Connect The Dots

RBI to create specialised cadre for financial sector

Analysts said that identifying stress triggers that may impact the larger financial sector could be hard to pinpoint.
990 0
RBI to create specialised cadre for financial sector

Mumbai: The Reserve Bank of India (RBI) board on Tuesday sought to create a specialised oversight cadre while reviewing the current structure of supervision at the regulator.

“With a view to strengthening the supervision and regulation of commercial banks, urban cooperative banks and Non-Banking Financial Companies, the Board decided to create a specialised supervisory and regulatory cadre within the RBI,” said a central bank statement.

ET in its May 21 edition had said that the RBI was expected to overhaul the crucial job of supervision so that the regulator is better equipped in picking up early warning signs. This may include consolidating the different supervisory activities under a separate division or head, creating a pool of officials for better analysis of the continuous flow of data from banks and finance companies, and involving specialists.

Analysts said that identifying stress triggers that may impact the larger financial sector could be hard to pinpoint. But the central bank can consider taking certain regulatory steps, such as lowering the threshold for financial entities that are considered ‘domestic systematically important banks (D-SIB).’ “Currently there are only three banks – SBI, HDFC Bank and ICICI Bank – classified as systematically important. Regulators may want to broaden the norm to include other important entities in the financial system as well,” an industry expert on conditions of anonymity said. “These institutions are mandated to ensure high capital buffers, leading to higher resilience against potential crises.”

The NBFC crisis, failures by credit rating agencies to flag risks, divergence in asset quality by big banks, and alleged lapses by auditors are among the reasons behind the regulatory move to create an additional oversight mechanism.

X
Share via
Copy link
Powered by Social Snap