##ized supervisory approach has been adopted for commercial banks, nonbanking financial companies ( nbfcs ) and urban cooperative banks ( ucbs ), with greater emphasis on identifying and addressing the root causes of identified vulnerabilities. 13. to enhance the effectiveness of supervisory frameworks, the reserve bank has employed various analytical tools. these include an early warning system, stress testing models, vulnerability assessments, cyber key risk indicators, phishing and cyber reconnaissance exercises, targeted evaluations of compliance with kyc / aml norms and micro - data analytics, among others. additionally, the reserve bank is in the process of adopting advanced analytics, artificial intelligence, and machine learning 2 / 5 bis - central bankers'speeches into supervisory data, while taking necessary safeguards, to gain even deeper insights into the operations of supervised entities. these initiatives reflect the reserve bank's commitment towards harnessing the power of technology and data - driven approaches to strengthen its supervision. 14. realising the importance of adequate skill and capacity building in supervisors, the reserve bank has set up a dedicated college of supervisors ( cos ). the college has been conducting a large number of general and specialised training programmes. an integrated learning management system has also been rolled out to facilitate continuous learning and updation. focus areas for supervisors 15. moving forward, i would like to emphasize nine specific areas where supervisory rigor should be directed more emphatically. 16. firstly, governance is of paramount importance and invariably at the root cause of supervisory concerns. effective corporate governance and sound regulation go hand in hand, reinforcing each other. the recent bank failures in advanced economies have underscored the pressing need to address governance concerns head - on. 17. secondly, supervisors must closely examine the business models adopted by banks and meticulously assess whether these models align with the institutions'risk appetite. this evaluation should delve into the level of business growth projections, sustainability of earnings potential, extent of diversification, provisioning cover, and appropriate pricing mechanisms, etc. 18. thirdly, supervisors need to examine it issues holistically. it is crucial to determine whether banks have the capacity to develop robust it systems that align with their business strategies. future - proofing by banks of their it infrastructure becomes imperative, necessitating strategic investments in both capital and operational expenditure. as virtual work environments and cyber risks become more prevalent, effective it governance takes on heightened significance. 19. fourthly, supervisors must focus on the efficacy of assurance functions viz

innovative mechanisms through memorandum of understanding between the rbi and the state governments to overcome issues of dual control and ensure better co - ordination, which were found to be successful when adopted for re - vamping the urban co - operative banks, have also been adopted in the ongoing programme of revival of the rural cooperative system. beyond deregulation and competition as the reform progressed, it was assumed that deregulation and competition would enhance efficiency and ensure better than before quality of service at reasonable but competitive cost to the customers. however, while many improvements have taken place, entirely as expected, several adverse features in regard to retail customers were noticed particularly in respect of a few banks. apart from issues of appropriate pricing, instances of unequal contracts, unfair trade practices, non - transparent fees, intrusion into privacy, excessive penalties, delays in cheque - clearing, arbitrary revision of interest rates or equated monthly instalments, usurious interest charges in some cases and excesses by loan recovery agents have been noticed warranting several institutional, policy and procedural interventions by rbi. a delicate balance between competing considerations is needed but to the extent banks have special privileges, the regulator who has granted such privileges has a responsibility to ensure financial deepening and widening in an efficient, fair and equitable manner. rbi considers delicate balances of these considerations to be critical for both growth of financial sector and a meaningful contribution of financial sector to growth and employment. latest initiatives the rbi ’ s mid - term review of annual policy statement, october 30, 2007, refers to some new initiatives that are worth noting. first, an internal working group has been constituted to consider recommendations made by a committee on agricultural indebtedness ( chairman : dr. r. radhakrishna ). second, recommendations of a technical group ( chairman : s. c. gupta ) on improving the legal and enforcement framework relating to money lenders was forwarded to state governments for appropriate consideration. third, the national commission for enterprises in the unorganised sector ( chairman : dr. arjun k. sengupta ) submitted a comprehensive report to the central government. a working group is being constituted to study those recommendations which relate to the indian financial system. fourth, it is proposed to review the working of lead bank scheme and related arrangements of coordination between rbi, banks, nabard, state government at the state and district levels. the review of these institutional arrangements for development oriented banking would help design a new framework reflecting not only the new orientation such as financial inclusion