The Reserve Bank of India (RBI) today pitched for a comprehensive legislation to deal with the solvency problems in the banking and financial sector, and to protect it from the impact of the global crisis. "Addressing these questions (relating to risks in the financial sector) will require some fundamental changes in our legal and regulatory framework," RBI Governor D Subbarao said here while addressing a conference. The first challenge, he added, "is developing a comprehensive legal framework for resolution that covers all the different types of financial institutions". Subbarao said the "legal framework governing bank resolution is spread all over, making the framework complex and often time non-transparent". He said the financial crisis has underscored the importance of rapid resolution to arrest contagion and restore stability. "Even as we have been able to resolve problems of banks so far, it is not clear if our resolution framework has been put to severe test," Subbarao added. The resolution methods used in India are assisting troubled banks in restructuring or merging it with a strong institution. Subbarao said that even as failures of commercial banks have been rare in India, failures among urban-cooperative banks are quite common. He said the RBI has a 'Board for Financial Supervision' to review banks supervisory functions and monitors the performance of banks, especially weak banks.
NDTV Profit
