Board for financial supervision (BFS)

Board for financial supervision(BFS)

The Reserve Bank of India performs the supervisory 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 under the Reserve Bank of India (Board for Financial Supervision) Regulations, 1994.

The objective of financial supervision 

The primary objective of BFS is to undertake consolidated supervision of the financial sector comprising Scheduled Commercial and Co-operative Banks, All India Financial Institutions, Local Area Banks, Small Finance Banks, Payments Banks, Credit Information Companies, Non-Banking Finance Companies, and Primary Dealers.

Institution of financial supervision 

The Board is constituted by co-opting four Directors from the Central Board as Members and is chaired by the Governor. The Deputy Governors of the Reserve Bank are ex-officio members. One Deputy Governor, traditionally, the Deputy Governor in charge of supervision, is nominated as the Vice-Chairman of the Board.

Establishment of financial supervision

In April 2018, a Sub-committee of the Board for Financial Supervision was constituted, under Para 11 & 12 of the Reserve Bank of India (Board for Financial Supervision) Regulations, 1994. 

chairman of the board for financial supervision 

The Sub-committee performs the functions and exercises the powers of supervision and inspection under the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, in relation to Payments Banks, Small Finance Banks, Local Area Banks, small Foreign Banks, select scheduled Urban Co-operative Banks, select Non-Banking Financial Companies and Credit Information Companies. 

the deputy governor of rbi 

The Sub-committee is chaired by the Deputy Governor in charge of supervision and includes the three Deputy Governors and two Directors of the Central Board as Members.

BFS Meetings

The Board is required to meet normally once every month. It deliberates on inspection reports, periodic reviews related to banking and non-banking sectors, and policy matters arising out of or having relevance to the supervisory functions of the Reserve Bank.

Board of Financial Supervision was established as Board of Financial Supervision was set up on Functions of Board of Financial Supervision in which year Board of financial supervision was constituted in which year 4 deputy governor of RBI 2020 Board of Financial Supervision is a committee formed under the aegis of RBI Deputy Governor 2020

The BFS oversees the functioning of the Department of Banking Supervision (DBS), Department of Non-Banking Supervision (DNBS), and Department of Co-operative Bank Supervision (DCBS) and gives directions on regulatory and supervisory issues.

financial supervision functions

Some of the initiatives taken by the BFS include:

  • Fine-tuning the supervisory processes adopted by the Bank for regulated entities;
  • Introduction of off-site surveillance system to complement the on-site supervision of regulated entities;
  • Strengthening the statutory audit processes of banks and enlarging the role of auditors in the supervisory process;
  • Strengthening the internal defenses within supervised institutions such as corporate governance, internal control, and audit functions, management information and risk control systems, review of housekeeping in banks;
  • Introduction of supervisory rating system for banks and financial institutions;
  • Supervision of overseas operations of Indian banks, consolidated supervision of banks;
  • Technical assistance program for cooperative banks;
  • Introduction of the scheme of Prompt Corrective Action Framework for weak banks;
  • Guidance regarding fraud risk management framework in banks;
  • Introduction of risk-based supervision of banks;
  • Introduction of an enforcement framework in respect of banks;
  • Establishment of a credit registry in respect of large borrowers of supervised institutions; and
  • Setting up a subsidiary of RBI to take care of the IT requirements, including the cybersecurity needs of the Reserve Bank and its regulated entities, etc.
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