MUMBAI: The Reserve Bank of India (RBI), which has been under attack for its failure in detecting trouble in advance to be able to prevent frauds in the banking and financial system, on Friday announced unified regulation and supervision departments for better monitoring.
Be it the Infrastructure Leasing and Financial Services Ltd (IL&FS) issue or the recent Punjab and Maharashtra Co-Operative Bank (PMC Bank) scandal, RBI has been at the receiving end of investor wrath for taking action after the crisis had erupted.
Currently, RBI’s supervision and regulation departments function separately — for banks, NBFCs and co-operative banks. As per the announcement made in May this year about the reorganisation, RBI said on Friday that henceforth, there will be one unified Supervision and Regulation department for all the three segments.
“With a view to having a holistic approach to supervision and regulation of the regulated entities so as to address growing complexities, size and interconnectedness as also to deal more effectively with potential systemic risk that could arise due to possible supervisory arbitrage and information asymmetry, it has been decided to integrate the supervision function into a unified Department of Supervision and regulatory functions into a unified Department of Regulation with effect from November 01, 2019,” RBI said.
The Reserve Bank said the restructuring will make supervisory and regulatory process more activity-based, and facilitate effective consolidated supervision of financial conglomerates among the RBI supervised entities. It would also “bestow graded supervisory approach to all the RBI supervised entities linked to their size and complexity,” it said.
The regulator at the receiving end
Be it case of IL&FS fiasco or the recent PMC Bank scandal, the Reserve Bank of India has been at the receiving end of investor wrath for taking action after the crises had erupted.