India’s central bank is exploring changes to its supervisory framework for lenders, transitioning from traditional compliance checks to a more detailed review of banks’ operations, reported Bloomberg citing sources.
According to the sources, the Reserve Bank of India (RBI) intends to shift its focus from examining financial ratios in isolation at each inspection to assessing how banks actually run their businesses.
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The sources noted that discussions on the overhaul are ongoing, and specifics may change.
Recent governance issues at institutions such as IndusInd Bank and the shuttered New India Co-operative Bank have illustrated the risks of relying solely on backward-looking oversight, outlined the news publication.
The apex bank is engaging with international consultants to analyse the processes banks use to issue and manage credit, shifting away from primarily conducting periodic reviews of financial statements.
This step aims to detect potential risks sooner, such as significant lending concentrated sectors or misjudgments in assessing credit costs, the sources said.
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By GlobalDataThe forthcoming changes will specify the procedures for identifying irregularities and setting corresponding penalties.
These regulations are expected to cover all institutions under the RBI’s oversight, including commercial banks, non-banking financial companies, and cooperative banks.
Separately, the Indian government’s Union Budget for 2026-27 has introduced plans for wider financial sector reforms.
Recently, Finance Minister Nirmala Sitharaman announced in Parliament the formation of a ‘High Level Committee on Banking for Viksit Bharat’, which will thoroughly assess the sector and make recommendations to prepare it for future growth.
