In a significant move to strengthen India's banking sector, the Reserve Bank of India (RBI) is set to dramatically increase its real-time, offsite surveillance of banks. RBI Governor Sanjay Malhotra outlined this strategic shift, emphasizing a transition from periodic, physical inspections to a more continuous, technology-driven monitoring system.
From Onsite Checks to Tech-Driven, Real-Time Oversight
Traditionally, the RBI's primary method of supervision has been onsite inspections, conducted annually or through targeted checks under its risk-based supervision framework. This approach, focused on the CAMELS model (Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Systems), involved physical verification of bank records.
However, the regulator is now pivoting towards a more proactive model. Real-time offsite supervision, powered by the Offsite Monitoring and Surveillance (OSMOS) system and advanced data analytics, will allow for continuous tracking of a bank's financial health between physical visits. Banks submit automated data daily, weekly, and monthly, enabling the RBI to detect early signs of stress in areas like asset quality, liquidity, and capital.
Key Benefits and Future Vision
Governor Malhotra, delivering the keynote at the third annual global conference of the College of Supervisors in Mumbai, highlighted the advantages of this shift. He stated that offsite supervision enables faster risk identification and optimizes resources by moving 70-75% of supervisory efforts to technology-driven analysis. It also improves data integrity and allows for quicker interventions, such as quarterly checks for weaker banks.
"Our endeavour should be to make supervision more offsite than onsite and as near real-time and not periodic," Malhotra said. He pointed out the vast amount of data the RBI already collects and stressed the scope for its more effective use. The Department of Supervision can build stronger analytics and supervisory dashboards for enhanced surveillance.
He also underscored the increasing role of Supervisory Technology (SupTech) and AI-enabled tools, while clarifying that final judgment and accountability will firmly remain with human supervisors.
A Collaborative Approach to Financial Resilience
Malhotra framed systemic resilience as a shared responsibility between supervisors and the banks they regulate. He characterized the relationship as collaborative rather than adversarial, with the long-term growth, stability, integrity, and credibility of the financial system as common goals.
Stability was highlighted as the essential foundation for sustainable innovation. Banks and financial institutions were encouraged to view supervisors as partners in building resilience, not merely as fault-finders. This approach is seen as critical for a bank-led system that supports inclusive growth. On enforcement actions, the Governor noted they should be viewed as corrective measures within a continuum of tools, not as standalone punitive responses.
The RBI's capability in assessing bank asset quality has already seen vast improvement in recent years, thanks to databases like CRILC. The push towards deeper, real-time offsite surveillance marks the next step in creating a more robust, transparent, and stable financial ecosystem for India.
