“India’s domestic financial system is now in a very strong position”: RBI Governor

RBI Governor Shaktikanta Das on Thursday said the Indian financial system is in a “very strong position”, characterised by strong capital adequacy, low levels of non-performing assets and healthy profitability of banks and non-banking lenders.

Underlining the imperative of promoting a future-ready ethos in the financial sector, Das also stressed the critical role of timely supervisory interventions in mitigating systemic risks.

The RBI governor said this in his/her inaugural address at the Global Conference on Financial Resilience organised by the College of Supervisors at the IGIDR campus in Mumbai.

he/she said, “India’s domestic financial system is now in a much stronger position than it was before we entered the COVID crisis period. The Indian financial system is now in a much stronger position, characterised by strong capital adequacy, low level of non-performing assets and healthy profitability of banks and non-banking lenders, i.e. NBFCs.”

he/she said, “I would like to commend the banks and other financial sector institutions for such a stellar performance in the year ended March 31. There is absolutely no room for complacency, because the world is changing, challenges are emerging, complexities are increasing, and problems can arise from any corner of the financial system within the country or the world, for reasons totally unrelated to you and me…”

Governor Das referred to global banking failures, including in the United States, and the challenges faced by institutions like Credit Suisse, and emphasized the lessons learnt from such events.

he/she acknowledged the detailed analysis done by the US Federal Reserve on bank failures and stressed the importance of proactive regulatory measures to prevent crises.

Highlighting RBI’s proactive approach, Governor Das cited the intervention in the Yes Bank crisis as evidence of the central bank’s ability to address financial instability pre-emptively.

he/she pointed out the benefits of RBI’s integrated approach in leveraging various aspects of banking operations to effectively manage crises.

Discussing the various sources of financial crises, Governor Das identified internal deficiencies within organisations, external factors such as climate change, technological disruptions, and unknown frauds as potential catalysts.

he/she stressed the need for supervisors to upgrade their methods and adapt them to changing stress scenarios over time.

Governor Das outlined RBI’s recent supervisory initiatives, including reduction of unsecured lending and reduction of bank exposure to non-banking financial companies (NBFCs), aimed at preventing future risks.

“Fortunately, all stakeholders in India, namely, the Reserve Bank, banks and non-banking financial companies (NBFCs), and the government have made concerted efforts in this direction. India’s domestic financial system is now in a very strong position, characterised by robust capital adequacy, low levels of non-performing assets and healthy profitability of banks and NBFCs,” Das said.

he/she stressed the importance of continued vigilance despite current regional stability, and urged financial institutions to embrace technological advancements while maintaining strong governance and ethical standards.

he/she highlighted the critical role of AI and machine learning in fraud prevention and operational efficiency, and emphasized the need for secure technology integration aligned with business goals.

“AI and ML can enhance predictive analytics and enable banks and NBFCs to identify potential risks and trends more accurately. These technologies can also improve fraud detection by spotting unusual patterns and transactions in real-time. Thus, they can protect institutions and their customers from financial crimes and fraud,” Das said.

he/she added, “Operational efficiency can be improved through the automation of routine tasks, which reduces human error and frees up resources for more strategic activities. Robotic process automation (RPA) can handle high-volume and repetitive tasks, such as data entry and transaction processing, more quickly and accurately than humans.”

Looking ahead, Governor Das underscored RBI’s commitment to regulatory stability, emphasising on a thematic and activity-based supervisory approach.

he/she highlighted RBI’s efforts to set up an integrated supervision department and involve senior officials to promote closer cooperation with bank boards.

Governor Das expressed RBI’s ambition to establish itself as a model for emerging economies, and advocated a holistic, customer-centric regulatory framework on the occasion of RBI’s centenary year.

Governor Das emphasised RBI’s ongoing initiatives, including the creation of an Integrated Supervision Department and adopting unconventional methods to enhance regulatory effectiveness.

he/she highlighted the active engagement of senior officials at the Executive Director level with bank Boards to strengthen RBI’s monitoring priorities.

Governor Das reiterated his/her vision for the RBI’s centenary year, which aims to establish the institution as a benchmark for the global South through a holistic, customer-centric regulatory framework.

These initiatives underline RBI’s commitment to enhance financial resilience and maintain high standards of governance in the dynamic global financial environment.