Risk Based Supervision

Abstract

Under the Risk Based Supervision (RBS) mechanism, supervisor is expected to concentrate its efforts on ensuring that
financial institutions use the process necessarily to identify as well as measure and control risk exposure. The RBS is
expected to focus supervisory attention in accordance with the Risk Profile of the bank, in the structured Risk Profile
Templates (RPT) to enable the bank to make a self-assessment of their Risk Profile. It is designed to ensure continuous
monitoring and evaluation of Risk Profile of institutions through risk matrix. This may optimize the utilization of the
supervisory resources of the RBI so as to minimize the impact of a crises situation in the financial system. Preparation of
Risk Audit Matrix is based on the magnitude of risk and frequency of risk is as per the direction of RBI. Once the Risk Audit
Matrix is compiled after the risk based internal audit, Branch Monitorable Action Plan (BMAP) will have to be chalked out
for the branch so as to take timely corrective action and also to mitigate any significant risks that may have been identified
during the supervisory process.