##che, 7 returns have so far been operationalised and the second tranche of returns on risk management aspects and consolidated supervision is expected to be introduced by next year. the supervisory intervention by the rbi is normally triggered by the deterioration in the level of capital adequacy, npas, credit concentration, lower earnings, and larger incidence of frauds which reflect the quality of control. internal control systems like the central banks in developed supervisory regimes, the rbi also has started placing an increasing reliance on professional accountants in the assessment of internal control systems of the banks and non - bank financial institutions. over the period, the responsibilities of auditors have been delineated not only to make the audit more detailed but also to make them accountable. the methodology and processes used to generate available data as certified by the audit profession would improve the reliability of financial statements as regards their conformity with national accounting and disclosure standards. another area of crucial importance is the strengthening of internal control systems in banks. the reserve bank has, over the years, emphasised the need for having an effective internal control system in banks. banks have also been advised to introduce the system of concurrent audit in – 4 – major and specialized branches. as a result, all commercial banks have introduced concurrent audit since 1993 by using external auditors as a major resource. the banks are now required to set up audit committees to follow up on the reports of the statutory auditors and inspection by the rbi. similarly, immediate action is warranted on reconciliation of inter branch accounts which, if left unreconciled, are fraught with grave risks. substantial progress has been made by banks in reconciliation of the outstanding entries, and the bfs reviews progress in this area at quarterly intervals. operational strength of the indian banking system it is now commonly acknowledged that the indian banking sector has, as a result of the ongoing reforms, emerged strong and resilient. the public sector banks which suffered losses of rs. 3, 293 crore in 1992 - 93 and rs. 4, 349 crore in 1993 - 94, i. e. in the initial years of introduction of prudential norms, have ended the year 1997 - 98 with a net profit of rs. 5027 crore. net npas of public sector banks formed 8. 2 % of the net advances and 3. 3 % of the total assets as at the end of march 1998. evolution of the risk management system financial institutions carry a wide range of risks, including credit, interest rate,

swaminathan j : embracing meaningful assurance for sustainable growth of the nbfc sector speech by mr swaminathan j, deputy governor of the reserve bank of india, at the conference of heads of assurance of non - banking financial companies ( nbfcs ), mumbai, 15 may 2024. * * * deputy governor shri rao, heads of assurance functions from non - banking financial companies, and my colleagues from the reserve bank of india. a very good morning to all of you. the reserve bank of india has been engaging with its supervised entities regularly over matters of governance and assurance functions, conveying the importance of strong organisational governance and remaining vigilant to ensure the continued stability of the financial sector. assurance functions namely, the risk management, compliance and internal audit, play a very crucial role, as guardians ensuring the regulated entity operates soundly, safely, ethically and within regulatory and legal boundaries. today's conference for the heads of assurance functions is an extension of our efforts, recognising the critical role these functions play in ensuring the robustness and resilience of the financial entity itself as well as the overall financial system. the role played by nbfcs in indian financial sector has been rapidly growing and their share in the credit portfolio has significantly gone up, more so in the last three years. just a decade ago, in 2013, the total credit extended by nbfcs represented approximately one - sixth of the magnitude of bank credit. however, this proportion has increased to one - fourth1, indicating a notable acceleration in credit delivery by nbfcs compared to banks. indeed, nbfcs have emerged as a preferred option for numerous underserved sectors, particularly small businesses and households, due to their ability to provide more feet on street and customer friendly credit solutions. moreover, nbfcs have embraced technology in a big way to further expedite and streamline their reach and credit delivery process. but this has also brought certain systemic risk, complexity and interconnectedness, which is the reason as to why the reserve bank has of late been engaging with this sector more often than before. hence the theme of my speech today is going to be focussing on the need to ensure effectiveness of assurance functions for sustainable growth. as nbfcs expand in both size and complexity, they must bolster governance and assurance functions to maintain a constant vigil over potential risks and vulnerabilities. it is crucial to ensure that the rapid growth and adoption of technology