Issues in Efficacy of Early Warning Signal System in Banks in India

Early warning systems are functional and technology driven approaches that draw attention to a number of parameters with activities happening in accounts in order to alert top management of the bank to take timely measure to keep the portfolio healthy. The objectives of an EWS /PMS depends on its intended use. A bank are at liberty to imagine a variety of parameters depending upon the control measures of RBI, control measures necessary by the banks such as risk managers, asset managers, and economic and financial forecasters, most EWSs are constructed with top management in mind and strategies adopted by them from time to time.There is no doubt that the banks in India are having a EWS system to identify RFA in a timely manner. Further, the banks are upgrading the EWS technology in respective banks by gaining more and more expertise in this field by inviting RFP from expert agencies from time to time. It is a matter of concern to see why in spite of a number of preventive warning system with the regulator, failure of Cooperative bank continuously raises a question on management of these banks by board as well as the supervision of regulator in time , rather than to let the bank close at a later stage. Why timely measures are not taken by banks or regulator who have immense powers of supervision and control