- 1 RBI policies on commercial banks
- 2 Licensing Requirements
- 3 Corporate Governance in Banks
- 4 Statutory Pre-emptions
- 5 Interest Rates
- 6 Prudential Norms
- 7 Disclosure Norms
- 8 Anti-Money Laundering Norms
- 9 Protection of Small Depositors
- 10 Para – banking Activities
- 11 Annual Onsite Inspection
- 12 OSMOS
- 13 Share this:
- 14 Related
RBI policies on commercial banks
RBI extended the banking facilities; strengthen the commercial banks in the country. It also extended the functional areas of the bank. There are some policies for the commercial banks are as follows:-
- Licensing Requirements
- Corporate Governance in Banks
- Statutory Pre-emptions
- Interest Rates
- Prudential Norms
- Disclosure Norms
- Anti-Money Laundering Norms
- Protection of Small Depositors
- Para – banking Activities
- Annual Onsite Inspection
To doing a business of commercial banks in India or outside India, RBI issues a license is required. Opening of branches are handled by the Bank Authority Policy. At present, Indian banks has not require the license from the RBI for opening a branch at a place where population below 50000.
Corporate Governance in Banks
One of the main objectives of RBI is to ensure high quality commercial power in banks. RBI has issued the guidelines for “fit and proper “criteria for the director of banks. In the guidelines is that the directors of the banks should have the knowledge and experience in the various banking areas.RBI can also appoint additional directors to the board of a banking company.
Each commercial bank is required to maintain certain parts of their Net Demand and Time Liabilities (NDTL) in the form of cash with the RBI called CRR (Cash Reserve Ratio) and in the form of securities called SLR (Statutory Liquidity Ratio). These are called statutory Pre-emptions.
Interest rates on the all categories of deposits and loaning transactions have been freed and determined by the banks. RBI controls the interest rates on saving accounts and deposited by the NRI (Non Resident Indians), small loans and other categories of advances.
Prudential norms means to responsible norms maintained by the banks. RBI issues these norms to be followed by commercial banks to strengths the balance sheet of banks. Some of them are related to income recognition, asset classification and provisioning, capital adequacy, investments portfolio and capital market exposures. RBI has issued its guidelines under the Basel II for risk management.
One of the most necessary tools for marketing discipline is to maintain public disclosure of relevant information. According to RBI, the banks are maintained the disclosures of their annual reports and some other documents with their capital capability, asset quantity, earning aspects and penalties imposed on them by the regulator.
Anti-Money Laundering Norms
KYC norms (Know Your Customer), Anti- Money Laundering (AML) and Combating Financing of Terrorism (CFT) guidelines are some of the major issues on which RBI keeps issuing its norms and guidelines.
Protection of Small Depositors
In case of bank failure, RBI has fixed the Deposit Insurance and Credit Guarantee Corporation (DICGC) to keep the interest of small investors. The DICGC provides insurance cover to all eligible bank depositors up to Rs.1 lakh per depositor per bank
Para – banking Activities
Para banking activities are those activities which do not comes under the traditional banking activities. Like asset management, mutual funds business, insurance business, merchant banking activities, factoring services, venture capital, card business, equity participation in venture funds and leasing. The RBI has permitted banks to undertake these activities under the guidelines issued by it from time to time.
Annual Onsite Inspection
RBI starts annual onsite inspection of banks to measures their financial health and performance in the terms of quality management, capital share, earnings as well as internal control system. On the inspections, banks rating based on the CAAMELS rating.
It means that offsite surveillance and monitoring system. RBI wants to submit the bank details and organized information periodically on the OSMOS. According to the OSMOS, RBI examines the condition of the banks.
Here this article is related to :-
- main function of rbi
- regulations of rbi on commercial banks