RBI plans to use advanced analytics to improve supervisory supervision

The Reserve Bank is planning to use advanced analytics to analyze its huge database, and to improve regulatory supervision on banks and NBFCs.

The central bank is looking to hire external experts for this purpose.

The RBI intends to upscale it to make sure that the benefits of advanced analytics can be applied to the Department of Supervision in the central bank, as it already uses AI and ML in supervisory processes.

The department has been developing and using linear and a few machine-learnt models for supervisory examinations.

The supervisory jurisdiction of the RBI extends over banks, urban cooperative banks UCBNBFCs, payment banks, small finance banks, local area banks, credit information companies, and select all India financial institutions.

It conducts continuous monitoring of such entities with the help of on-site inspections and off-site monitoring.

The central bank has suggested an expression of interest in EoI for engaging consultants in the use of Advanced Analytics and for generating supervisory inputs.

The Project has been conceived to expand analysis of huge data repository with RBI and externally through the engagement of external experts, which is expected to improve the effectiveness and sharpness of supervision, despite the global supervisory applications of AI ML applications.

The selected consultant will be required to look at and profile data with a supervisory focus.

The goal is to increase the data-driven surveillance capabilities of the Reserve Bank, the EoI said.

It said that regulatory and supervisory authorities are using techniques commonly referred to as 'Supertech' and'regtech' to assist supervisory and regulatory activities across the world.

Many of these techniques are still exploratory, but they are rapidly gaining popularity and scale.

On the data collection side, AI and ML technologies are used for real-time data reporting, effective data management and dissemination.

These are used for data analytics to look at firm-specific risks, such as liquidity risks, market risks, credit exposures and concentration risks, misconduct analysis, and mis-selling of products.