial institutions; shares; debentures, bonds and commercial paper of any company; mutual fund units; inter-corporate loans; other secured loans and advances considered good; bills purchased; Right-of-Use (ROU) assets |
| 125% | Consumer credit / retail loans — but excluding housing loans, education loans, vehicle loans, loans against gold jewellery and microfinance loans; and credit card receivables |
Mark two of these. Students routinely get “other secured loans and advances considered good” wrong — it is 100% even though it is secured. And ROU assets at 100% is a fresh addition.
Three new concepts on the infrastructure risk weights
| Concept | What it means |
|---|---|
| Fall-out | The lower weight applies only while the conditions are met. Once the exposure stops qualifying, it goes back to 100%. |
| Clubbing | If fresh loans are given to the same project, add them together and recompute the repayment percentage. ₹1,000 crore with ₹60 crore repaid is 6% → 50%. Lend another ₹500 crore and the base becomes ₹1,500 crore → 4% → back to 75%. |
| Grandfathering | An exposure that enjoyed a lower weight under the rules up to 31 March 2026 but would now attract a higher weight may continue at the existing weight until the next review or renewal, or 31 March, whichever is earlier. Roughly a one-year cushion. |
Income recognition, asset classification and provisioning
Income recognition is as you have always known it: accrual basis while the asset is performing, and a shift to cash basis once it turns non-performing, reversing what was already accrued.
| Item | Position |
|---|---|
| NPA trigger | 90 days — for every layer. The old 120-day relaxation for Base Layer NBFCs is over. |
| Sub-standard duration — Base Layer | 18 months |
| Sub-standard duration — Middle Layer and above | 12 months |
| Loan rescheduled, renegotiated or restructured | A standard asset is immediately downgraded to sub-standard and stays there until one year of satisfactory performance after the revised terms |
| Loss asset | Where recovery is not considered possible, classify directly as a loss asset — do not wait out 90 days and then the sub-standard period |
Provisioning on non-performing assets
| Classification | Secured portion | Unsecured portion |
|---|---|---|
| Sub-standard | 10% — note that unlike banks, there is no secured/unsecured split here | |
| Doubtful — up to 1 year | 20% | 100% |
| Doubtful — 1 to 3 years | 30% | 100% |
| Doubtful — more than 3 years | 50% | 100% |
| Loss asset | 100% | |
20 – 30 – 50 on the secured portion, 100% on the unsecured portion the moment it turns doubtful. That trio has real exam chances.
Provisioning on standard assets
| Layer | Standard asset provision |
|---|---|
| Base Layer | 0.25% |
| Middle Layer | 0.40%, including microfinance loans |
| Upper Layer | Separate table — see below |
Upper Layer — standard asset provisioning (there is an ICAI illustration on exactly this, so treat it as important):
| Type of loan | Provision |
|---|---|
| Individual housing loans and loans to small and micro enterprises | 0.25% |
| Housing loans extended at teaser rates | 2%, dropping to 0.40% once rates become normal |
| Commercial real estate — residential housing | 0.75% |
| Commercial real estate other than residential housing | 1.00% |
| Restructured advances | As per applicable restructuring norms |
| All other loans, including medium enterprises | 0.40% |
There is a logic to it. Small borrowers default less, so 0.25%. Teaser-rate housing loans are being pushed at artificially low rates, so 2% while that lasts. Commercial real estate is riskier, and a mall is riskier than residential housing — 1% against 0.75%. Ask “why” at each row and you will not need to memorise it.
Two more provisioning points from the amendment
Extra provision on restructuring. An additional 5% specific provision over and above the provision for the class the asset falls into. So a standard asset that is restructured goes to sub-standard at 10%, plus 5%. Once at least 20% of the restructured amount has been repaid, that extra 5% can be reversed.
