These prescriptions govern illustratively licencing of banks and their expansion through branch network, their corporate governance framework, the reserves they must maintain with the Reserve Bank, the type and quantum of capital they must hold and the way they must manage risk. Although, I have explained the concept with reference to banks, it applies equally to regulation of NBFCs, and other financial institutions.
To ensure that banks comply with our regulations, we undertake periodic on-site inspections which are supplemented with off-site surveillance on an ongoing basis. We also hold periodic meetings with the top managements of banks to alert them to the bank’s vulnerabilities and to sensitize them to our supervisory concerns.