RBI Plans Major Overhaul of Banking Supervision to Combat Frauds

• The RBI is considering a significant change to its banking supervision approach, moving from a 'box-checking' model to an in-depth examination of banks' business models and operational methods.
• The new proposal will focus on how banks lend, manage risk, and generate profits, rather than solely on financial ratios and historical data.
• To combat the surge in cyber frauds, RBI plans to hire cybersecurity and digital risk experts for its supervision department.
• The rapidly growing Indian banking sector, with increased credit growth and new financial products, necessitates a more robust supervisory framework.
• The new framework will define rules for identifying risks, flagging irregularities, and applying penalties, applicable to commercial banks, NBFCs, and co-operative banks.