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RBI shifts 30 banks to risk-based supervision

The Reserve Bank of India has switched some 30 banks to risk-based supervision, giving up the existing CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and system & control) framework. The will mean the central bank is keen on undertaking micro-management of the banks. The CAMELS framework is a US Federal Reserve creation in the 1970s to ascertain the health of a bank. Under this framework, banks were rated on financial parameters and performance. Post the 2008 global crisis, regulators across the world have begun shifting to risk-based supervision to ensure banks do not take undue risks to maximise profits and boost performance. According to sources, the RBI has during its inspection of banks for the financial year 2014, identified 30 large private, foreign and public sector banks for being subjected to risk-based supervision. Former RBI deputy governor K.C. Chakrabarty had prepared a report on the review of supervisory processes for commercial banks, and had suggested replacing the CAMELS system with the risk-based supervision system.

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