Loading...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    India's exports rise 19.63 pc to USD 44.24 bn in Jul; trade deficit widens to $31.98 bn
    Vizhinjam port to commence EXIM operations from Aug 18: Kerala CM Satheesan
    Ratul Puri: Beyond Low-Cost Power to Clean Energy Reliability
    PMS Bazaar Collaborates with NSDL Database Management Limited (NDML Accreditation Agency) to Expand Access to SEBI Accredited Investor Certification
    Compounded annual growth rate of Manufacturing GVA at constant prices (2022-23 base) as per revised series during 2022-23 to 2025-26 is 10.88%
    National Company Law Tribunal (NCLT) Launches e-Inspection and e-Certified Copy Services
    The Government of India to launch the Central Bank Digital Currency (CBDC)-based Direct Benefit Transfer (DBT) in the Union Territories of Chandigarh ...
    India and the Southern African Customs Union (SACU) sign Terms of Reference (ToR) for negotiations towards a Preferential Trade Agreement
    Airtel ends all prepaid mobile plans offering 1.5 GB data per day with unlimited calls
    ED arrests IBC resolution professional
    Mumbai cops bust fake documents racket; four arrested
    After nine years at helm, N Chandra to exit Tata Sons amid expansion, governance standoff
    RBI invites comments on the Draft “Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026”
    Sensex falls 188 pts amid elevated crude oil prices; Tata Group stocks decline after N Chandra's exit
    SJM urges govt to stand firm against US tariff pressure, calls for boycott of American products
    Union Minister of Commerce and Industry Shri Piyush Goyal Calls for Fair Trading Practices and Taking ‘Make in India’ from Local to Global
    Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman delivers keynote address at Seminar on “Role of the New Development Bank in M...
    Delhi HC halts processing of IT-returns of Supreme Court, high court judges
    Over 36,000 firms shut operations in Maharashtra in 5 yrs; Oppn claims graft, govt interference
    Powering India's Energy Freedom
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
August 13, 2026
Show AI Summary
Merchandise export growth was driven by petroleum, electronics, engineering and marine goods, while rising imports widened the trade deficit.
India's merchandise exports increased in July, while imports also rose and widened the trade deficit. Export growth was attributed to higher overseas shipments of petroleum products, electronics, engineering goods and marine goods. Exports and imports both recorded growth during the April-July fiscal period, and exports to West Asian countries increased in July.
August 13, 2026
Show AI Summary
EXIM operations at international seaport to commence after customs clearance, bonded-area establishment, and temporary highway connectivity.
Vizhinjam International Seaport is scheduled to commence EXIM operations after Customs clearance, issuance of Customs notifications, establishment of a Customs-bonded area, and temporary connectivity to NH-66. The port had previously handled transshipment operations. A proposed transfer of a stake in the port concessionaire to a foreign shipping company remains under committee examination and requires Central Government consideration of strategic and security aspects.
August 13, 2026
Show AI Summary
Renewable energy reliability requires storage, grid readiness and ancillary service markets alongside competitive clean-power procurement.
Renewable energy procurement is shifting beyond lowest tariffs towards dependable, dispatchable and affordable clean power, assessed through capacity value, balancing capability and system economics. Storage-backed renewable and hybrid projects can improve renewable utilisation, reduce variability and curtailment, and support peak demand. Higher renewable penetration also requires supportive storage policies, timely approvals, aligned intrastate transmission planning, stronger distribution infrastructure, and market mechanisms for ramping reserves, frequency response and fast-response balancing services.
August 13, 2026
Show AI Summary
Accredited Investor certification facilitates eligible investors' access to alternative investment products, lower thresholds and applicable regulatory flexibilities.
SEBI's Accredited Investor framework enables eligible investors and entities to obtain certification that may allow lower minimum investment thresholds for Portfolio Management Services, Alternative Investment Funds and other alternative investment products, along with applicable regulatory flexibilities. PMS Bazaar and NSDL Database Management Limited's Accreditation Agency facilitate end-to-end applications, subject to required documentation and prescribed payment. Assistance is available to individual investors and eligible clients of investment providers without additional platform, service or processing charges, while prescribed certification fees remain payable.
August 13, 2026
Show AI Summary
Manufacturing GVA growth under the revised national accounts series highlights stable sectoral contribution and resilience-focused industrial measures.
Manufacturing performance is assessed under the revised National Accounts Statistics series using 2022-23 as the base year. Manufacturing's share of total Gross Value Added at current prices remained broadly stable through 2025-26, and Manufacturing GVA at constant prices achieved a compounded annual growth rate of 10.88% from 2022-23 to 2025-26. Production Linked Incentive schemes, logistics and industrial-corridor measures, semiconductor initiatives, and MSME support seek to strengthen domestic manufacturing, diversify supply chains, reduce import dependence, and improve resilience.
August 13, 2026
Show AI Summary
