RBI to set up separate Enforcement Department

The Reserve Bank of India will set up enforcement department to effectively monitor banks in case they violate regulations. The RBI on Wednesday said that it has decided to establish a separate Enforcement Department which will start operations from April 1, 2017.

“As of now, each department of the RBI takes action against banks for violations of rules. RBI now proposes to have it centralised in one department,” said a senior official from RBI who did not want to be named. “This will help RBI follow-up and maintain a record on banks performance,” he added.

Enforcement department will deals with cases of non-compliance with regulations noticed either through the surveillance process or otherwise. “With a view to developing a sound framework and process for enforcement action, it has been decided to establish a separate Enforcement Department,” said RBI in a statement issued with policy on Wednesday.

RBI said that regulation, surveillance and enforcement are three important facets of financial sector oversight mechanism. Regulations determine the framework in which financial entities function so that prudence, transparency, and comparability are ensured on the one hand and customer interests are protected on the other. Surveillance is the process through which adherence to the regulations is monitored. Currently, in the Reserve Bank, there is a clear demarcation of the regulatory and surveillance functions which is not the case with enforcement of rules.