RBI to strengthen risk-based supervision of banks & NBFCs

The Reserve Bank of India has decided to review and strengthen the risk-based supervision (RBS) of the banking sector to enable financial sector players to address the emerging challenges. RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban co-operatives banks, non-banking financial companies and other financial institutions.

“It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI stated while inviting bids from technical experts/consultants to carry forward the process for banks.

“It is intended to review the existing supervisory rating models under the CAMELS approach for improved risk capture in a forward looking manner and for harmonising the supervisory approach across all SEs,” it added.

The annual financial inspection of UCBs and NBFCs is largely based on the CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and systems & control) model.

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