Electronic inspection and certified copies expand digital access to judicial records while supporting efficient case management and reduced delays.
NCLT has launched e-Inspection and e-Certified Copy Services for faster and more convenient access to judicial records and certified copies by advocates, litigants and other stakeholders. The services support a technology-enabled Registry framework and transparent, efficient justice delivery. Pendency monitoring, workload redistribution, Special Benches, maximisation of court time, and registration and listing guidelines are intended to improve case management, optimise limited judicial resources and reduce avoidable delays.
August 13, 2026
Show AI Summary
CBDC-based food subsidy transfers enable eligible beneficiaries to use Digital Rupee wallet credits for traceable foodgrain purchases.
CBDC-based Direct Benefit Transfer under the Pradhan Mantri Garib Kalyan Anna Yojana will credit eligible beneficiaries' food subsidies as programmable Digital Rupee tokens directly into CBDC wallets. Beneficiaries may use these credits to purchase foodgrains from empanelled merchants through secure, real-time and traceable payments, replacing conventional bank-account transfers. The model is intended to improve traceability, reduce leakages and cash handling, enable real-time monitoring of subsidy use, and provide a scalable framework for CBDC integration with welfare schemes.
August 13, 2026
Show AI Summary
Preferential trade agreement negotiations begin under agreed terms covering market access, origin rules, trade remedies and dispute settlement.
India and the Southern African Customs Union have signed Terms of Reference to commence negotiations for a Preferential Trade Agreement. Negotiations are envisaged on trade in goods and market access, rules of origin, customs procedures and trade facilitation, trade remedies including bilateral safeguards, sanitary and phytosanitary measures, technical barriers to trade, dispute settlement, and legal and horizontal provisions. The Terms of Reference establish the negotiating framework only; preferential tariff treatment and other operative commitments depend on conclusion of a final agreement.
August 12, 2026
Show AI Summary
Prepaid plan restructuring eliminates mid-tier daily-data options and channels subscribers toward higher-priced plans with expanded data access.
Bharti Airtel has discontinued prepaid plans combining 1.5 GB daily data allowances with unlimited calling, directing subscribers towards higher-priced plans with expanded data access, including unlimited 5G data. The restructuring reduces low-priced unlimited-data offerings and changes the pricing architecture for customers using discontinued mid-tier plans. Management links tariff repair to differentiated mobile-plan categories and sustained average revenue per user growth.
August 12, 2026
Show AI Summary
Insolvency professional conduct faces money-laundering allegations over re-admitted claims, creditor committee changes, and a connected resolution applicant.
Enforcement action under the Prevention of Money Laundering Act concerns allegations that an insolvency professional re-admitted claims earlier rejected as spurious and fraudulent during the Corporate Insolvency Resolution Process. The alleged re-admission altered the Committee of Creditors' composition and facilitated consideration of a resolution plan allegedly submitted for, and funded through an entity controlled by, a company promoter under investigation for diversion of bank-loan funds. Adverse findings reportedly included acting beyond authority by relying on fabricated and improperly submitted material.
August 12, 2026
Show AI Summary
Identity document forgery allegations prompt investigation into fraudulent Aadhaar updates and falsified government and educational certificates.
Alleged forgery and misuse of identity-related records are under investigation following operations at Aadhaar centres. Seized materials reportedly include forged birth, educational, residence, caste and citizenship certificates, records bearing forged signatures and seals, and equipment used for Aadhaar updates. Four persons were arrested in two operations for allegedly preparing forged records and using them to update Aadhaar cards. Cases have been registered under relevant provisions of the Bharatiya Nyay Sanhita, with investigation continuing into the extent of the alleged network.
August 12, 2026
Show AI Summary
Holding-company governance succession follows leadership departure, requiring transition planning amid unresolved strategy, capital allocation, board representation and listing questions.
Tata Sons' leadership succession and governance framework have become central following the chairman's decision not to seek reappointment when his term ends in February 2027. The board has been asked to decide on a successor promptly. Unresolved matters include the strategic roadmap, losses and capital requirements in newer businesses, board representation, capital allocation, an exit route for the Shapoorji Pallonji Group, and the possible listing of Tata Sons. Future leadership must manage these issues while improving returns from investment-intensive businesses and maintaining established operations.
August 12, 2026
Show AI Summary
Interest-rate regulation for loans and advances proposes harmonised fixed and floating loan-pricing principles across regulated entities.
Interest-rate regulation for loans and advances is proposed to be harmonised across all regulated entities through a principles-based framework for fixed-rate and floating-rate loans. The framework would be calibrated to each entity's nature, complexity and scale, while supporting monetary policy transmission, credit-risk-based pricing, and fair, non-discriminatory borrower treatment. It addresses divergent commercial-bank practices in determining the marginal cost of funds-based lending rate and its components, alongside limited regulatory coverage of fixed-rate loans. Separate final directions are intended for each category of regulated entity after consideration of feedback.
