Indian banks need to improve their systems and processes to identify early any stress on the quality of their loans, the Reserve Bank of India (RBI) said.
"Asset quality of banks is one of the most important indicators of their financial health. However, it has been observed that existing MIS on the early warning systems of asset quality, needed improvement," the central bank noted.
The regulator directed banks to review their existing technology and MIS framework and strengthen the systems further for early detection of signs of distress at individual account level as well as at segment level.
"Such early warning signals should be used for putting in place an effective preventive asset quality management framework, including a transparent restructuring mechanism for viable accounts under distress within the prevailing regulatory framework, for preserving the economic value of those entities in all segments," RBI said.
"There should be no inconsistencies between information furnished under regulatory or statutory reporting and the banks' own MIS reporting," it added.
Last year, the central bank had directed banks to automate the process of filing regulatory reports. It also opened a door of opportunities for technology firms.
According to industry players while it provided an opportunity to technology companies like iCreate Software to secure contracts for automating the data flow, it also gave them the chance to cross-sell other banking software products.