Research sponsored by TCS BaNCS

In this white paper, Theresa Karunakaran, Axis Bank, highlights the need for financial institutions regulatory bodies and supervisors in India to strengthen the institutional structure, policies and processes to ensure that another financial crisis does not recur.

The financial crisis of 2008 left the Indian financial system largely unaffected due to its relatively lower level of sophistication, lesser integration with overseas markets and tighter regulation and supervision. The RBI was appreciated for its efforts in leaning against the wind to stem the growth in sensitive sectors like real estate.

This white paper highlights the need for financial institutions in India to strengthen their supervisory philosophy, strategy and systems. This white paper also features an interview with N. Ganapathy Subramaniam, President, TCS Financial Solutions, on how banks will change their risk management approach and if technology will play a role in the successful implementation of the new process of risk management.

Here’s an excerpt of the interview:

“Risk-based supervision’s (RBS) main purpose is to develop a risk profiling of commercial banks in India. Post the recent global economic crisis, there has been a shift towards RBS, and away from the erstwhile CAMELS (Capital adequacy, Asset quality, Management, Earnings appraisal, Liquidity and Systems & controls) approach, which was more of a transaction testing model. The supervisory stance of RBS will extend to an analysis of a bank’s propensity for failure and its likely impact on the financial system. With banks moving into this uniform methodology of supervision, India will now be at par with best practices around the world.RBS can be termed forward looking as it seeks to assess risk buildup by examining whether the supervised entity/bank follows regulatory prescriptions, and if its internal risk management practices are aligned with regulatory expectations. In short, its goals are to help banks optimize the utilization of supervisory resources and minimize the impact of crises scenarios in the financial system.”

Read the white paper.

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