Tightening its regulations over the operations of foreign banks in the country, the Reserve Bank of India (RBI) has asked their chief executive officers (CEO) to monitor the compliance system.

It is observed that operations of foreign banks functioning in India as branches of the parent banks generally do not have a separate audit committee vested with the responsibility of examining and reviewing inspection and audit reports for their compliance, said RBI .

In the recent past, there have been concerns about the adequacy of regulatory compliance by foreign banks in India and it is felt that this is on account of business heads/units reporting directly and being answerable to their ‘functional heads’ located overseas and not to the chief executive officer (CEO) of Indian operations, added RBI.

In this context, it has been decided that for all foreign banks operating in India, the chief executive officer would be responsible for effective oversight of regulatory and statutory compliance as also the audit process and the compliance thereof in respect of all operations in India, the RBI directed.

Sources pointed out that RBI had to issue such an instruction as so many scams involving foreign banks have been unearthed in recent times and it has been difficult for the RBI to fix the exact responsibility for such development.

“Whenever RBI has summoned the CEO of a foreign bank to ask for the explanation for the scams, the CEOs in general have shifted the blame to the system their banks follow and their inability to detect the scam. Many a time CEOs have said the concerned department involved in the scam don’t report to them,’’ said RBI sources.

However foreign banks sources have said some banks have India panels where heads of risk management departments, compliance departments are members.

But they may not be that effective the way such a mechanism operates in other private and public sector banks. (PTI)