Taking cue from the ongoing financial turmoil, the RBI has decided to strengthen the regulatory framework and monitor the overseas operations of Indian banks to ensure their safety and solvency.
The mid-term policy review announced on Friday said an appropriate supervisory framework, including a revised off-site surveillance system, for overseas operations of Indian banks would be finalised by end-November 2008.
In addition, the apex bank would also constitute an internal Working Group to lay down the roadmap for adoption of a suitable framework for cross-border supervision and supervisory cooperation with overseas regulators.
The committee would submit report by the end of November.
According to Punjab National Bank Executive Director J M Garg, these are welcome initiatives as it would help in ensuring safety of the banks.
Although Indian banks are largely insulated from the global financial turmoil, further strengthening of safety valve would mitigate the risk down to zero, he said.
The regulator has also asked banks to give detailed information on the sources and deployment of their funds based on the overseas returns.
Concerns were conveyed to banks for taking appropriate action, the statement added.
RBI noted banks with overseas presence and branches of foreign banks functioning in India have migrated to Basel II Framework with effect from March 31, 2008.
Remaining banks are required to migrate to the Basel II framework with effect from March 31, 2009, it said.
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