Operational risk is defined as the risk of direct or indirect loss resulting from breakdowns in internal procedures, people, system and external events. Examples of operational risk are frauds, system failure, error in financial transactions, failure to discharge demand of contractual obligations due to insufficient funds, etc.
RBI on Thursday (12-12-2019) notified that the bank has in the recent past noticed a few instances of Fat Finger, Big Figure errors on the part of market participants in G Sec auctions. In view of such errors that can cause financial loss to the bidders, the Central Bank has developed a “Price / Yield range setting” facility on its Core Banking Solution (CBS) platform known as ‘e-Kuber’.
The “Price / Yield range setting” facility allows a participant to define a range i.e. a maximum and a minimum value for bids they intend to submit. The participant can set in the range either on price or yield terms, for each security, for every auction which can be set before the auction and can also be modified during the auction. Once the limits are set by the participating entity, auction bids will be automatically validated against the set limits.
As the new facility arranged by RBI is a risk management measure, the bank advised all participant entities to take advantage of the facility and start using the facility and put it to good use.
