The Reserve Bank of India (RBI) has decided to review and strengthen the Risk-Based Supervision of the banking sector with a focus to enable financial sector players to address the emerging challenges. The Central Bank uses the risk-based supervision model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

"It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies if any," the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks. In case of UCBs and NBFCs, the Expression of Interest (EOI) for 'Consultant for Review of Supervisory Models' said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

"It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward-looking manner and for harmonising the supervisory approach across all SEs," it said. Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control). The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors' interests and financial stability.

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