The Count Your Lender Is Asking For
📌 TL;DR - Stock Audit Services at a Glance
A stock audit is an independent physical count of inventory a lender has financed, reconciled to the books and to the stock statements already filed. The engagement settles quantity, ownership and valuation basis, and produces a signed report carrying the drawing power computation. CARO 2020 clause 3(ii)(a) separately requires reporting of discrepancies of 10 per cent or more in the aggregate for each class of inventory. Commonly ordered ahead of a facility renewal.
A stock audit is an independent physical count of the inventory a lender has funded, reconciled to your books and to the statements you have already submitted to the bank. Most businesses meet one the same way: a line in a sanction letter, or an email from the branch asking when the auditor can visit. The bank is not testing whether you keep records. It is testing whether the stock behind the drawing power is there, in the quantity claimed, and owned by you.
When a Bank Asks for a Stock Audit
A bank asks for a count at predictable moments: at renewal, when limits are enhanced, when quarterly statements arrive late or stop agreeing with the books, and when an account drifts towards sma classification. Inventory and receivables are usually the primary security behind a working capital facility, so the lender's exposure moves every time the stock does. The supervisory frame sits in the RBI Master Circular on loans and advances; the trigger that reaches you sits in your own sanction letter.
Stock Audit Requirement as per RBI: What the Guidance Says
There is no single RBI line that reads conduct one every year. What the guidance does is place the duty on the bank: to monitor the security backing a working capital advance, to inspect it, and to run a loan policy that says how and how often. Banks discharge that duty by writing an inspection clause into the sanction. So the stock audit requirement as per RBI is, in practice, a requirement on your lender that is passed to you through the terms you have already signed.
Stock Audit Applicability: Who Gets Asked and Why
Stock audit applicability follows the facility, not the turnover. Borrowers running cash credit or overdraft against stock and book debts are in scope because the security is inventory that moves daily. A borrower with only a term loan against plant rarely sees one. Consortium and multiple-banking accounts are asked more often, because no single lender can see the whole exposure. Group companies that move stock between themselves attract the same attention, for the same reason.
The Stock Audit Limit Lenders Work To
The stock audit limit that people search for is a number in a bank's own credit policy: a sanctioned working capital exposure at or above which a count is ordered, usually annually. It varies by bank and by internal rating, and consortium accounts are often covered whatever the size. A separate and frequently confused threshold sits in company law: under CARO 2020 clause 3(ii)(b), a company sanctioned working capital limits in excess of five crore rupees in aggregate, from banks or financial institutions on the basis of security of current assets, has the quarterly returns or statements it files with those banks tested against its books by the statutory auditor. That is a reporting duty on the auditor, not a trigger for the count.