August 12, 2026
Show AI Summary
Elevated crude oil prices and Tata leadership transition drove broad equity market selling amid inflation concerns.
Indian equity markets declined amid elevated crude oil prices, inflation concerns and broad risk-off selling. Tata Group shares, particularly TCS, came under pressure after N. Chandrasekaran announced that he would not seek reappointment as Tata Sons Chairman when his current term ends. Crude oil prices approaching the USD 90-per-barrel level affected investor confidence because of potential inflationary effects, while uncertainty over United States-Iran negotiations and Strait of Hormuz shipping disruptions added to global energy market concerns.
August 12, 2026
Show AI Summary
Trade sovereignty and energy security underpin calls to resist tariff pressure and protect sensitive sectors in bilateral negotiations.
Trade sovereignty and energy security are advanced as grounds for resisting tariff pressure linked to Indian purchases of Russian crude. Bilateral trade negotiations should proceed through equality, reciprocity and mutual respect without compromising agriculture, dairy, energy security or strategic autonomy. Concerns are also raised over removal of e-commerce inventory restrictions for foreign direct investment and over proposed Merchant Discount Rate charges on UPI transactions. Withdrawal of the inventory measure and opposition to payment-provider charges are urged, alongside possible restrictions on United States technology and social-media companies and consumer boycotts of American goods and services.
August 12, 2026
Show AI Summary
Fair trading practices and circular production are promoted to strengthen Make in India and expand global market participation.
Trade and industrial policy messaging encourages businesses to digitise operations, adopt good manufacturing practices, follow fair trading practices, and promote recycling, reuse and a circular economy. Nine free trade agreements are identified as creating preferential market-access opportunities for Indian industry and businesses. MSMEs, entrepreneurs, farmers, fishermen, workers and the services sector are encouraged to expand Indian products and services globally, improve competitiveness through scale, and strengthen the quality, design and brand value associated with Make in India.
August 12, 2026
Show AI Summary
Private capital mobilisation requires credible long-term frameworks, risk-sharing mechanisms, and multilateral partnerships to strengthen infrastructure investment.
Private capital mobilisation in infrastructure and development finance depends on credible long-term frameworks, investor confidence, project bankability, and balanced risk allocation. Public capital is intended to catalyse rather than replace private investment. Key financing mechanisms include Viability Gap Funding, the Hybrid Annuity Model, credit enhancement, and Infrastructure Investment Trusts. Long-term investment visibility and coordinated connectivity are supported through the National Infrastructure Pipeline and PM Gati Shakti framework, alongside investment measures for freight, rail, waterways, and coastal cargo.
August 12, 2026
Show AI Summary
Judicial allowance exemptions under the new tax regime remain disputed, with return processing and resulting demands kept in abeyance.
Tax treatment of specified judicial allowances under the new income-tax regime is disputed. Statutory service-condition provisions are asserted to exclude allowances, including official residence, conveyance, sumptuary allowance and leave travel concession, from income computation and to override the Income-tax Act. Pending consideration, affected judges may show these amounts as receipts not in the nature of income, and their returns are not to be processed further. Any resulting demand remains in abeyance, while refundable amounts are withheld subject to the pending proceedings.
August 12, 2026
Show AI Summary
Corporate closure data highlights worker-claim treatment through insolvency adjudication and liquidation priority, while affected-worker information remains unmaintained.
Corporate closure data recorded 36,211 private companies in Maharashtra as liquidated, dissolved or struck off during the preceding five financial years. Central information is not maintained on workers affected by closures or special rehabilitation packages. In corporate insolvency resolution, employee and worker claims are adjudicated under orders of the adjudicating authority. In winding-up or liquidation, the liquidator deals with pending wages and other admissible statutory dues, subject to available funds and the statutory order of priority.
August 12, 2026
Show AI Summary
Compressed biogas development converts organic waste into cleaner fuel, rural income and reduced dependence on imported fossil fuels.
CBG development is presented as a route for converting agricultural and organic waste into biomethane, bio-fertiliser and briquettes while reducing fossil-fuel imports, crop-residue burning and waste-management burdens. NexGen Energia's asset-light land-partner model uses landowner-provided sites while the company designs, installs and operates plants, including gas upgrading and offtake logistics. Anaerobic digestion and alternative gas-purification technologies support use of agricultural residue, food waste, manure and distillery effluent. Expansion is linked to the GOBARdhan National Circular Bioenergy Scheme, despite capital, feedstock-aggregation and commissioning constraints.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Showing Results for : Reset Filters
PMLA, Black Money & ED

