RBI's Stern Warning to Financial Institutions

In a significant address, Reserve Bank of India (RBI) deputy governor Swaminathan J cautioned banks and non-banking financial companies (NBFCs) against the allure of bypassing internal safeguards and regulatory norms for growth. Speaking at the 109th foundation day of Karur Vysya Bank (KVB), he emphasized that competitive pressures should not undermine prudence or governance.

Emerging Risks in the Financial Sector

Swaminathan highlighted the progress within the financial sector but pointed out emerging risks due to a mismatch between strategic intent and operational discipline. He criticized practices like creative accounting and lenient policy frameworks, warning they could erode public trust in the banking system.

A Framework for Ethical Decision-Making

Drawing from the classical Tamil text Thirukkural, Swaminathan proposed a five-point framework for banks to consider in their decision-making processes. He urged alignment of systems, processes, and people with ethical standards across all levels of operation.

The Importance of Digital Safeguards

The deputy governor also underscored the necessity of implementing digital tools with adequate safeguards to ensure security and integrity in the digital transformation of the banking sector.