Internal Compliance Monitoring: RBI’s Single Dashboard Circular for Banks & NBFCs

Regulated Entities (RE) must periodically ensure compliance with the RBI’s Circulars and Directives. A streamlined compliance process and thorough internal compliance monitoring are essential. The RBI Circular on 31 January 2024 provided a five-month deadline for a new directive for using technology to have a dashboard in place. 

how banks and NBFCs can seamlessly integrate robust monitoring tools and mechanisms for a single dashboard by June 30, 2024.

The financial sector is the backbone of any economy, and ensuring its stability and integrity is of paramount importance. As the custodian of the Indian financial system, the Reserve Bank of India (RBI) plays a crucial role in maintaining this stability through comprehensive regulations and oversight. The recent RBI directive (RBI/2023-24/117) dated 31 January 2024 emphasizes the critical importance of compliance for regulatory entities (REs) in India’s financial landscape. This directive aims to strengthen the regulatory framework, enhance financial stability, and protect consumer interests by ensuring REs adhere to established norms. By boosting investor confidence and aligning with global standards, the directive facilitates a trustworthy financial and regulatory environment conducive to innovation and growth, ultimately reinforcing the integrity and resilience of the Indian financial system.

Internal Compliance Monitoring RBI's Single Dashboard Circular for Banks & NBFCs

What does the RBI Circular 117/2023-24 say

The RBI circular RBI/2023-24/117, dated 31 January 2024, directs RE to adopt and implement tools/mechanisms for monitoring all applicable compliances. It advocates that RE deploy a single/unified dashboard for better internal compliance monitoring. The Circular would apply based on the size and complexity of its operations.

The tool/mechanism should do the following:

  • Bring all stakeholders on one platform, showing all compliances in one place.
  • Create a workflow for identifying, assessing, monitoring, and managing compliance requirements. 
  • Escalate all non-compliances to the right stakeholder.
  • Have a unified dashboard view for senior management on the compliance position of the regulated entity.

Applicability of the RBI Circular 117

  • Small Finance Banks (SFB)
  • Payments Banks
  • Non-Banking Financial Companies (NBFC) (ML and UL)
  • Housing Finance Companies
  • Scheduled Commercial Banks (SCB)
  • Primary (Urban) Co-operative Banks (Tier III and IV)
  • Credit Information Companies
  • All India Financial Institutions

Deadline to comply with the RBI Circular 117

The time limit to comply with the RBI Circular is June 30, 2024. REs are advised to thoroughly review and update their internal compliance monitoring and tracking processes, making necessary adjustments to the existing systems or implementing new systems by June 30, 2024.

The importance of compliance

Compliance plays a pivotal role in ensuring the stability and trust of the financial system. It safeguards the interests of stakeholders, including customers, investors, and the broader economy. Non-compliance can expose REs to significant risks, such as reputational damage, legal liabilities, financial penalties, and potential regulatory sanctions. Moreover, in an era of heightened scrutiny and public accountability, adhering to regulatory requirements is essential for maintaining the credibility and sustainability of financial institutions.

What is Internal Compliance Monitoring?

Internal compliance monitoring is the act of continuously assessing within the RE whether it is complying with the regulatory requirements, including internal policies and specific industry standards. Its goal is to help enterprises achieve consistent regulatory compliance and avoid non-compliance.

Internal monitoring of compliance assures that your team follows company policies and procedures. While internal auditing ensures that the necessary controls are in place, it’s through monitoring that one can determine whether or not staff are following those controls in their daily activities. This helps enterprises guard against liability, data breaches, and costly penalties.

FAQs

What is the RBI's Single Dashboard Circular?

The RBI’s Single Dashboard Circular is a regulatory directive aimed at streamlining the internal compliance monitoring of banks and Non-Banking Financial Companies (NBFCs). It mandates the implementation of a unified dashboard to oversee and manage compliance activities effectively.

What is the purpose of the Single Dashboard?

The Single Dashboard aims to enhance the efficiency and effectiveness of compliance monitoring within banks and NBFCs. It provides a centralized platform for tracking compliance activities, identifying potential issues, and ensuring timely resolution.