RBI on Internal Controls, Regulatory Sandbox and Digital Lending Rules
RBI issued a statement on strengthening governance arrangements with respect to the risk-based internal audit framework. The statement highlights that while the RBI guidance note on risk-based internal audit lays out the basic approach for risk-based internal audit functions, banks are expected to re-orient their approach, in line with the evolving best practices, as a part of their overall governance and internal control framework. Banks are encouraged to adopt the International Internal Audit standards, like those issued by BCBS and the Institute of Internal Auditors (IIA). In a separate statement, RBI announced the opening of a Second Cohort under the Regulatory Sandbox with cross-border payments as its theme. The window for submission of applications for the Cohort shall be open from until February 15, 2021.
RBI also decided to select “micro, small, and medium enterprise (MSME) lending” as the theme for the Third Cohort, the details of which shall be announced in due course. In addition, RBI notified that a working group is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place. The terms of reference would require the working group to:
- Evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities
- Identify risks posed by unregulated digital lending to financial stability, regulated entities, and consumers
- Suggest regulatory changes, if any, to promote orderly growth of digital lending
- Recommend measures, if any, for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies
- Recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services
Keywords: Asia Pacific, India, Banking, Governance, Internal Audit, Internal Control, Regulatory Sandbox, Cross-Border Payments, Digital Lending, Credit Risk, Regtech, RBI
Previous Article
ECB Analysis Shows Privacy as Biggest Concern in Use of Digital EuroNext Article
CMF Consults on Implementation of IFRS 17 in ChileRelated Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