Indian Banking at Crossroads – Challenge of Risk Management from Globalisation to Financial Inclusion (Valedictory address delivered by Shri R. Gandhi, Deputy Governor, Reserve Bank of India on the occasion of Seminar on Banking at Hotel Taj President, Mumbai on May 8, 2014 organized by the Indian Merchant’s Chamber)

May 9, 2014

Contents
Summary
Note

Note

-

Bookmark

Print

Print

Shri Shailesh Vaifya, Chairman, Indian Merchants’ Chamber (IMC), Shri Chandan Bhattacharya, Chairman, Finance and Banking Committee, IMC and delegates to this IMC National Seminar, a very warm good evening! It is an honour for me to be here today to deliver the valedictory address of this National Seminar organised by IMC. The Seminar provides an opportunity to consider the developments in the banking risk management, assess the recent experience in this space and work on the way ahead.

Why risk management assumes greater significance in banks

2. Most business activities and operations are driven by considerations of returns or profitability. However the search for returns exposes the businesses to risks. Also risks escalate and multiply with returns sought – banks are no different; only the element of riskiness in the banks’ business and operations is higher as they not only carry out their operations with borrowed money and with high leverage but also attempt to provide a vast range of financial services.

3. Banks perform multifarious functions. However financial intermediation and maturity transformation are by far the most significant activities performed by banks. Banks essentially have a liquid liability profile, as against an illiquid asset profile, which makes them vulnerable to runs and in this process alone, they generate or are exposed to different types of risks. Credit, market and operational risks are the three primary risks that have a substantial bearing on the performance of banks. There are a number of other types of risks, emanating both from within and without that the banks are exposed to in their day to day functioning.

4. Further, banks are intricately linked to the various segments in the financial sector and the economy. Problems emanating from the banking sector can cause wide spread destabilization to the segments to which it is, directly or indirectly linked.

5. As the banks perform this role of intermediation in fiduciary capacity, ensuring a balance between the risks and returns assumes significance and the effort towards achieving this balance can be referred to as risk management. The various financial crisis of the past brought to the fore the importance of robust risk management practices in financial institutions including banks. Progressive technological developments and advanced modelling techniques have, however, rendered risk management a highly complex and sophisticated discipline lately.

What is Risk Management?

6. Risk management can be defined as a function of risk identification, measurement, monitoring and reporting to ensure that the returns are appropriate to the risk undertaken and the risks undertaken are commensurate with the risk appetite and risk tolerance. Risk management has to ensure that the bank holds adequate capital and reserves to make sure that its solvency and stability are not threatened, both in the short and the long run.

7. The capital measurement standards commonly known as the Basel Accords I and II published in 1988 and 2006 respectively, had already emphasized the importance of risk management by linking progressively the banks’ capital adequacy to the risk weighted assets (RWA) on account of the Credit and RWA equivalent for Market and Operational risks. Based on the principle of proportionality, Basel II further entails progressive advancement to sophisticated but complex risk measurement and management approaches to credit, market and operational risks depending on the size, sophistication and complexity of the respective banks. In addition, Pillar 2 and Pillar 3 of Basel II emphasize the need for developing better risk management techniques in monitoring and managing risks not adequately covered or quantifiable under Pillar 1 and increased disclosure requirements.

Recent global initiatives for strengthening risk management practices in banks

8. As a response to the global financial crisis, a package of reforms collectively referred to as Basel III has been unleashed as part of the global regulatory effort to enhance the soundness and resilience of the banking system. These reforms focus on capital, liquidity, leverage and macro prudential aspects of banking risk management. Basel III, on one hand, attempts to improve the quality and quantity of loss absorbing capital that a bank holds and aims at increasing the risk coverage of the capital framework, in particular for trading activities, securitisations exposures to off-balance sheet vehicles and counterparty credit exposures arising out of derivatives. On the other hand, it has devised regulation for dealing with systemic risk by prescribing countercyclical capital requirement, to contain pro-cyclicality and a framework for G-SIBs and D-SIBs has also been laid down to manage risks arising from inter-connectedness.

