The Reserve Bank of India on 19th September 2022, decided to introduce certain principles, standards, and procedures for Compliance Function in UCBs, keeping in view the principles of proportionality. Accordingly, this Circular shall be applicable to all UCBs under Tier 3 and Tier 4 categories except UCBs under All Inclusive Directions (AID). UCBs under Tier 1 and Tier 2 categories shall continue to be governed under the existing guidelines.
The Compliance Function shall ensure strict observance of all statutory and regulatory requirements for the UCB, including standards of conduct, managing conflict of interest, treating customers fairly and ensuring the suitability of customer service.
Compliance Function shall be responsible for undertaking the following activities at the minimum:
- Assist the Board and the Senior Management in overseeing the implementation of Compliance Policy including policies and procedures, prescriptions in Compliance Manuals, internal codes of conduct, etc.
- Play the central role in identifying the level of Compliance risk in the organisation. The Compliance risks in existing / new products and processes shall be analysed and appropriate risk mitigants put in place.
- Compliance Function shall monitor and test Compliance by performing sufficient and representative Compliance testing, and the results of such Compliance testing shall be reported to the Senior Management. It shall periodically circulate the instances of Compliance failures among staff, along with the required preventive instructions. Staff accountability shall be examined for major Compliance failures.
- Ensure compliance of regulatory/supervisory directions given by RBI in both letter and spirit in a time-bound and sustainable manner.
- Attend to compliance with directions from other regulators in cases where the activities of the entity are not limited to the regulation/supervision of RBI. Further, discomfort conveyed to the UCB on any issue by other regulators, and action taken by any other authorities/law enforcement agencies, shall be brought to the notice of RBI.
- The Compliance Department may also serve as a reference point for the staff from operational departments for seeking clarifications/interpretations of various regulatory and statutory guidelines.
