Osmos Way Forwards

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08.08.2019-302 views -Osmos Way Forward

 Osmos Way Forward Article

Seven Years of ‘OSMOS' - Looking Back and Approach Forward*


It is difficult to assume what would have been the positioning if the digital off-site program for financial institution monitoring was not instituted in RBI seven years ago. Although in the 1st two years, the program was receiving stabilised, it really is from the 12 months 1997, Off-site Monitoring and Surveillance System (OSMOS) is becoming fully detailed and during the last five years, the Division has extracted the benefits out of it in a big way. Without a doubt, during these seven years the OSMOS in Department of Banking Oversight has considerably helped the Department in enhancing the capability to physical exercise its remedies role. Additional, within a amount of three years of its operation, an opportunity was taken to up grade the system to deal with the changing requirements of banking supervision. With the effect, the opportunity and insurance coverage of off site surveillance was enlarged. On this page, an attempt has been made to return back and see how a system was set up, what benefits have been completely derived to date and what further plans are waiting for the future. Our experience with OSMOS in the Indian context probably will end up being an flexible model for many Central Banks, especially in the growing countries. One of the important features of Banks all over the world is always to regulate the financial system, assure financial balance and thus help economic growth of the country. When several central banks are directly involved in the oversight of the financial system and also other financial institutions, others have created individual regulatory organisations to carry out this function. Illustratively, while a lot of countries their best Zealand count pre-dominantly in off-site cctv surveillance, in other countries, including USA, on-site inspection is a crucial tool intended for bank oversight. Irrespective of the regulating set-up, on-site examinations coupled with off-site cctv surveillance and monitoring have become the major tools of bank oversight. The system in India is a combination of on-site inspection and off-site cctv surveillance with prejudice towards the previous.

Setting up in the Board to get Financial Oversight (BFS)

Post-1992 irregularities in the securities marketplace, a need was felt to make a separate regulatory/ supervisory physique to regulate the financial system. Appropriately, the BFS was set up in the year year 1994 on par with a panel to the central board of the Reserve Financial institution. The Chief of the servants, Reserve Bank of India was chosen as the Chairman. Whilst one of the Deputy Governors is usually nominated because the Vice-Chairman, four administrators from the Central Board happen to be appointed because members of BFS. Introduction of OSMOS

As early as 1991, the Narasimham Committee (1991) had advised setting up of the Off-site monitoring function to strengthen the economical sector guidance. The advice also found favor in the Report of the Padmanabhan committee (1995). Taking cue from these kinds of recommendations, the BFS, in the first conference held in Dec 1994, described that an off site supervision program be create within the Reserve Bank to gather financial data from uses a quarterly basis in order to assess the financial health in the banks among on-site examinations. The goals of creating an off-site supervision process are generally five-fold:

To provide on-going information about the health of financial institutions in-between on-site inspections;

To build a memory on the supervised corporations;

To capture systemic developments in financial and to support policy projects;

Intended for better focus of supervisory work and to optimize resource allowance; and

Identification of banks showing financial damage and to act as an Early Caution System (EWS) and as a trigger for on-site home inspections.

After learning the intercontinental best practices, a circular was issued to banks on Feb . 28, 95 introducing off site prudential supervisory reporting system. To begin with, a set of...