9. The reforms require banks to raise the amount of common equity to 4.5% of assets by January 2019 from the 2% requirement under Basel II. The new minimum for Tier 1 capital has now been raised to 6%. The innovative elements of the Basel III requirements include additional layers of capital in form of the Capital Conservation Buffer and Countercyclical Capital Buffer, minimum Liquidity requirements in the form of short term Liquidity Coverage Ratio (LCR) and long term structural Net Stable Funding Ratio (NSFR), a leverage ratio as a back-stop to the risk based capital framework and additional proposals for the Global Systemically Important Banks (G-SIBs). The Capital Conservation Buffer is prescribed as 2.5% of common equity in addition to the 4.5% minimum requirement bringing the total common equity requirements to 7% which if breached would restrict pay-outs of earnings to help protect the minimum common equity requirement. The capital buffer can be used to absorb losses during periods of financial and economic stress. The countercyclical capital buffer entails common equity or other fully loss absorbing capital in the range of 0% – 2.5% to be implemented according to national circumstances and kicks in when credit to GDP ratio deviates significantly from the trend. The paradigm changing approach to risk management under Basel III is introducing macro-prudential regulations to deal with systemic risk. The crisis brought home the point that even while individual financial institutions are strong, when each of them act to preserve its own interests, these actions could lead to instability of the system.

10. An internationally harmonised Leverage Ratio has been introduced as a simple back-stop facility to complement the risk based capital framework in order to contain build-up of excessive leverage in the system and comprises of 3% loss absorbing capital relative to all of a bank’s assets, including off-balance sheet assets without risk weighting. Certain enhancements have also been introduced to the Basel II framework by raising standards for the supervisory review process and public disclosures under Pillar 2 and 3, together with additional guidance in the areas of sound valuation practices, stress testing, liquidity risk management, corporate governance and compensation. The liquidity requirements include a minimum liquidity coverage ratio (LCR) intended to provide enough cash to cover funding needs over a 30-day period of stress. As such under LCR, the banks will be required to hold a buffer of high-quality liquid assets sufficient to deal with cash outflows encountered in acute short-term stress scenario. At the long-term spectrum, the net stable funding ratio (NSFR) is intended to address maturity mismatches over the entire balance sheet for upto one year and provides incentives for banks to use stable sources to fund their activities. The proposals for the G-SIBS are tougher, to include combinations of capital surcharges, contingent capital and bail-in debt as also strengthened arrangements for cross border supervision and resolution in view of the higher complexity, connectedness and riskiness. Keeping in view the need to safeguard against any disruption to the recovery of the real economy and allow national jurisdictions sufficient time to translate the new standards into national legislation, a transition phase of six years from 1 January 2013 to 1 January 2019 has been envisioned for full implementation.

Recent developments and emerging regulatory scenario in India for improving risk management in banks

11. The Reserve Bank too has adopted a proactive and calibrated approach towards demanding and facilitating robust risk management efforts by the banks. Reserve Bank has been adopting a considered approach of limiting the systemic risk originating from both the pro-cyclicality as well as interconnectedness dimensions. For example, countercyclical measures were adopted as early as 2004 to stall heating up of certain specific sectors by increasing the risk weights and provisioning ratios for sensitive sectors such as capital market, housing, commercial real estate during the period when the boom was building up. Several measures were taken to reduce the inter-connectedness among banks on the one hand and between banks and NBFCs on the other, to address the cross-sectional dimension of systemic risk and regulatory limits have been placed on exposures to capital market exposures. Such macro-prudential approach, which was not widely prevalent then, saved the domestic economy from the adverse shocks during the height of the crisis.

12. The road-map for the implementation of Basel II in India was in phases and was designed to suit the country-specific conditions.

BASLE III

13. Implementation of Basel III Capital Regulations has commenced in India from April 1, 2013; and it will also be in phases, and would be fully implemented as on March 31, 2019 close to the internationally agreed Basel III transitional arrangement.

