NDB replaces EY with KPMG in line with audit rotation requirement

National Development Bank PLC (NDB) has moved to appoint KPMG as its external auditor for the 2026 financial year, replacing Ernst & Young (EY), in a change driven by the Central Bank-mandated rotation rules but coming at a time of intensified scrutiny, following the bank’s recent fraud disclosure.

In a clarification to the Colombo Stock Exchange, NDB said the shareholders approved the appointment at its Annual General Meeting on March 27, with EY ceasing to hold office thereafter.

The bank stressed that the transition was made to comply with Direction No. 6.2(d)(iv) of the Central Bank of Sri Lanka’s Banking Act Directions No. 5 of 2024, on corporate governance, which caps the tenure of an external auditor at six years.

The filing was issued in response to a request from the exchange for further clarification on the earlier announcement.

NDB is currently grappling with one of the largest internal fraud cases reported in Sri Lanka’s banking sector, with gross exposures estimated at around Rs.13.2 billion. The bank has indicated it will take a prudent provisioning approach, warning of a potential after-tax impact of approximately Rs.4 billion in the March 2026 quarter under a worst-case scenario.

Regulatory oversight has intensified, with the Central Bank confirming that the issue does not impact customer deposits, while also signalling close supervision of the bank’s capital and liquidity position.

The bank has also appointed Deloitte Touche Tohmatsu India LLP to conduct an independent forensic review into the fraudulent transactions, focusing on the potential lapses in internal controls, oversight and governance. The findings are to be submitted directly to the regulator.