ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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'Fit and Proper' Banks

In the current supervisory regime of banking regulation, governance concerns take a lower priority than asset-liability and capital-adequacy issues. The RBI's proposed stipulations on ownership regulation will have credibility only if the central bank adds another dimension to its supervisory range. It must accept that keeping a watch over the practices and processes of commercial banks is as much a critical component of its supervisory responsibility, as scrutinising the commercial bank's handling of its asset and liability portfolio. The RBI should consider having a separate instrument, a kind of management audit and inspection, as an essential component of its overall inspection. This will add teeth to its surveillance responsibility and keep the RBI abreast of what is happening on the governance front in every commercial bank.

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