RBI Notifications

RBI to strengthen risk-based supervision (RBS) of banks, NBFCs


From UPSC perspective, the following things are important :

Prelims level: CAMELS model

Mains level: Paper 3- Strengthening risk-based supervision of banks, NBFC

About RBS model

  • The RBI uses the Risk-Based Supervision (RBS) model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

Decision to review the model

  • The Reserve Bank has decided to review and strengthen the Risk-Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.
  • The review process will help make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies if any.
  •  Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).
  • It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in a forward-looking manner and for harmonising the supervisory approach across all Supervised Entities.



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