The Reserve Bank of India (RBI) is putting in place a Platform for Regulated Entities for Integrated Supervision and Monitoring (PRISM), a web-based end-to-end workflow automation system, to strengthen compliance by supervised entities (SEs).

This comes in the backdrop of continuous engagement and more frequent reviews of risk profiles and supervisory assessments being envisaged for supervised entities, including banks and non-banking financial companies.

With the growing intensity and reach of the Reserve Bank’s supervisory function, the focus of its new approach to ‘continuous supervision’ is on early identification of risks and conduct of supervisory actions, according to an article in RBI’s latest monthly bulletin.

This is aimed at helping supervised entities to strengthen their internal defences and resilience and bringing focus on root cause analysis (RCA).

PRISM will have various functionalities (inspection; compliance; incident functionality for cyber security; complaints; and returns functionalities), with built-in remediation workflows, time tracking, notifications and alerts, management information system (MIS) reports and dashboards.

Strengthening supervisory framework

In its latest annual report (2020-21), RBI said it has been working towards strengthening the supervisory framework for both banking and non-banking sectors.

“The supervisory approach is now more forward-looking and root-cause oriented than before, incorporating both quantitative and qualitative elements into assessment processes.

“During the year, initiatives were taken towards (a) integration of supervisory functions meant for different supervised entities; (b) specialisation and reinforcement of supervision through both vertical and horizontal risk assessments; (c) setting up a dedicated College of Supervisors for capacity development; and (d) harnessing SupTech (supervisory technology),” the report said.

The report underscored that a special thrust is being given from the current supervisory cycle towards carrying out Root Cause Analysis (RCA) which, inter alia, includes a detailed assessment of governance, oversight and assurance function, business strategy and risk and compliance culture.

In 2021-22, the RBI’s department of supervision (DoS) plans to strengthen the on-site assessment of oversight and assurance functions including risk and compliance culture as also business strategy/model.

DoS intends to adopt innovative and scalable SupTech to enhance the efficiency and efficacy of supervisory processes by modifying its capacity and capability.

The department also plans to streamline the process of data collection from all the banks and their off-site assessment and on-site supervision of select banks based on the outcome of risk-based model developed for KYC/AML supervision.

Additionally, DoS is seeking to enhance Fraud Risk Management System, including improving efficacy of Early Warning Signal (EWS) framework, strengthening fraud governance and response system, augmenting the data analysis for monitoring of transactions, introduction of dedicated market intelligence (MI) unit for frauds and implementation of automated unique system generated number for each fraud.

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