Statutory auditors annual certificate

This query is : Resolved

Arun (Querist)
Follow

20 June 2014 Hello sir, Greetings from Arun Shanks, Forwarding the mail from HDFC bank. Please help to understand the notice received. I spoke to the Mumbai Treasury office of the HDFC, they suggested to ask C.A to understand better as they would well aware of this. They want this certificate before 30th June. Please help, regards, Arun Shanks. Statutory Auditors Certificate. Dear sir/Madam, we find from our records that you have entered into Foreign exchange derivative contracts with our bank in FY 2013-14 against underlying exposure viz contracted exposure Extract of FEMA regulations: As per RBI guidelines A.P. (DIR Series) Circular No.32 dated December 28, 2010 issued on Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Overseas Hedging of Commodity Price and Freight Risks. in the case of contracted exposure -AD Category I banks must obtain "Quarterly certificates from the statutory auditors of the users, that the contracts outstanding at any point of time with all AD Category I banks during the quarter did not exceed the value of the underlying exposures" Further, as per RBI guidelines vide A.P. (DIR Series) Circular No.2 dated 04 July 2013, while offering hedging products under the contracted exposure route to their customers may obtain an annual certificate from the statutory auditors to the effect that the contracts outstanding with all AD category I banks at any time during the year did not exceed the value of the underlying exposures at that time.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

25 July 2025 Hello Arun,

This notice from HDFC Bank is asking for a **Statutory Auditor’s Annual Certificate** related to your foreign exchange (forex) derivative contracts for the financial year 2013-14.

### What is this certificate about?

* **RBI Guidelines (FEMA & OTC Forex Derivatives):**
Banks are required to ensure that the forex derivative contracts taken by their clients do **not exceed the underlying exposure** (the actual foreign currency risk/transaction the company has).

* **Compliance:**
As per RBI Circulars (Dec 2010 and July 2013), banks must obtain a certificate **from the company’s statutory auditors** stating that, at any point during the year, the **total outstanding derivative contracts did not exceed the underlying exposure**.

* This is a regulatory compliance to ensure forex derivatives are used only for hedging genuine exposures, not for speculation.

---

### What should the Statutory Auditor do?

The auditor needs to verify:

1. The details of your underlying exposures (like imports, exports, foreign currency loans, etc.).
2. The details of the forex derivative contracts entered with all AD Category I banks.
3. Confirm that at any time during the year, the outstanding contracts did **not exceed** the underlying exposure value.

---

### Typical format of the certificate includes:

* Company details and auditor details
* Statement that, based on the examination of records, the outstanding forex derivative contracts did not exceed the underlying exposure at any time during the FY 2013-14.
* Date and signature of auditor.

---

### Your next steps:

* Provide your auditor with all relevant documents on foreign currency exposures and derivative contracts.
* Request the auditor to prepare and issue the certificate before the deadline (30th June).

---

If you want, I can help draft a sample format of this certificate for your auditor.

Would you like me to do that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now