• Mandate /Goals: Regulation aimed at protecting depositors’ interests, orderly development and conduct of banking operations and fostering of the overall health of the banking system and financial stability.
• Perimeter: Commercial banks, Small Finance Banks, Payments Bank, All India Financial Institutions, Credit Information Companies, Regional Rural Banks and Local Area Banks.
• Evolution: Regulatory functions have evolved with the development of the Indian banking system and adoption of prudential norms based on international best practices.

• The tools used for regulation are statutory, prudential regulation, other regulatory guidelines and moral suasion through speeches of Governor, Deputy Governors and periodic meetings, seminars, etc.

Focal points for providing framework for regulation:

Issuance of ‘licences’ for opening of banks
‘Authorisations’ for opening of branches by banks in India,
governing foreign banks entry and expansion and approval of Indian banks to operate overseas,
policy formulation, review and implementation on Prudential Norms, Basel – II and III frameworks, validation of quantitative models on Credit, Market and Operational Risks, Stress testing,
International Financial Reporting Standards (IFRS), Securitisation,
Resolution mechanism, etc.
Monitoring maintenance of SLR and CRR by banks,
Approving the appointments of Whole Time Directors & Part-Time Chairperson of Private Sector Banks and Chief Executive Officers of foreign banks operating in India, and their compensation packages.
overseeing the amalgamation, reconstruction and liquidation of banking companies,
policy issues relating to customer service,
Anti-Money Laundering and Combating Financing of Terrorism and issuing of instructions regarding KYC
regulation of financial institutions
According prior approval for acquisition of 5% or more of the shares or voting rights of Private Sector Bank

Building a heterogeneous banking system

• The Reserve Bank is striving towards a more competitive, efficient and heterogeneous banking structure. It believes that a heterogeneous banking system can meet varied customer needs in a more efficient manner. As different banks would operate differently based on their reach, liquidity, capitalization and market power considerations, they will be able to offer a wider range of customer service enhancing consumer welfare. The licensing policies regarding Universal Banks, Small Finance Banks and Payments Banks are a step in the direction of building a heterogeneous banking system.

Licensing of Universal Banks

• Two banks viz., IDFC Bank Limited and Bandhan Bank Limited, were issued banking licence in terms of the 'Guidelines on Licensing of New Banks in the Private Sector dated February 22, 2013'. Based on the experience gained from this licensing exercise, the Reserve Bank has moved towards accepting applications for universal bank licence on a continuous basis under the 'Guidelines for 'on tap' Licensing of Universal Banks in the Private Sector dated August 1, 2016.

Licensing of Differentiated Banks

• Guidelines for Licensing of Small Finance Banks and Payments Banks were issued on November 27, 2014. Banking licenses have been issued to Small Finance Banks and Payments Banks under these guidelines. These banks are "niche" or "differentiated" banks, with the common objective of furthering financial inclusion.

Capital for banks

• Basel III Capital Regulations for Indian banks will be fully phased in as on March 31, 2019, closer to the internationally agreed date of January 1, 2019, instead of March 31, 2018 as was announced earlier.

Management of Stressed Assets

• To ensure effective stressed asset management, guidelines were issued to banks which among other things, covered the need to ensure that the banking system recognises financial distress early and takes prompt steps to resolve it.

Special knowledge or practical experience useful to banking companies:

• In the backdrop of innovations in banking and technology, to guide the banks in managing their diversified business portfolios and risks, the areas of special knowledge and practical experience enumerated under various statutory provisions for the directors on the boards of commercial banks (excluding RRBs) have been broadened to include (i) Information Technology (ii) Payment & Settlement Systems (iii) Human Resources (iv) Risk Management and (v) Business Management.

Minimum qualifications and experience for CFO and CTO:

• A Chief Financial Officer and Chief Technology Officer would play a crucial role in strengthening and sustaining the banks' risk governance framework in light of rapid innovations in banking and technology. Therefore, minimum qualification and experience were stipulated for adherence by banks while inviting applications for these positions.

Appointment of Chief Risk Officers in Banks

• Banks are required to keep the credit risk management function separate from the credit sanction process towards effective risk management. For bringing uniform approach and alignment of risk management system with the best practices, banks are required to frame a Board-approved policy, clearly defining the roles and responsibilities of the Chief Risk Officer (CRO) who shall not have any reporting relationship with business verticals or business targets. Under no circumstances, “dual hatting” will be allowed i.e., CRO shall not function as CEO/COO/CFO/Chief of Internal Audit.

Basel III Leverage Ratio Framework

• The experience drawn from the global financial crisis suggests that the build-up of excessive on-balance sheet, as well as off-balance sheet leverage in the banking system was at the core of the financial fragilities that were witnessed during the global financial crisis. Based on recent recommendations of the Basel Committee on Banking Supervision (BCBS), the Reserve Bank will issue revised guidelines on the leverage ratio .

Review of the exposure limits for single/ group borrowers

• With a view to gradually aligning them with the revised global standards the Reserve Bank proposes to review exposure norms in 2014-15. The tightening of exposure norms will also help in risk mitigation during cyclical downturns as banks exposure under the framework will be more granular and diversified to a large number of unrelated counterparties rather than being concentrated to a handful of large and related counterparties.

Improving the financial system’s ability to cope with distress

• It is important to improve the financial system’s ability to cope with stress and distress by not only providing for counter-cyclical buffers, but also by directly dealing with stress through effective resolution regimes. The Reserve Bank in 2013-14 has taken several initiatives in this regard and plans to carry the agenda forward by strengthening the corporate debt restructuring mechanism, credit information and the resolution regime. In coordination with Financial Stability and Development C ouncil (FSDC), the Reserve Bank intends to take the process forward by seeking necessary legal and institutional changes and by creating of a resolution fund.

Implementation of Ind AS by banks

• The Reserve Bank is in the advanced stages of finalising a roadmap for implementation of Ind Accounting Standards to be adopted by banks and Non-Banking Finance Companies.

• Reserve Bank of India Act, 1934
• Banking Regulation Act, 1949
• Deposit Insurance and Credit Guarantee Corporation Act