The Reserve Bank of India (RBI) is tightening regulatory and supervisory
control over development financial institutions (DFIs), and has set up
an internal committee to study and recommend new powers required by the
central bank.
The committee is likely to recommend an RBI panel of auditors for the
DFIs, similar to the one existing for commercial banks. Besides, the
committee may recommend more powers to the RBI to regulate the
appointment of directors on the boards of the institutions, sources
said.
A source said, "The RBI is planning to tighten supervisory and
regulatory control over FIs. An internal committee has been set up to
study new powers to be transferred to the RBI. They are working out how
some of the regulations in the Banking Regulation Act could be made
applicable to FIs."
"At the moment, the FIs can appoint their own auditors. They have
freedom to appoint auditors and replace them whenever they choose. RBI
is considering its own panel of auditors for FIs, the same way for
commercial banks. This is one of the most crucial powers that may be
transferred to it. But the committee is working on this," the source
said. Audit of commercial banks is done by chartered accountant firms
appointed by the RBI. Sources said the new supervisory powers were
necessary for closer scrutiny of FIs' functioning, particularly as they
chart their course to becoming universal banks.
"The FIs are moving towards universal banking as they have already
started dealing in short-term loans and deposits. Similar
