RBI – the regulatory body responsible for the Indian financial regulations

The Reserve Bank of India (RBI) plays a critical role in safeguarding the Indian financial system’s integrity and stability. In order to achieve this, the RBI regularly issues regulations and guidelines for various financial institutions like Banks, Payment Banks, Housing Finance Companies (HFCs), and Non-Banking Financial Companies (NBFCs) in India. These regulations aim to ensure responsible financial practices and protect consumer interests. On 31st January 2024, RBI passed a circular emphasizing the need for shifting towards comprehensive, integrated, enterprise-wide, and workflow-based solution or tools, that is, the need for implementation of comprehensive compliance management solution by 30th June 2024 and extended through another circular till 31st October, 2024. This circular was passed after conducting a thorough assessment of Supervised Entities (SEs) where it was observed that despite adapting to different automation techniques, the automation of monitoring process remains a work-in-progress and requires implementation of systematic process in place. Hence, RBI emphasized on the fact that there is a need to implement a compliance management tool for managing cross-functional compliances.

The key features highlighted by RBI for such Compliance Management Solution or Tool are:

1. Cross-Functional Collaboration: Provide for effective communication and collaboration among all the stakeholders (by bringing business, compliance and IT teams, Senior Management, etc. on one platform);
2. Systematic Process: Have processes for identifying, assessing, monitoring and managing compliance requirements;
3. Escalation of Non-Compliance: Escalate issues of non-compliance, if any;
4. Capture the reason for delay in compliance: Require recording approval of competent authority for deviations/ delay in compliance submission; and
5. Bird-eye View of Compliance Position to the Management: Have a unified dashboard view to Senior Management on compliance position of the Regulated Entity (RE) as a whole.

The Challenge of Manual Compliance Management System

Traditionally, compliance management within these institutions has often relied heavily on manual processes. This includes tasks like manual compliance tracking, where a lawyer and other business functions, manually monitor deadlines and ensure timely completion of compliance tasks. Data management, where there are issues like maintaining extensive documentation and records on personal laptops and systems, to comply with the regulations.

Further, there are always challenges in identifying and addressing potential compliance gaps and breaches. With new laws and updates passed regularly by the regulatory bodies in this field, it becomes a challenge to stay abreast with all necessary changes. As we are aware “Ignorance of law is no excuse”, not being aware of such regulatory changes also cannot save you from  non-compliance which at times lead to hefty penalties.

While manual methods can work for smaller organisations, they become extremely difficult and cumbersome as the volume and complexity of regulations grow. This is precisely why the RBI has mandated a shift towards technology-driven compliance management systems.

The requirement of a compliance management system/tool for rbi compliances

The recent RBI circular directed all upper- and middle-layer NBFCs and other Regulated Entities (REs) to adopt a more robust approach to compliance management. This directive emphasizes the use of technological solutions to:

• Enhance efficiency: Automate repetitive tasks and streamline compliance workflows.
• Improve accuracy: Eliminate human errors in data entry and recordkeeping.
• Increase transparency: Foster clear communication and collaboration among stakeholders.
• Boost risk mitigation: Proactively identify and address potential compliance breaches.

Now, the deadline for implementing a technology based compliance management system is 31st October, 2024. This means that financial institutions have a limited window to adapt and meet the RBI’s requirements.

Introducing Lexplosion’s Compliance Management Tool for RBI Requirements

Lexplosion, a pioneer in providing legal-tech solutions, offers a comprehensive compliance management tool for RBI requirements. Komrisk, our compliance management solution empowers financial institutions to streamline their compliance processes and achieve complete peace of mind. Our solutions cater to the specific needs of these regulated entities which include Banks, Payment Banks, HFCs, and NBFCs, ensuring they stay compliant with all applicable laws and regulations.

