• The Reserve Bank of India has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.

• The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, Urban Cooperative Banks, Non-Banking Financial Companies and all India financial institutions.

• It is now intended to review the supervisory processes and mechanisms in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies.

• The supervisory functions pertaining to commercial banks, Urban Cooperatives Banks and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities. 

• It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all supervised entities.

• Annual financial inspection of Urban Cooperatives Banks and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control). 

• The RBI undertakes supervision of supervised entities with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors' interests and financial stability. 

• The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

• In case of Urban Cooperative Banks and NBFCs, it conducts the supervision through a mix of offsite monitoring and on-site inspection, where applicable. 

• A technical advisory group consisting of senior officers of the RBI would examine the documents submitted by the applicants in connection with Expression of Interest.

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