Compliance
What the exam tests
Compliance in an SFB means governance machinery - board oversight, an independent compliance function, audit, RBI inspection readiness and accurate regulatory reporting - not merely an advisory desk.
Core rules
- The board owns compliance: a board-approved compliance policy, an independent Chief Compliance Officer (senior, functionally independent, not running a business line) and periodic compliance certification to the board or Audit Committee of the Board (ACB).
- The ACB is mandatory and must meet at the prescribed frequency, reviewing internal audit findings, compliance lapses and the half-yearly review of the bank's systems.
- Reporting: DSB returns, certified PSL returns, CRILC submissions (large exposures, SMA and default reports at Rs 5 crore and above) and fraud returns. Errors must be corrected and disclosed, not buried.
- Audits: statutory auditors appointed within RBI norms, internal and concurrent audit, and information-systems audit of digital channels.
- RBI supervision: annual financial inspection produces a Risk Assessment Report and supervisory action; powers flow from Sections 35 and 35A of the BR Act, 1949.
- Compliance culture covers the whistle-blower policy, conflict-of-interest rules, related-party dealings and timely escalation.
Worked example
A mapping error keeps a Rs 6 crore SMA-2 account out of two weekly CRILC submissions. Correct handling: rectify the data in the next submission, report the lapse to the ACB with root cause and remediation plan, log it in the compliance register, and fix the system mapping to prevent recurrence. A quiet correction with no escalation is itself a governance failure, even where the underlying account is fully secured.
Marks-losing traps
Treating compliance as a post-facto reporting job; confusing the ACB with a management audit committee; assuming CRILC reporting starts at Rs 1 crore; describing compliance as the auditor's responsibility.