Key Features of Lexplosion’s Compliance Management Tool for RBI Compliance

Lexplosion’s compliance management tool is designed to address all the essential features outlined by the RBI, that is:

1. Cross-Functional Collaboration: Each department, right from Human Resource team managing the Labour compliances under various laws like Shops and Establishment Act, Gratuity Act, Maternity Benefit Act, etc to IT team handling the compliances under laws like Information Technology Act, Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules,  CERT-IN Guidelines to Finance team handling the compliances under laws like provident fund, payment of professional tax, to other departments handling the Industry specific compliances under various laws and regulations can keep a track and monitor all their compliances with few clicks through Lexplosion’ s compliance management tool.
2. Systematic Process: Every compliance related to cross-functional team can be systematically provided within the tool with automatic dates getting triggered through Lexplosion’ s compliance management system enabling cross-functional team to complete their tasks on-time.
3. Escalation of Non-Compliance: The escalation feature available in Lexplosion’ s compliance management system intimates up to 10 escalation points about the compliance which are approaching as well as about the compliances whose due date has passed, and is flexible enough to incorporate reminders as required by the users.
4. Capture the reason for delay in compliance: In case there is any delay in completing a particular compliance on-time, one can capture by commenting the exact reason for such delay and also refer to such comments at a later date through Lexplosion’ s compliance management solution.
5. Bird-eye View of Compliance Position to the Management: The solution enables the Higher Team Members to have a bird-eye view of the compliance status across all departments, all operating units and all entities with a single click of a button.

Apart from the key features mandated by RBI which are already present in Lexplosion’ s compliance management tool, there are some other additional features as well:

• Customized Compliance Library:It contains a comprehensive database of relevant compliance tasks specific to your organization’s operations.
• Task Management: The users can assign, track, and manage compliance tasks with ease. The tool facilitates clear communication within teams and ensures accountability for task completion.
• Compliance Workflow & Escalations: The tool enable users to automate workflows for compliance processes, ensuring timely execution and smooth navigation through different stages. The tool also offers a flexible escalation mechanism to address any potential compliance issues efficiently.
• Uploading of Proofs: The tool enables users toupload electronic records and documents to substantiate completion of compliance tasks. The feature provides an audit trail and facilitates easy access to compliance documentation.
• Ongoing Regulatory Updates:The main Unique selling point of Lexplosion’s compliance tool is that it stays updated with the latestregulations and amendments, ensuring you’re always compliant with all laws and regulations applicable to your Organization.
• Technical Support: Lexplosion has a dedicated support team to assist with any technical queries or challenges you might encounter while using the compliance management system.
• Secure Cloud Solution: Lexplosion’ s compliance management tool is built on a secure cloud platform, offering scalability, data security, and remote accessibility.
• Mobile Application: Along with Lexplosion’ s compliance management system users can also enjoy the flexibility of managing compliance tasks on the go with a mobile application.

Benefits of Using Lexplosion’s Compliance Management Tool for RBI Compliance

To deal with the RBI circular and implement a compliance management tool, financial institutions can reap significant benefits, including:

• Reduced Costs: Automate manual tasks and streamline workflows to optimize resource allocation and reduce operating costs.
• Enhanced Accuracy: Eliminate human errors and ensure data accuracy in compliance reporting.
• Improved Efficiency: Streamline compliance processes and free up valuable resources to focus on core business activities.
• Increased Transparency: Foster clear communication and collaboration within the organization regarding compliance.
• Proactive Risk Management: Identify potential compliance gaps and take corrective actions before any breaches occur.
• Regulatory Peace of Mind: Gain confidence in your organization’s compliance posture and avoid hefty penalties associated with

The 30th June, 2024 deadline for implementing a tech-based compliance management system is fast approaching. Don’t wait until the last minute! Partner with Lexplosion and leverage our robust RBI compliance management tool to ensure seamless compliance, mitigate risks, and achieve peace of mind.

Contact us today for a free demo and be compliant with the RBI circular. Mitigate the risk of non-compliance and rest assured, while we help you implement a robust compliance management tool for your organization.

Email: inquiries@lexplosion.in

Written by: Saikat Mondal, Amanya Gangawat

Disclaimer

This content is intended for informational purposes only and does not constitute a legal opinion. Despite our efforts to maintain accuracy, we do not make representations, warranties or undertakings regarding the quality, completeness or reliability of the content. Readers are encouraged to seek legal counsel prior to acting upon any of the information provided herein. This content, including the design, text, graphics, their selection and arrangement, is Copyright 2024, Lexplosion Solutions Private Limited or its licensors. ALL RIGHTS RESERVED, and all moral rights are asserted and reserved.

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