What is LFAR full form in Banking?
The LFAR full form in Banking is a Long-Form Audit Report. The bank auditor issues this report in addition to the statutory audit reports. The statutory audit report given by the bank auditor does not cover all aspects of a bank’s operations; therefore, the RBI has issued a notification requiring bank auditors to issue an additional report known as the LFAR report in addition to the statutory audit report. The RBI, the highest body supervising banks, has announced a structure for LFAR. Bank auditors are expected to provide a separate LFAR report to the bank management.
Purpose of LFAR:
The LFAR conducts a thorough examination of all aspects of a bank’s operations, including regulatory compliance, risk management strategies, and the efficacy of internal controls. The Reserve Bank of India (RBI) requires banks operating in India to prepare an LFAR. It helps ensure that banks follow the RBI’s norms and regulations. The LFAR evaluates the adequacy and effectiveness of the bank’s internal control systems, which include those for loan advances, investments, deposits, and other important operations.
Importance of LFAR in Banking:
The LFAR is an important instrument for regulatory agencies such as the RBI in monitoring bank operations and ensuring that they are sound and stable. The LFAR provides useful insights into a bank’s operational strengths and problems. It aids in identifying areas requiring remedial action or improvement.
