**Summary:**
The Reserve Bank of India (RBI) has issued a directive (DoS.CO.CSITEG.SEC.No.93101015/2023-24) on January 31, 2024, addressing the streamlining of internal compliance monitoring functions through the leveraging of technology. This directive is applicable 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).
The RBI's assessment of select Supervised Entities (SEs) revealed varying levels of automation in compliance monitoring, often relying on manual intervention. The RBI emphasizes the need for comprehensive, integrated, enterprise-wide, and workflow-based solutions to enhance the effectiveness of this function. These solutions should facilitate communication and collaboration among stakeholders (business, compliance, IT, and senior management), support the identification, assessment, monitoring, and management of compliance requirements, escalate non-compliance issues, record approvals for deviations or delays, and provide a unified dashboard view of the Regulated Entity's (RE) overall compliance position to senior management. The choice of specific tools and mechanisms for compliance monitoring and unified dashboard development is left to the RE, based on its size and operational complexity.
Regulated Entities are directed to conduct a thorough 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 track the progress of implementation.
For acknowledgements or further information, contact T K Rajan, Chief General Manager, CSITE Group, RSD, Department of Supervision, Central Office, 13th floor, Maker Tower E, Cuffe Parade, Mumbai – 400005. Telephone: 91 22 22189131/39; Fax: 91 22 22180157; Email: csiterbi.org.in.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system.
Scheduled Commercial Banks: Banks in India excluding Regional Rural Banks that are listed in the Second Schedule of the Reserve Bank of India Act, 1934.
Regional Rural Banks: Regional Rural Banks in India.
Small Finance Banks: A type of niche bank in India.
Payments Banks: A type of niche bank in India, that can accept deposits and remittances.
Primary Urban Cooperative Banks: Urban Cooperative Banks in India.
Non-Banking Financial Companies: Financial institutions that provide banking services without meeting the legal definition of a bank.
Mumbai, Maharashtra: City in India where the central office of Reserve Bank of India is located.
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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