KOLKATA: The Reserve Bank of India (RBI), facing criticism for regulatory and inspection gaps that have partly been blamed for the Nirav Modi scandal and IL&FS implosion, has overhauled its regulatory and supervision apparatus for the financial sector. Its various departments dealing with different verticals, such as banks and NBFCs, would now be under the same roof and could help facilitate early detection of financial wrongdoings.
Three separate verticals for regulation — the departments of banking regulation, cooperative bank regulation and non-banking regulation — will be merged into one for efficiency enhancement since banks and nonbanks compete in several respects, and now operate in overlapping business domains.
The name of the unified department will be ‘department of regulation’, sources within the RBI told ET.
Similarly, the department of banking supervision, department of cooperative bank supervision and department of nonbanking supervision will be merged into one. The name will be ‘department of supervision.’ These changes will come into effect from October 1. The RBI did not respond to ET’s mail sent late Thursday. This move will help create a specialised regulatory cadre and a supervisory cadre for the banking regulator, as suggested by RBI’s central board at a meeting in May. The board had reviewed the existing structure and felt the need for a specialised and bigger cadre to deal with growing diversity, complexities and interconnectedness within financial sector.
Such massive internal restructuring in RBI is taking place after a gap of 6 years. In 2013-14, RBI under Raghuram Rajan had created separate departments for regulation and supervision for non-banks and cooperative banking verticals.
“With the growing importance of non-banks in the financial system, the need for a stronger regulation has been felt for quite some time,” a senior RBI official said, on the condition of anonymity.
Source- Economic Times.