RBI Governor Shaktikanta Das urges banks to enhance risk management and governance.

RBI Governor Shaktikanta Das stressed on Wednesday how important it is for banks to improve their compliance culture, risk management procedures, and governance standards. Das brought up the ongoing progress in banks’ asset quality, loan provisioning, capital sufficiency, and profitability during meetings with managing directors (MDs) and chief executive officers (CEOs) of public sector banks and a few private banks. The Reserve Bank and the senior management of its regulated companies continue to interact through these sessions.

Das highlighted the banking industry’s growing strength and resilience in his introductory remarks. He did, however, emphasize how crucial it is to strengthen bank governance standards, risk management procedures, and compliance cultures even further. Concerns about asset liability management (ALM), trends in unsecured retail lending, liquidity risk management, and the ongoing disparity between credit and deposit growth were among the main topics covered.

Additionally, the governor emphasized the necessity of strong cybersecurity safeguards and efficient third-party risk management. In order to stop digital scams, he asked banks to bolster their efforts against “mule accounts” and amp up client awareness and education programs. A number of important topics were discussed, including cybersecurity, risks posed by third parties, cybercrimes, bolstering assurance functions, credit flows to MSMEs, expanding the use of the Indian Rupee in cross-border transactions, and banks’ involvement in the Reserve Bank’s innovation initiatives.

Executive directors in charge of regulatory and supervisory duties, as well as RBI Deputy Governors M Rajeshwar Rao and Swaminathan J, attended the sessions. The final one of these gatherings took place on February 14, 2024.

Das emphasized in his remarks the significance of banks upholding strict governance and risk management guidelines. He emphasized that in order to guarantee the stability and security of the banking industry, constant improvement and attention are required. Das claims that this strategy will improve banks’ operational resilience and enable them to manage changing risks more skillfully.

The talks also underlined how important banks are to maintaining the economy, especially by means of creative projects and enhanced loan availability to MSMEs and other industry sectors. The goal of the RBI’s emphasis on boosting the Indian Rupee’s usage in foreign exchange transactions is to improve the nation’s financial system.

Governor Das has taken a proactive approach to mitigating potential vulnerabilities within the banking industry with his call to action. Strong governance, risk control, and compliance should be banks’ top priorities in order to help them overcome obstacles and support long-term economic growth.