of supervision ( dos ) was created bringing all ses, namely, scheduled commercial banks, nbfcs and ucbs under one umbrella. unifying the supervisory functions shall reduce the supervisory arbitrage and information asymmetries across ses and address the complexities arising from their interconnectedness. this will also help in the holistic understanding of systemic risks. steps have been taken to improve the supervisory function through better capacity building and skilling of supervisors and for this purpose a separate college of supervisors ( cos ) has been set - up which is conducting extensive training programs in different areas. supervisory specialisation is also being reinforced by way of creating specialised divisions for risk - based supervision of kyc / aml risk, data analytics, cyber security and it examinations, among others. a supervisory action framework has also been put in place which provides for graded early supervisory action depending on the frequency and severity of breaches identified. ( b ) strengthening sound governance and internal controls 1. emphasis on risk culture 9. as banks are in the business of taking risks, sound risk culture lies at the heart of every decision that they take. in alignment with global developments, reserve bank too has made risk culture and business model analysis as part of its supervisory assessment. the focus has been to ensure that entities put in place a well - defined risk appetite framework, and business decision making is broadly in alignment with their risk appetite and risk bearing capacity. 2. strengthening the assurance function 10. reserve bank attaches a lot of importance to the effective functioning of internal assurance functions in its financial entities and has issued revised guidance for concurrent, internal, as well as external audits in banks. the guidelines are expected to ensure that these audits act as an 2 / 4 bis central bankers'speeches effective early warning, give greater clarity on supervisory expectations, avoid conflict of interest, provide sufficient authority / resources / independence to these functions, among others. 3. compliance function 11. the compliance function in a bank is an integral part of corporate governance, as it can affect the bank ’ s reputation with its shareholders, customers, employees and the markets ( bis, 2005 ). the recent guidance by the reserve bank on compliance function casts responsibility of the compliance culture and management of compliance risk explicitly upon the board. the guidance advises banks on laying down a board - approved compliance policy, well - defined selection process for chief compliance officer ( cco ), a fixed tenure to ccos, and requisite authority. reserve bank would expect

for moving forward, would be the reforms in governance, that are critical to strengthen state capacity to perform its core functions more effectively and equitably. the business community has a vital stake in the improvement of the quality of governance by empowering the public institutions, since good governance can prevail only when public institutions function fairly and efficiently. let me conclude by thanking the institute, in particular dr. arvind subramanian, for giving me the privilege of making the presentation. i now eagerly look forward to the interactive session that follows. thank you.