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RBI Governor Asserts Robust Health of India’s Financial System

3 weeks ago
RBI Governor Asserts Robust Health

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In an address at the inaugural Global Conference on Financial Resilience, Reserve Bank of India (RBI) Governor Shaktikanta Das declared the Indian financial system to be in a “much stronger position” compared to the pre-COVID era, underscoring the importance of proactive supervision and technological integration. 


Strengthening Financial Stability 

Speaking at the event organized by the College of Supervisors at the IGIDR Campus in Mumbai, Governor Das highlighted the system’s robust capital adequacy, low levels of non-performing assets, and the healthy profitability of banks and non-banking financial companies (NBFCs). 

“India’s domestic financial system is now in a much stronger position than it was before we entered the period of the COVID crisis,” said Das. “I would like to compliment the banks and other financial sector entities for such a stellar performance in the year which has just ended on March 31”, he added. 


Learning from Global Failures 

Governor Das began his speech by referencing recent global banking failures, including those in the United States and the challenges faced by institutions like Credit Suisse. 

He emphasized the importance of learning from these incidents and the necessity of proactive regulatory measures. 


Proactive RBI Interventions 

Highlighting the RBI’s proactive approach, Das cited the intervention in the Yes Bank crisis as evidence of the central bank’s capability to address financial instability effectively. 

He emphasized the importance of the RBI’s integrated approach in leveraging various facets of banking operations to manage crises. 


Identifying Potential Risks 

Addressing potential catalysts of financial crises, Governor Das pointed to internal deficiencies, external factors such as climate change, technological disruptions, and undetected fraud. 

He stressed the importance of supervisors enhancing their methods to align with evolving stress scenarios. 


Supervisory Initiatives 

Das outlined RBI’s recent supervisory initiatives aimed at preempting future risks, including the moderation of unsecured lending and reducing bank exposure to NBFCs. 

“Fortunately, all stakeholders in India, namely, the Reserve Bank, the Banks and Non-banking financial companies (NBFCs), and the government have made tangible efforts in this direction,” Das noted. 


Embracing Technological Advancements 

Emphasizing continuous vigilance, Das urged financial institutions to embrace technological advancements while maintaining robust governance and ethical standards. He highlighted the role of AI and machine learning in enhancing predictive analytics, fraud detection, and operational efficiencies. 

“AI and ML can enhance predictive analytics and enable banks and NBFCs to identify potential risks and trends more accurately. These technologies can improve fraud detection by recognizing unusual patterns and transactions in real time,” he said. 


Commitment to Regulatory Stability 

Looking ahead, Governor Das outlined the RBI’s commitment to regulatory stability through a thematic and activity-based supervisory approach. He mentioned the creation of a unified supervision department and the proactive engagement of senior officers with bank boards. 

Das reiterated the RBI’s vision for its centenary, aiming to position the institution as a benchmark for emerging economies through a holistic, customer-centric regulatory framework.