Urban cooperative banks must update and strengthen their internal control systems continuously to identify and manage emerging risks and changing dynamics of traditional risks, according to Reserve Bank of India Deputy Governor Swaminathan J.
In a conference held for heads of assurance functions of select urban cooperative banks on Thursday, Swaminathan also said effective assurance functions is crucial in safeguarding financial soundness of banks and upholding customers’ trust.
He also said the central bank would maintain “its zero-tolerance policy towards poor governance practices” in urban cooperative banks.
In a separate keynote address, Deputy Governor Rajeshwar Rao also outlined the importance of the three assurance functions—compliance, internal audit and risk management—for efficacy and independence of such lenders.
Given that urban cooperative banks face stiff competition from other players, Rao urged chief risk officers to monitor and contain risks in their balance sheets. On compliance, he stressed a forward-looking approach and internal audit function, while establishing a clear communication channel.
Other functions within the bank must enable proactive reporting of significant gaps, and facilitate necessary corrective action, Rao added.