to enhance the soundness of the financial system by adopting a holistic approach towards addressing the growing complexities and inter - connectedness, and to deal effectively with the potential systemic risks. 10. in the past five years, there has been a significant strengthening of the reserve bank's supervisory systems and shifting from an entity - based approach to a more thematic and activity - based approach. structural changes have been implemented to enhance agility, flexibility, and specialization. a unified and harmonized supervisory approach has been adopted for commercial banks, nbfcs, and urban cooperative banks ( ucbs ), with a greater focus on identifying the root causes of vulnerabilities. 3 / 5 bis - central bankers'speeches 11. the reserve bank has deployed a wide array of tools to enhance the effectiveness of supervisory frameworks. these include an early warning system, stress testing models, vulnerability assessments, cyber key risk indicators, conduct of phishing and cyber reconnaissance exercises, targeted evaluation of compliance with kyc / aml norms, micro - data analytics to analyse granular data, among others. we are also in the process of adopting the use of advanced analytics, artificial intelligence and machine learning on supervisory data for even better insights into operations of supervised entities. 12. supervisors often detect serious issues such as non - compliance, divergences from iracp norms, and gaps in internal controls and it systems during their limited time at the bank. however, it is reported that these concerns frequently surprise directors when presented in risk assessment and off - site analytical reports. boards should reflect on why critical deficiencies go unnoticed despite having access to relevant data and assessments, and work on building internal capabilities to identify and address such issues at an early stage. 13. sometimes supervision is viewed as intrusive. let me clarify that supervision is neither designed to be intrusive or punitive nor are supervisors the risk managers of supervised entities. it should be appreciated that supervision is only the fifth line of defence in banking, as it serves as an additional layer of oversight beyond the traditional three lines of defence model ( business operations, risk management and compliance, and internal audit ) and the fourth line of defence ( external audit ). supervision is forced to step in only when these lines fail. preparing for the future 14. before, i conclude, let me dwell upon the road ahead. the future of banking is expected to be shaped by advancements in technology leading to greater business and process automation, changing customer expectations, and evolving regulatory

the required 10. 875 per cent. overall, the government ’ s efforts to infuse capital into psbs has significantly helped them achieve these targets. 5. we have also put in place frameworks on countercyclical capital buffer ( cccb ), leverage ratio, liquidity coverage ratio ( lcr ) and net stable funding ratio ( nsfr ) 1. for better management of concentration risks and in order to align indian banks with the international norms, the reserve bank proposed guidelines on large exposures which became effective from april 1, 2019. the latest round of reforms published by the basel committee on banking supervision ( bcbs ) in december 2017 have implementation timelines stretching up to 2022. the reserve bank is expected to come up with the draft guidelines by 2020 for consultations. non - performing assets 6. the deterioration in asset quality of indian banks, especially that of public sector banks ( psbs ), can be traced to the credit boom of 2006 - 2011 when bank lending grew at an average rate of over 20 per cent. other factors that contributed to the deterioration in asset quality were 1 / 6 bis central bankers'speeches adverse macro - financial environment ; lax credit appraisal and post - sanction monitoring standards ; project delays and cost overruns ; and the absence of a strong bankruptcy regime until may 2016. the reserve bank set up a central repository of information on large credits ( crilc ) in 2014 which was followed by an asset quality review ( aqr ) in 2015. as a result of these initiatives, the recognition of non - performing assets improved, leading to a sharp rise in the gross npa ratio from 4. 3 per cent at end - march 2015 to 7. 5 per cent at end - march 2016. it further reached the peak of 11. 5 per cent in march 2018. recent supervisory data suggests that various efforts made by the reserve bank in strengthening its regulatory and supervisory framework and the resolution mechanism instituted through insolvency and bankruptcy code ( ibc ) are bearing fruit. this is reflected in significant improvement in asset quality of scheduled commercial banks ( scbs ) during 2018 - 19 as gross npa ratio declined to 9. 3 per cent as on march 2019. 7. at the same time, there has been an improvement in provision coverage ratio ( pcr ) of scbs to 60. 9 per cent at end - march 2019 from 48. 3 per cent at end - march 2018 and 44. 0 per cent at end -