The principal objective of inspection in banks is to ensure that operating units follow the rules and procedures. Changing environment is demanding and hence the need for radical changes in the methodology and strategy in inspection of bank advances. The new model should be suitable to identify, measure and control risks involved in advances. Remedial steps required to minimize the risk should be addressed quickly and timely. To improve the quality of assets, RBI has recently come up with a risk based inspection and audit model.
The principle objective of inspection in banks is to ensure that the operating units of banks adhere to the rules and procedures prescribed by the control unit and to locate irregularities and deficiencies observed therein so that timely action is taken by the operating unit for removing and/or controlling such deficiencies and interest of the bank is safeguarded. The present strategy of inspection is based on the model.
However, in today's competitive environment no bank can afford to remain satisfied with such routine inspection, particularly in the sphere of advances. In fact, management of most of the banks have realized the need for change in strategy and methodology of inspection particularly in the sphere of advances but very few of them could develop suitable strategy for the same. Reserve Bank of India has also suggested some changes in inspection of bank advances by classifying individual advance accounts with a cut off limit of Rs. 50 lacs and above, under watch category and introducing continuous surveillance statement, etc. However, there is need for radical change in the methodology and strategy to suit the needs of the day.
To develop a model to suit the modern economy we have to comprehend the reasons that have created the need for such a change like Globalization of Financial Services Revolution in information technology, Growing risk in operation Increasing expertise in risk management and, Improving operation technology. |
