The Reserve Bank of India has picked up eight banks to start risk-based supervision in the current fiscal.

Risk-based supervision (RBS) will be done as a pilot project in addition to the usual CAMELS rating inspection.

CAMELS is an acronym for six parameters -- capital adequacy, asset quality, management, earnings, liquidity and systems that are taken into account for rating.

The banks that have been randomly selected for the inspection are Punjab National Bank in Delhi, Allahabad Bank in Kolkata, Indian Overseas Bank in Chennai, State Bank of Hyderabad in Hyderabad, ING Vysya in Bangalore, IDBI Bank and Hong Kong and Shanghai Banking Corporation in Mumbai and the Federal Bank in Thiruvananthapuram.

The RBI will work out the risk profile of these banks on the basis of select parameters and then the bank that emerges as most risk prone will be the one on which supervision will concentrate on.

It is believed that RBS will cut down the time and manpower required for a supervision. It will follow the CAMELS supervision within one to three months depending on the availability of data at the respective banks.

However, the report generated out of the RBS will be for RBI's own risk assessment purpose and will not be revealed to the banks.

The development follows from the RBI's mid-term review of October 2002 whereby it was indicated that RBI was in the process of switching over to risk-based supervision of banks during 2003.

Thereafter, an internal group was set up at the instance of the Board for Financial Supervision to assess the preparedness of banks to switch over to RBS regime.