**Summary:**
The Reserve Bank of India (RBI) has issued a directive (DoS.CO.CSITEG.SEC.No.93101015/2023-24) on January 31, 2024, addressed to Scheduled Commercial Banks (excluding Regional Rural Banks), Small Finance Banks, Payments Banks, Primary Urban Cooperative Banks (Tier III and IV), Upper and Middle Layer Non-Banking Financial Companies (including Housing Finance Companies), Credit Information Companies, and All India Financial Institutions (EXIM Bank, NABARD, NaBFID, NHB, and SIDBI) regarding the streamlining of the internal compliance monitoring function through the use of technology.
The RBI's assessment of select Supervised Entities (SEs) revealed varying levels of automation in compliance monitoring, with significant manual intervention remaining prevalent. To enhance the effectiveness of this function, the RBI advises Regulated Entities (REs) to implement comprehensive, integrated, enterprise-wide, and workflow-based solutions. These solutions should facilitate communication and collaboration among stakeholders (business, compliance, and IT teams, Senior Management, etc.), provide processes for identifying, assessing, monitoring, and managing compliance requirements, escalate non-compliance issues, require approval recording for deviations or delays, and offer a unified dashboard view of the RE's overall compliance position to Senior Management. The RE can determine the appropriate tools and mechanisms for monitoring compliance and developing the unified dashboard based on its size and operational complexity.
REs are required to conduct a comprehensive review of existing internal compliance tracking and monitoring processes and implement necessary changes or new systems by June 30, 2024. An appropriate monitoring mechanism should also be established to review the implementation progress.
Acknowledgement of receipt is requested. Contact information for the CSITE Group, RSD, Department of Supervision, Central Office is available at the 13th floor, Maker Tower E, Cuffe Parade, Mumbai 400005. Telephone: 91 22 22189131/39; Fax 91 22 22180157; email: csiterbi.org.in. The directive was issued by T K Rajan, Chief General Manager.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and monetary policy.
Scheduled Commercial Banks: Banks in India that are listed in the Second Schedule of the Reserve Bank of India Act, 1934, excluding Regional Rural Banks.
Regional Rural Banks: Regional Rural Banks are financial institutions in India that operate at the regional level providing banking and financial services to rural areas.
Small Finance Banks: Specialized banks in India that primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities.
Payments Banks: A type of bank in India that is allowed to accept deposits, offer payments and remittance services, and distribute simple financial products but cannot lend money.
Non-Banking Financial Companies: A company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares, stock, bonds, debentures, securities issued by Government or local authority or other marketable securities of a like nature.
Mumbai, Maharashtra: A city in Maharashtra where the Central Office of the Department of Supervision of Reserve Bank of India is located.
June 30, 2024: The deadline for Regulated Entities (REs) to implement necessary changes to existing systems or implement new systems for internal compliance tracking and monitoring processes.
भारतीय �रज़व र् बक�
RESERVE BANK OF INDIA
www.rbi.org.in
___________________________________________________________________
RBI/2023-24/117
DoS.CO.CSITEG.SEC.No.9/31-01-015/ 2023-24 January 31, 2024
The Chairman/Managing Director/Chief Executive Officer
Scheduled Commercial Banks (excluding Regional Rural Banks);
Small Finance Banks; Payments Banks;
Primary (Urban) Co-operative Banks (Tier III and IV);
Upper- and Middle-Layer Non-Banking Financial Companies
(including Housing Finance Companies);
Credit Information Companies and
All India Financial Institutions (EXIM Bank, NABARD, NaBFID, NHB and SIDBI)
Madam/ Dear Sir,
Streamlining of Internal Compliance monitoring function – leveraging use of
technology
RBI had recently carried out an assessment in select Supervised Entities (SEs) of the
prevailing system in place for internal monitoring of compliance with regulatory
instructions and the extent of usage of technological solutions to support this function.
It is seen that SEs have adopted varying levels of automation to support this function,
ranging from use of macro-enabled spreadsheets to workflow-based software
solutions. The review brought out that automation of the compliance monitoring
process in SEs remains a work in progress with various aspects of this function being
carried out with significant manual intervention. There is, thus, a need to implement
comprehensive, integrated, enterprise-wide and workflow-based solutions/ tools to
enhance the effectiveness of this function.
2. Such a solution/ tool should, among other things, provide for effective
communication and collaboration among all the stakeholders (by bringing business,
compliance and IT teams, Senior Management, etc. on one platform); have processes
for identifying, assessing, monitoring and managing compliance requirements;
escalate issues of non-compliance, if any; require recording approval of competent
authority for deviations/ delay in compliance submission; and have a unified
dashboard view to Senior Management on compliance position of the Regulated Entity
पयर्वेक्षण िवभाग, क��ीय कायार्लय, वल्ड र्�ेड स�टर, कफ परेड, मुंबई 400005
CSITE Group, RSD, Department of Supervision, Central Office, 13th floor, Maker Tower-E, Cuffe Parade, Mumbai 400005
Te1e: +91 22 22189131-39; Fax +91 22 22180157; email: csite@rbi.org.in(RE) as a whole. The RE, based on the size and complexity of its operations, may
decide on the tools/ mechanism it would prefer to deploy for monitoring of compliance
and development of the unified dashboard.
3. Accordingly, REs are advised to carry out a comprehensive review of the existing
internal compliance tracking and monitoring processes and institute necessary
changes to existing systems or implement new systems latest by June 30, 2024.
4. An appropriate monitoring mechanism may also be put in place to review the
progress of its implementation.
5. Please acknowledge receipt.
Yours sincerely,
(T K Rajan)
Chief General Manager
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