In order to ensure robustness in working of banking entities, the Reserve Bank of India (RBI) has proposed to replace existing approaches for measuring minimum operational risk capital requirements of banks with a new Basel-III standardised approach. ‘Operational risk’ refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
The RBI issued the ‘Draft Master Direction on Minimum Capital Requirements for Operational Risk’ as part of the convergence of its regulations for banks with Basel-III standards. The central bank has sought comments on the draft by January 31, 2022.
All existing approaches - Basic Indicator Approach (BIA), The Standardised Approach (TSA)/ Alternative Standardised Approach (ASA) and Advanced Measurement Approach (AMA) for measuring minimum operational risk capital requirements - are proposed to be replaced by the new standardised approach (Basel-III Standardised Approach). The central bank aims to put the modified norms in place from April 1, 2023.
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