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Functions of RBI - Board of Financial
Supervision (BFS)
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Functions of RBI - Board of Financial Supervision (BFS)



Issues in Regulation and Supervision

The Board for Financial Supervision (BFS) evolved a country-specific approach to consolidated supervision through a multi-disciplinary Working Group which examined the introduction of consolidated accounting practices for consolidated supervision, in line with international best practices. The frequency of some of the off-site surveillance returns was increased to a monthly basis during 2001-02 and progress was made towards implementation of risk-based supervision.

The regulation of systemically important institutions performing payment and settlement services such as the Clearing Corporation of India Ltd., is to be performed by the Reserve Bank with oversight authority vested in the Board for Financial Supervision (BFS). Similarly, in view of the growing systemic implications of PDs operations for the stability of the financial systems, they have been brought in the purview of regulation of BFS.
[Source: RBI Report on Banking Year 2002]

Constituted in November 1994 as a committee of the Central Board of Directors of the Reserve Bank of India

Objective

Primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.

Constitution

The Board is constituted by co-opting four Directors from the Central Board as members for a term of two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge of banking regulation and supervision, is nominated as the Vice-Chairman of the Board.

BFS meetings

The Board is required to meet normally once every month. It considers inspection reports and other supervisory issues placed before it by the supervisory departments.

BFS through the Audit Sub-Committee also aims at upgrading the quality of the statutory audit and internal audit functions in banks and financial institutions. The audit sub-committee includes Deputy Governor as the chairman and two Directors of the Central Board as members.

The BFS oversees the functioning of Department of Banking Supervision (DBS), Department of Non-Banking Supervision (DNBS) and Financial Institutions Division (FID) and gives directions on the regulatory and supervisory issues.

Functions

Some of the initiatives taken by BFS include:

  • restructuring of the system of bank inspections

  • introduction of off-site surveillance,

  • strengthening of the role of statutory auditors and

  • strengthening of the internal defences of supervised institutions.

  • The Audit Sub-committee of BFS has reviewed the current system of concurrent audit, norms of empanelment and appointment of statutory auditors, the quality and coverage of statutory audit reports, and the important issue of greater transparency and disclosure in the published accounts of supervised institutions.

Current Focus

  • supervision of financial institutions

  • consolidated accounting

  • legal issues in bank frauds

  • divergence in assessments of non-performing assets and

  • supervisory rating model for banks.


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[..Page Updated on 30.11.2004..]<>[chkd-appvd -ef]