Risk Based Supervision

Abstract

Under the Risk Based Supervision (RBS) mechanism, supervisor is expected to concentrate its efforts on ensuring that financial institutions use the process necessarily to identify as well as measure and control risk exposure. The RBS is expected to focus supervisory attention in accordance with the Risk Profile of the bank, in the structured Risk Profile Templates (RPT) to enable the bank to make a self-assessment of their Risk Profile. It is designed to ensure continuous monitoring and evaluation of Risk Profile of institutions through risk matrix. This may optimize the utilization of the supervisory resources of the RBI so as to minimize the impact of a crises situation in the financial system. Preparation of Risk Audit Matrix is based on the magnitude of risk and frequency of risk is as per the direction of RBI. Once the Risk Audit Matrix is compiled after the risk based internal audit, Branch Monitorable Action Plan (BMAP) will have to be chalked out for the branch so as to take timely corrective action and also to mitigate any significant risks that may have been identified during the supervisory process.