  1. As against the minimum Tier 1 leverage ratio of 3 per cent proposed by the Basel Committee of Banking Supervision (Basel Committee) during the parallel run period beginning from January 1, 2013 to January 1, 2017, the Reserve bank has prescribed a minimum Tier 1 leverage ratio of 4.5 per cent during the parallel run period. The leverage ratio framework is being revised in line with the recent proposals of the Basel Committee.
  2. The Reserve Bank has issued enhanced Pillar 3 disclosure requirements effective from quarter ended September 30, 2013 to improve transparency of regulatory capital and to enhance market discipline.
  3. Comprehensive liquidity risk management (LRM) guidelines were issued on November 7, 2012. Based on the recent guidelines published by the Basel Committee on Liquidity Coverage Ratio (LCR) in January 2013, the Reserve Bank is in the process of finalizing its guidelines on LCR which are expected to be issued shortly.
  4. The guidelines issued by the Reserve Bank on July 2, 2013 (effective January 1, 2014) on capital requirements for bank exposures to CCPs provide incentives for banks to clear standardised OTC derivatives contracts through qualified central counterparties.
  5. While none of the Indian banks figure in the list of G-SIBs, domestic SIBs have to be identified. A draft framework for dealing with the D-SIBs has been published on December 2, 2013. It requires that additional common equity capital requirement applicable to a D-SIB with highest systemic importance will be 0.8% of RWAs.
  6. The Reserve Bank revised its guidelines on securitisation in May 2012 and introduced norms on minimum holding period, minimum retention ratio, and standards for due diligence to align the interest of the originators and investors, and induce ‘Skin in the Game’ concept to discourage ‘Originate to Distribute’ models.
  7. Un-hedged foreign currency exposures (UFCE) of the corporates are a cause of concern as they pose risk to the individual corporates as also to the entire financial system. Guidelines on risk management of un-hedged exposures as also the methodology to be followed by banks for computing incremental provisioning and capital requirements for exposure to corporates having un-hedged foreign currency exposures have since been introduced.
  8. As a prudential measure aimed at avoiding concentration of credit risk and large losses due to Intra-Group Transactions and Exposures (ITEs), the Reserve Bank of India has prescribed regulatory guidelines on February 11, 2014, putting in place both quantitative limits for the financial Intra-Group Transactions and Exposures and prudential measures for the non-financial ITEs.
  9. As the growing volume of non - performing assets along with restructured assets was becoming a major cause for concern for the financial as well as the real sector, a framework for revitalizing distressed assets in the economy has been implemented with effect from April 1, 2014. The Framework lays down guidelines for early recognition of financial distress, information sharing among lenders and co-ordinated steps for prompt resolution and fair recovery for lenders. It envisages centralised reporting and dissemination of information on large credits, early formation of lenders' forums and incentives for lenders and borrowers to agree on resolution and disincentives for both in the event of failure to act in a timely way. Improvements in the current restructuring process such as an independent evaluation of large value restructuring with a focus on viability and fair sharing of gains and losses between promoters and creditors have been mandated. Finally, a more liberal regulatory treatment of distressed asset sales, particularly to asset reconstruction companies, has been provided. It proposes to bring non-bank lenders also under its ambit for enhanced effectiveness.
  10. The Basel Committee issued the Principles for Sound Stress Testing Practices and Supervision in May 2009. In tune with these principles, the extant Reserve Bank guidelines on stress testing have been updated. Stress testing which is based on forward looking approach is expected to provide a complementary and independent risk perspective to other risk management tools such as value-at-risk (VaR) and economic capital and complement risk management approaches that are based on complex, quantitative models using backward looking data and estimated statistical relationships.
  11. With the objective of building up a buffer of capital which can be used to achieve the broader macro-prudential goal of restricting the banking sector from indiscriminate lending in the periods of excess credit growth that have often been associated with the building up of system-wide risk, the Reserve Bank has proposed to create a Countercyclical Capital Buffer (CCCB) framework for banks in India. The proposed draft CCCB framework in India is based upon the credit-to-GDP gap in conjunction with other indicators like Gross Non-Performing Assets (GNPA) growth. The CCCB shall increase linearly from 0 to 2.5 per cent of the risk weighted assets (RWA) of the bank based on the position of gap between 3 percentage points and 15 percentage points.
  12. The Reserve Bank is keen to introduce a countercyclical provisioning approach with the objective of building up provisioning buffer for the banking system when the banks in general are making profits so that this can be used to absorb losses in case of downturn. A discussion paper on Introduction of Dynamic Loan Loss Provisioning Framework for Banks in India has been put on the RBI website on March 30, 2012. A comprehensive forward looking provisioning framework based on data collected from select banks in respect of certain segments and system–wide data is being developed. The new approach would smoothen the impact of incurred losses on the Profit and Loss Account through the cycle and thereby facilitate continued lending by banks during downturns.
  13. The Reserve Bank has from time to time also issued regulatory guidelines on other areas such as Corporate Governance, Fit & Proper, Know Your Customer/Anti Money Laundering, Credit Information Sharing, Customer Services in addition to specific guidance on credit, market and operational risk management etc., to strengthen the over-all risk management culture in Indian banks.

