76 occasions amounting to ` 122. 9 crore on various commercial banks operating in india. however, fear of fines and penalties will not be enough to keep up with the evolving nature of regulations. but a financial management system with built - in control makes compliance an everyday practice that enables the organisation to operate at greater efficiency. in addition, sound governance creates conducive environment for the values of compliance, integrity, trust, and respect for the law ; to thrive in the organisation ’ s culture. as a result, a bank can empower its entire organization to operate with responsibility while maintaining the flexibility necessary to stay ahead of ever - evolving regulations and business challenges. compliance culture – indian scenario reserve bank of india had introduced a system of “ compliance officer ” in banks way back in august 1992, based on recommendations by the committee on frauds and malpractices in banks ( ghosh committee ). the role of compliance officers came into sharper focus since 1995 when the general manager in charge of audit and inspection was made responsible for the compliance functions, with a requirement for periodic reporting or certification on compliance functions directly to the cmd. however, it was gradually recognized that the circumference of compliance functions in banks needed to be not only enlarged, but also clearly defined, especially in a scenario where successive annual financial inspection reports prepared by the banking supervisor highlighted a host of compliance deficiencies. rbi ’ s recognition for the need and importance of compliance functions received a further impetus after basel committee on banking supervision ( bcbs ) issued the high level paper on compliance risk and compliance function in banks in april 2005. these principles formed the basis for our https : / / in. reuters. com / article / banks - regulator - fines / u - s - eu - fines - on - banks - misconduct - to - top - 400 - billion - by2020 - report - idinkcn1c210d work on issuing rigors for compliance functions in banks, in the year 2007. subsequent to the financial crisis, the focus on compliance has gone up significantly, especially in the area of conduct, kyc / aml, suitability and appropriateness of banking products offered to a specific customer. in this context, and acknowledging the benefits offered by a good compliance culture and costs of poor conduct, the compliance culture of indian banks needs to be strengthened. during the course of the supervisory process, the reserve bank has observed various lacunae in the compliance culture of indian banks. some

sound corporate governance and compliance culture will permit the supervisor to place more reliance on the bank ’ s internal processes. in this regard, supervisory experience underscores the importance of having appropriate levels of authority, responsibility, accountability, and checks and balances within each bank, including those of the board of directors, senior management and the assurance functions by way of risk, compliance and internal audit. i am hopeful that deliberations over the past two days on emerging trends in banking, changes in global regulatory landscape, the new bankruptcy regime in india and technological innovations affecting the way banks do business would prepare banks to not only cope up with the emerging challenges, but also help banks to use the opportunity provided by the new paradigm to further the agenda of inclusive and compliance oriented banking in the country. references 1. bank of international settlements, “ compliance and the compliance function in banks ”, bis 2. bank of international settlements, “ corporate governance principles for banks – guidelines ”, bis 3. flanner, mark. j, “ market discipline in bank supervision ”, chapter 15 of the oxford handbook of banking, first edition, oup 4. hagendorff, jens, “ corporate governance in banking ”, chapter 6 of the oxford handbook of banking, second edition, oup 5. mundra, s. s., “ re - emphasizing the role of compliance function in banks ”, speech delivered at the cafral conference of chief compliance officers in rbi, mumbai 6. chakrabarthy, k. c., “ compliance function in banks – back to the basics ”, speech delivered at the launch of certificate programmes on compliance function and training, mumbai 7. padmanabhan, g., “ emerging issues in cyber security in the financial sector ”, speech delivered at the sri chithira thirunal memorial lecture series organised by the state bank of travancore, thiruvananthapuram