RBI cautions NBFCs against employing algorithm-based financing and advises urban cooperative banks to remain vigilant about risks.

At a Mumbai conference for the Heads of Assurance Functions of a subset of Urban Co-operative Banks (UCBs), namely Chief Compliance Officers, Chief Risk Officers, and Heads of Internal Audit, Rao stated, “Chief Risk Officers need to support management in keeping an eye on and controlling risks in banks’ balance sheets.

Today, on May 16, M Rajeshwar Rao, Deputy Governor of the Reserve Bank of India (RBI), said that chief risk officers of urban cooperative banks have to assist management in keeping an eye on and managing risks related to the balance sheet.

At a Mumbai meeting for the heads of assurance functions (chief risk officers, chief compliance officers, and heads of internal audit) of particular urban According to Rao, Chief Risk Officers of Co-operative Banks (UCBs) are required to support management in tracking and mitigating risks in the balance sheets of the banks.

In his keynote address, Rao emphasized the importance of the three assurance roles and the need to guarantee their independence and efficacy. He promoted the Compliance Function in a proactive manner. He went on to say that in order to share important findings and implement corrective measures, the Internal Audit Function should establish open lines of contact with other functions.

Approximately three hundred people representing more than 120 UCBs attended the meeting.

Deputy governors M. Rajeshwar Rao and Swaminathan J. spoke to the attendees, per an RBI press release. S C Murmu, Saurav Sinha, Rohit Jain, and Manoranjan are the executive directors. Mishra attended the seminar together with other high-ranking officials from the Reserve Bank’s departments of regulation, supervision, and enforcement.

During the conference, Swaminathan emphasized how important it is to recognize and handle both new and evolving risks, as well as how the dynamics of established risks are changing. To do this, internal control systems need to be enhanced and updated on a regular basis.

Swaminathan also cautioned non-banking financing businesses (NBFCs) against certain systemic risks, complexity, and interconnection during the same conference today.

While automation might improve efficiency and scalability, NBFCs shouldn’t let these models fool them, he continued with caution.

When assessing credit, an excessive dependence on past data or algorithms might result in errors or omissions, especially in dynamic or changing market circumstances.

Consequently, he continued, NBFCs need to keep an open mind about their strengths and weaknesses in addition to regularly observing and validating credit scoring models.

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