02 June 2023

EC No. 105 / DoS - 27 / 2023

Ref. No. NB. HO. DoS. Pol. / 633 / J-1 / 2023-24

Managing Director, All State Cooperative Bank
Managing Director/Chief Executive Officer
All District Central Cooperative Banks

Madam /Dear Sir

Enhanced CAMELSC Supervisory Approach – Guidance Notes

As you are aware, a Working Group on Risk Based Supervision (WG-RBS) constituted by NABARD to examine the extant approach of supervision, industry practices and suggest measures for moving over to Risk Based Supervision recommended that an interim approach of 'Enhanced CAMELSC’ before migrating to Risk Based Supervision (RBS), may be adopted owing to constraints faced by NABARD and Supervised Entities (SEs).

2. The status and progress of implementation of Enhanced CAMELSC is being apprised to the Board of Directors of NABARD on a regular basis. In the 89th meeting of Board of Supervision, the Enhanced CAMELSC approach was approved for roll out for a set of banks based on a differentiated approach from 01 April 2023. Enhanced CAMELSC based Supervisory Rating Model has been developed for rating the banks on Enhanced CAMELSC based Supervision. In tune with the changing scenario of Risk Profiling in the Banking industry, the Enhanced CAMELSC based supervisory rating provides a forward looking, risk oriented and data driven approach for the pre-eminent assessment of SEs. The Enhanced CAMELSC Model leverages the existing reporting framework by incorporating the additional risk and control factors for SEs, alongwith the introduction of substantial additional Quantitative and Qualitative parameters.

3. Recognising that all SEs are not on the same level of maturity curve in terms of capabilities, infrastructure, data quality, assessment and measurement of risk, operations, etc., a proportionate and differentiated approach for supervision would be justifiable. Accordingly, it has been decided to roll out the Enhanced CAMESLC based supervisory approach in a phased manner. The list of banks identified for Enhanced CAMELSC based supervisory approach from 01 April 2023 is enclosed as Annexure I. The remaining banks will be covered under revised approach in due course and the same will be notified to the Banks by NABARD.

4. To facilitate efficient implementation of Enhanced CAMELSC, a Comprehensive Guidance Notes have been prepared on Enhanced CAMELSC based supervisory rating and the same will serve as a useful reference document for the banks. Efforts have been made to make the Guidance Notes informative and educative. Besides, they also provide a quick understanding of various parameters under Enhanced CAMESLC approach and their relevance from risk management perspective.

5. We request you to take up necessary steps for migration to Enhanced CAMELSC, i.e. identification of required data points, putting in place adequate systems/ processes / information systems to enable compilation of quantitative and qualitative data and make available the same to Inspecting Officers when they visit the bank for inspection. Since Enhanced CAMELSC model is data-driven/information intensive, we request the Board and Top Management to bestow their attention and put in place an efficient internal system.

6. The link for downloading the Guidance Note on Enhanced CAMELSC for RCBs is mentioned below:
Guidance-Notes-for-Enhanced-CAMELSC-for-RCBs

7. Please acknowledge receipt of this circular to our Regional Office concerned.

Yours faithfully

Sd/-
(K S Raghupathi)
Chief General Manager

Encl: as above