NEW DELHI: Amid concerns over the RBI’s recent regulatory record, the financial sector watchdog is set to unveil a separate vertical for supervision and regulation on Friday as part of a revamp to focus on improving oversight for banks, non-banking finance companies and cooperative banks.

The new vertical will combine the roles performed by RBI’s departments and will come amid the criticism over several frauds going undetected, starting with the swindle by diamond traders

and Mehul Choksi at Punjab National Bank to the collapse of IL&FS and the recent incident at PMC Bank.

While many in the government believe that RBI has been relying on annual inspections, the regulatory agency has made it clear that it does not have powers like the

or the

to launch search operations and relied on the books and data available with banks.

Based on its inspections, the RBI suggests steps to address concerns related to specific loans and practices, or even orders a systemic revamp. Official sources told TOI that the government and the RBI have had detailed discussions on the issue recently.

In fact, it was during RBI’s appraisal of the IL&FS collapse that the long-pending suggestion for specific supervisory vertical was pulled out and cleared by its central board in May. The new vertical will, however, not focus on housing finance and rural cooperative banks, which are in the domain of

and Nabard, respectively.

While RBI is going to rely on some of its own employees manning the new wing, it also plans to rope in personnel on deputation from other financial agencies after a thorough scrutiny. Going forward, the RBI is looking at having a dedicated cadre of officers who will be given the option of joining the supervision vertical at the time of recruitment itself, sources said.

Currently, the RBI has departments dedicated to supervision and regulation of commercial banks, cooperatives and finance companies. Sources said the regulator intends to use some of the learnings from the recent incidents to beef up supervision and regulation.