Separate Rbi Wings Created To Keep Tab On Banks, Nbfcs

The Reserve Bank of India (RBI)s department of supervision (DoS) has been bifurcated into two independent departments to monitor banks and non-banking finance companies (NBFCs).

The new arrangement became effective yesterday.

According to RBI officials, this has been done to strengthen the supervision of non-bank finance companies, particularly in view of the criticism that it had to face in the wake of the collapse of CRB Capital Markets.

DoS Banks, the wing which will monitor the banking sector, will be headed by A Q Siddiqui, chief general manager, who was until now heading IECD.

DoS Non-Banks, the section which will supervise the NBFCs, will be looked after by T Bandyopadhyaya, additional chief general manager, who was with the NBFCs division of DoS. This division has now become a separate department.

 

Speculations are on that the department of finance companies (DFC) of the apex bank may be merged with DoS Non-Banks. The DFC has, for historical reasons, been located at Calcutta, with a central office cell in Mumbai.

S P Talwar, deputy governor, who was looking after the DoS, will continue to look after both the DoS Banks and DoS Non-Banks, the officials said.

The separation of supervisory functions became necessary as many NBFCs have come to face liquidity problems and chances of their defaulting in repayment of deposits have gone up. At least three NBFCs have been downgraded by credit rating agencies in the last one week.

Following the amendment to the RBI Act, the apex bank had made it mandatory for the NBFCs to register with it. More than 37,500 companies have applied for registration.

This fact, too, would have made the latest decision necessary, to cope with the flood of applications and the subsequent monitoring, banking circles said.

The amendment to the RBI Act was brought about to give more teeth to the apex bank in supervising the NBFCs. The separation of the two functions is expected to give it an edge, the RBI officials said.

Over a period of time, the recruitment of new staff would strengthen the base of new departments, they added.

In another related development, A Chandramouliswaran, chief general manager of DoS has been sent back to Industrial and Export Credit Department (IECD), where he worked earlier.