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RBI wants banks to create uniform policy on risk management

The Reserve Bank has told banks to create policy on responsibilities of the chief risk officer. The regulator intends to bring in some sort of uniformity in the risk management system in banks. RBI noted that banks are required to have separate risk management function and credit sanction process. But banks seem to be following such a procedure, feels RBI. The regulator said in a notification that in order to bring uniformity in approach followed by banks, as also, to align the risk management system with the best practices, it has asked banks to lay down a board-approved policy clearly defining the role and responsibilities of the CRO. The notification also said the appointment of the CRO shall be for a fixed tenure with the approval of the board of directors of the banks. The CRO could be transferred/removed before completion of the tenure only with the approval of the board and such premature transfer/removal have to be reported to the RBI. RBI also does not want banks to give any additional responsibilities to the CRO, including the responsibility of CEO, COO, CFO or chief internal auditor. The CRO should have direct reporting lines to the MD and CEO/Risk Management Committee (RMC).

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