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RBI released Guidelines to have Uniform Compliance Practices in banks

Published on September 12, 2020
Current Context: The Reserve Bank of India released a notification for compliance functions in banks and the role of Chief Compliance Officer (COO).
RBI released Guidelines to have Uniform Compliance Practices in banks
  • The guidelines for compliance practices in banks are the board approved compliance policy.
  • As per the notice drafted by the central bank, the banks are supposed to have an effective compliance culture, independent corporate compliance function and strong compliance risk management programme both at the bank and group level.
  • As per the central bank, this independent compliance function is to be headed by the Chief Compliance Officer (COO). The COO is expected to manage compliance risk effectively. COO will be appointed for a minimum fixed tenure of not less than 3 years.
  • The compliance function is responsible to manage the compliance risk of the bank. Compliance risk which is an integrity risk, associated with risk of legal sanctions, regulatory sanctions, financial loss, or the loss which bank may suffer if not followed with the applicable laws, regulations, codes of conduct etc.
  • Compliance policy defined by RBI ensures expectations on compliance culture covering from accounts, incentive structure and effective communications and challenges. It also defines the role of COO, defines processes for identifying, assessing, monitoring, managing and reporting on compliance risk throughout the bank.
  • Duties of Compliance functions: (a) To appraise the board and management on rules and regulations on any further development (b) Clarifying on any compliance-related issues (c) Conduct assessment of compliance risk at least once in a year by developing risk-oriented activity plan for compliance assessment and to submit activity plan to ACB for approval and for internal audit process (d) To periodically report to respective authority in case of any major changes related to compliance risk and compliance failures (e) To conduct representative compliance testing.
  • Role of COO: (a) To conduct audits, inspections and to ensure that banks adhere to internal and external laws (b)To analyze risk areas and ensure bank’s operations are with respect to federal laws (c) To assess policies and ensure that policies are in line with rules on mortgage and customer deposits (d) To give compliance advice to risk management unit of an organisation (e) To work coordinately with bank’s COO and to conduct compliance programs to train and educate bank staff on the formation of new regulations.
  • Static Part: 
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das
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