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RBI eases compliance reporting norms for banks

The financial scandals of the late 90s and early 2000s resulted in Reserve Bank of India (RBI) mandates to the various banks in India to submit regulatory reports primarily to prevent and deter frauds and money laundering. Today most of the banks in India submit a set of 222 regulatory reports at varied frequencies to the RBI.

The reports can broadly be classified into 12 categories:

  1. Basic statistical returns,
  2. Department of Banking Supervision (DBS) returns analysis,
  3. Statutory returns analysis,
  4. Delinquency and collections,
  5. Financial statements analysis,
  6. Risk management,
  7. Treasury,
  8. Reconciliation,
  9. Foreign exchange and international operations,
  10. Fraud,
  11. Advances, and
  12. Deposits

Prepared manually by various operations teams in the banks, the reports were prone to inaccuracies in the data. In its approach paper on Automated Data Flow (ADF) dated November 2010, RBI had asked all the banks in India to automate the process of regulatory reporting. As a part of the ADF project, RBI asked banks to build a Central Data Repository (CDR) that would act as a data warehouse for information flowing in automatically from all the core systems of a bank. This automation exercise would ensure that the information required for RBI reports flowed seamlessly from all core systems to a CDR and thereafter into RBI reports, thereby eliminating errors resulting from manual intervention.

Currently most banks are at an advanced stage of achieving ADF compliance and the experience has given the banks and RBI enough time to evaluate whether ADF compliance has solved the data quality issues around regulatory reporting.

At the same time a committee headed by Rashid Jilani made recommendations on the various compliance norms to be adopted by the banks mandatorily in 2013 for prevention of Frauds and Malpractices.

In view of this development, RBI has now eased some of the compliance reporting norms as recommended by the Jilani Committee related to frauds and malpractices, and the reports need not be filedwith the Audit Committee of the Board (ACB).

RBI has however advised absolute compliance to these recommendations in a complete and sustained fashion.  Banks have been asked to appropriately factor in these recommendations in the internal inspection/audit processes and duly document these in their manuals/instructions.

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