RBI to set up separate Enforcement Department
The Reserve Bank of India (RBI) has decided to set up separate Enforcement Department to effectively monitor banks in case they violate regulations and speed up regulatory compliance.
The department will be operational from April 1, 2017 i.e. the next financial year (2017-18). It will mainly deal with the penalties imposed on banks for violation of norms.
- Currently, the penalties are determined by the banking and non-banking supervision departments against banks violating rules.
- The Enforcement Department will serve as centralised department to deal with penalties imposed on banks. This will help RBI follow-up and maintain a record on banks performance.
- It will deal with cases of non-compliance with regulations noticed either through the surveillance process or otherwise.
Regulation, enforcement and surveillance are three important facets of financial sector oversight mechanism. Regulations determine the framework in which financial entities function so that transparency, prudence and comparability are ensured on the one hand and customer interests are protected on the other. Surveillance is the process through which adherence to the regulations is monitored. Currently, in the RBI, there is a clear demarcation of the surveillance and regulatory functions, but it was not in the case with enforcement of rules.
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