The Reserve Bank of India performs this
function under the guidance of the Board for Financial Supervision (BFS).
The Board was constituted in November 1994 as a committee of the Central
Board of Directors of the Reserve Bank of India.
Primary objective of BFS is to undertake
consolidated supervision of the financial sector comprising commercial
banks, financial institutions and non-banking finance companies.
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.
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.
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
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.
- supervision of financial institutions
- consolidated accounting
- legal issues in bank frauds
- divergence in assessments of non-performing assets and
- supervisory rating model for banks.