Recent risk management in banks

14. A survey on banking risk management, conducted under the aegis of the Institute of International Finance, sees a renewed focus on risk culture. It reports that risk culture is now at centre stage and banks have made significant progress toward changing their risk governance frameworks in the wake of the financial crisis. Board risk committees are nearly universal, and members have received appropriate training in risk management. The role of the chief risk officer has broadened, while its seniority and status have been enhanced. They now report either to the chief executive officer or jointly to the CEO and risk committee. However, the survey laments that the industry continues to wrestle with the process of embedding risk culture beyond the boardroom and into business units while ensuring adequate risk transparency.

15. Many respondents cited the balance between a sales-driven front-office culture and a risk-focused culture at higher levels as their top organizational challenge; they also note lack of systems and data. They believe their organizations need to do more to instill a strong risk culture, underscoring the need for a sustained effort over a long period of time.

16. Risk appetite continues to be an essential part of risk governance, but the industry continues to be challenged to embed risk appetite into business decisions. The financial services industry recognized during the financial crisis that boards needed to change focus from share price and profitability to the risks entailed in their strategies. Also, chief risk officers needed to be empowered to create cultural change within their organizations.

17. With these shifts well underway, senior risk executives are focused on moving reputation and operational risk higher up the agenda. However, banks are still struggling to ensure that specific business decisions are consistent with risk appetite and are putting new programs in place to achieve this.

18. One of the challenges that banks face in developing comprehensive risk measurement models are the scarcity of available historical and time series loss data and the quality, completeness and reliability of the data available. Effective risk management requires specialisation and technical expertise as also independent and dedicated risk management function. While efforts are on in this direction, the HR policies and limited suitable number of the skilled human resources present myriad challenges in fully achieving this objective. Attrition and ability to retain the skilled personnel adds to the challenge.

Present experience in risk management in Indian banks

19. The regulatory initiatives as also the banks’ individual efforts in this direction have certainly improved the risk management standards in Indian banks in the last few years. Since the initiation of structural reforms in the Indian banking sector in 1991, the reach and business volumes of Indian banks have increased many fold; the operations have grown and assumed higher degree of sophistication. The Indian banks' current capital base and liquidity position are broadly comfortable, as a starting point, vis-a-vis the Basel III guidelines. Both the capital to risk weighted assets ratio (CRAR) and the core CRAR of Indian banks, respectively stood at 10.42 per cent and 9.24 per cent respectively as on March 31, 1997 and have consistently remained well above the regulatory requirement of 9 per cent and 6 per cent, respectively under Basel II. The CRAR and core CRAR were at 13.88 per cent and 9.7 per cent respectively as at March 31, 2013. Indian banks, thus, start from a position of strength in the process of transition to Basel III regime. Many challenges, however, still lie ahead and I shall touch upon these in a little while.

20. Asset quality is an important parameter to measure the health of the banks and concomitant with asset quality is the provisioning coverage that banks hold against stressed assets. Asset quality of the Indian banking system had improved significantly since introduction of prudential norms, SARFAESI Act, CDR Mechanism, Credit Information Companies, etc. The GNPAs ratio had steadily declined from 15.7 per cent in 1996-97 to 2.35 percent in 2010-11. However, as fallout of the global financial crisis and the consequent headwinds from many advanced nations in the west, the GNPAs have risen to 2.94 per cent as on March 2012 and further to 3.42 per cent as at the end of March 2013. As per the provisional data, as on December 2013, the GNPA ratio was at 4.47 per cent. The ratio of restructured standard advances to gross advances stood at 5.8 per cent at end-March 2013 adding to the total stress.

21. All Indian banks, including foreign banks in India, migrated to the standardized approaches of Basel II by March 31, 2009 in two phases. Large sized Indian banks and banks with international presence have been encouraged to adopt the Basel II advanced approaches for computation of capital for credit, market and operational risk. Out of the 14 banks that submitted applications for migration to the Internal Rating Based approach for credit risk, seven have been given approval for parallel run. Under operational risk, parallel run has been approved for two banks for The Standardized Approach (TSA) out of the 13 banks that applied. Ten banks have so far conveyed their intent for migration to the Advanced Measurement Approach (AMA) of which cases of four large banks which made preliminary submissions in this regard are under different stages of examination. In respect of Market Risk, eight banks have conveyed their intent for migration to the Internal Model Approach.

