In order to bring uniformity in approach
and to align the risk management system with the best practices, banks are
advised to:
·
Lay down a Board-approved policy defining
the role and responsibilities of the CRO.
·
CROs shall be appointed for a fixed
tenure. Any change before the completion of the tenure shall only be with the
approval of the Board which shall be reported to RBI. In case of listed banks,
any change in incumbency shall also be reported to the stock exchanges.
·
CRO shall be a senior official and shall
have the necessary qualification and experience in risk management.
·
The CRO shall report directly to the MD
& CEO / Risk Management Committee (RMC) of the Board. RMC shall meet the
CRO without the presence of the MD & CEO, at least once in a quarter.
·
The CRO shall not have any reporting
relationship with the business verticals of the bank and shall not be given any
business targets.
·
In case the CRO is associated with the
credit sanction process, it shall be expressed clearly whether the CRO’s role
would be that of an adviser or a decision maker. The policy shall include the
necessary safeguards to ensure the independence of the CRO.
·
In banks that follow committee approach
in credit sanction process, if the CRO is one of the decision makers, he shall
have voting power and all other members, shall individually and severally be
liable. If the CRO is not a part of the credit sanction process, his role will
be limited to that of an adviser.
·
In banks which do not follow committee
approach, the CRO can only be an adviser in the sanction process.
·
The CRO in his role as an adviser shall
be an invitee to the credit sanction/approval committee without any voting
rights.
·
The CRO shall not be given the
responsibility of any other function.
Based
on RBI circular dated 27/04/2017. For any further clarification, please refer
www.rbi.org.in