Default Loss Guarantee (DLG). Digital lending apps often route loans through NBFCs and agree to bear the first loss, say the first 5%. Where such a guarantee exists, the NBFC may reduce its provision to that extent — but only when computing provisions under Ind AS. The RBI-prescribed provision has to be made in full regardless. That distinction is exactly the kind of thing an MCQ is built on.
Leverage ratio — the illustration
For a Base Layer NBFC: total outside liabilities divided by owned funds. If that works out to 4.92, it is within the limit, because the leverage ratio must not exceed 7.
How to actually use this before Nov 2026
- Professional Ethics: one revision is enough. Fix the Clause 9 versus Clause 5 rule and the tax audit counting rules. That is where the marks are.
- NBFC: do not read it once and move on. Go through the registration conditions until the three-condition test is automatic, then work the capital adequacy ladder with a pen — Own Funds, Net Owned Funds, Tier 1, CET 1.
- Do the ICAI illustrations yourself before looking at the solution. Cover the working column, decide what is plus and what is minus, then check. That is what builds the MCQ speed.
- Revise the risk weight table twice. It is the single most MCQ-dense table in the chapter.
Where to get the notes and the rest of the material
Both PDFs — Professional Ethics Amendments Applicable from Nov 2026 and NBFC Amendments & Related Complete Notes — Nov 2026 — are on the AuditGuru Telegram channel, free:
- Professional Ethics amendments PDF — t.me/AuditGuru/5963
- NBFC amendments PDF — t.me/AuditGuru/5965
- Every CA Final Audit resource in one place — tinyurl.com/CAFinalAllinOne
- CA Inter Audit resources — tinyurl.com/CAInterAllinOne
Related reading on this site:
- All EMPs and OMPs in CA Final Audit: every standard, every situation
- ICAI’s CA Final MCQ pattern change for Nov 2026
- The presentation rules that quietly add 10–15 marks
If you want the amended chapters in printed, exam-ready form, the PARAM Question Bank and MCQ Book combo and the FADU Chart Book 2.0 are on the store.
Frequently asked questions
Are these amendments applicable to CA Inter Audit as well?
No. Both sets come from the CA Final RTP. Professional Ethics and NBFC Audit are CA Final Audit topics. CA Inter students should follow the CA Inter RTP and Study Material for their own attempt.
Has the tax audit limit changed from 60?
No. The ceiling is still 60. What changed is that the 60 belongs to the individual member and cannot be pooled or distributed among partners, and that counting is now done on the date of signing within a financial year, enforced through the UDIN portal.
Does a revised tax audit report consume one of my 60?
No. A revision of a report already signed is not counted again. Belated reports for earlier years are counted, in the financial year in which they are signed.
If an NBFC qualifies for the registration exemption, does its registration lapse automatically?
No. It has to apply to surrender its Certificate of Registration, and the window for existing registered NBFCs runs up to 31 December 2026. Only after deregistration is it treated as an Unregistered Type I NBFC.
What is the difference between public deposits and public funds?
Public deposits means taking deposits directly from the public. Public funds is broader and includes public deposits plus commercial paper, debentures, inter-corporate deposits and bank finance. Money raised through instruments compulsorily convertible into equity within 10 years is excluded from public funds.
Which NBFCs have to maintain the leverage ratio?
Base Layer NBFCs other than those lending against gold jewellery. They are not required to maintain CRAR, Tier 1 or CET 1, but their leverage ratio — outside liabilities to owned funds — must not exceed 7.
How much CET 1 does an Upper Layer NBFC need?
9%, within an overall CRAR of 15% and Tier 1 of 10%. Top Layer NBFCs have the same requirement plus any higher capital charge RBI specifies for them.
This is my reading of the amendments as given in ICAI’s Revision Test Paper for the November 2026 CA Final Audit examination, and of the related RBI directions, as at August 2026. Applicability, cut-off dates and coverage can be revised. Always confirm the position for your own attempt against ICAI’s own announcements at icai.org and the Study Material and RTP applicable to your attempt.
Mast raho. Smart padho. — CA Ravi Taori