30 banks to switch to risk-based supervision from April 1
Mumbai: Thirty large banks have informed the Reserve Bank that they are ready to switch to the new uniform risk-based supervision system from April 1, which will enable them to assess their risks on a real-time basis.
"The risk-based supervision system is likely to be implemented from April 1. The RBI has decided to implement it in 30 large banks. These banks were called for a meeting today with the RBI," Indian Banks Association chairman and PNB chief KR Kamath told reporters after the meeting with the top RBI brass led by deputy governor KC Chakrabarty.
The new system will bring in a uniform methodology to check the health of the banking system, as against the CAMESL framework used at present which follows a compliance-based and transaction-testing approach.
The new system will bring the banking supervision practices in India at par with the best practices in the world.
"We discussed how the risk-based supervision would shape up," State Bank of India Chairman Pratip Chaudhuri said.
When asked about the changes the banks will have to bring following the implementation of the new system, Kamath said, "there are many ambiguities today with banks reporting so many things with their own definitions. The idea is to see that you have one uniform norm through which everybody can report."
Other bank chiefs who participated in the meeting included SS Mundhra of Bank of Baroda, Ajai Kumar of Corporation Bank, Shyam Srinivasan of Federal Bank, ICICI Bank head Chandra Kochhar, HDFC Bank's Aditya Puri, BA Prabhakar from Andhra Bank and French lender BNP Paribas' Jacques Michel, among others.
The CAMELS (capital adequacy, asset quality, management, earnings, liquidity and sensitivity to financial risks) framework was developed in the early 1970s by the US Fed to assess the health of a bank.