22. There is, however, another very significant aspect of the bank operations, just as in any corporate entity, and that is the commercial aspect viz., profitability management. Profitability in banks, as in the corporates, is reflective of the financial well-being, health and robustness of the entity and has a direct bearing on its capital formation ability. On the flip side, if the bank’s strategies, business models, planning and operations and risk management are weak, obsolete or outdated or not in tune with the macro-economic environment, the income flowing there from may be low or may end up in losses. Profitability is impacted by the business decisions of the bank, the business model it pursues, quality and type of asset base as also by operational efficiencies and any noteworthy shift in its strategies and policies. The risk profile of a bank can also be gauged from its income and expenditure statement to a great extent. However, currently alignment of the risk management and profitability management objectives is not so much in focus.

23. Since the profitability or the income and expenditure plans and decisions of the banks are directly connected to the regulatory concerns of capital adequacy and solvency as also the stability and soundness of banks, it is incumbent on the banks and the supervisors to carefully analyse the components of income and expenditure. A careful analysis and comparison of these streams of income and expenses would provide the bank an in-depth understanding of its business focus, structure and stability of profits and serve as the guiding principles for rebalancing and / restructuring its balance sheet. This would enable a bank to not only, derive optimum earnings, rationalize cost and expenses but also to initiate changes in and diversify its business design / model in alignment with the industry or the current and profitable market practices.

The way ahead

24. Over the years and especially in the wake of the learnings from the global financial crisis, banks have enhanced their efforts in the direction of improving risk management practices as I have enumerated earlier. However, going forward much work still remains.

i. Banks must pay greater attention to the risk governance aspects, wherein the boards must have full understanding of the risks, typical to the respective bank as also full involvement in designing appropriate policies and strategies for the risk management. For this purpose, risk appetite and risk tolerance levels must be clearly defined, keeping in past and forward looking view on likely internal and external risk environment.

ii. An independent risk management function headed by a Chief Risk Officer (CRO) with sufficient freedom and stature assumes critical importance. Banks must ensure that the board level risk committees as also the independent challenge function in form of internal and external audit / reviews are effective in the real sense and have the requisite understanding, resources and wherewithal to perform their responsibility in a meaningful way.

iii. Senior management of the banks must play a proactive role.; They should communicate the risk management policies, risk appetite and tolerance statement, risk management practices to the operational in-charges at the business units and corporate levels for proper understanding and compliance.

iv. These efforts need to be supplemented by a robust Management Information System (MIS) and information technology platforms to provide the board and the top management with timely, reliable and complete risk related information on the bank for effective decision making and decisive action taking.

v. ‘Embededness’ or ‘Use Test’ which entails use of inputs to and outputs from the quantitative models in enhancing quality risk management and decision making need better encouragement.

vi. Over-reliance on quantitative models can grossly under-estimate tail risks and it is necessary to also use expert judgement in dealing with risk estimation and management. Stress tests, as also reverse stress tests and back testing should be gainfully utilised as complements to model based risk estimation.

25. Before concluding I will like to relay what A.T. Kearney, a reputed international consultant, has got to say about risk management in banks. They believe that the framework for risk management in a bank is fundamentally no different today than it was prior to the credit crunch and recession. However, the risk function lacks certain business acumen, and continues to be considered a handbrake on growth. A.T. Kearney suggests that a return to managing risks - not ignoring them or believing they can be passed off - is the cure. I could not agree more.

References:

1. Report on Trend and Progress of Banking in India 2012-13

2. Anand Sinha: Address on ‘Perspectives in Risk Governance’ on August 23, 2012 at the Risk & Governance Summit organised by the Indian School of Business, Hyderabad and Deloitte at Mumbai.

3. Anand Sinha: Address on Reflections on Regulatory Challenges and Dilemmas on August 24, 2011 at FICCI-IBA Conference on “Global Banking: Paradigm Shift” at Mumbai.

4. Hennie van Greuning, Sonja Brajovic Bratanovic: Analysing Banking Risk: A framework for assessing corporate governance and financial risk management.

5. EY Survey on Remaking Financial Services - Risk management five years after the crisis.

6. A.T". Kearney's "Seven Tenets of Risk Management.

7. Senior Supervisors Group (2008), “Observations on Risk Management Practices during the Recent Market Turbulence”

8. The World Bank and International Finance Corporation (2010), “Bank Governance: Lessons from the Financial Crisis”, Note Number 13.

9. Group of Thirty, “Toward Effective Governance of Financial Institution

Topics

Acts Income Tax