“Protecting customers’ interest is not just a priority – it has to become the cornerstone of a sustainable and resilient financial system… Our aim should be to ensure that digitalisation and innovations are aligned with fair outcomes for consumers,” the governor said at the third annual global conference of the College of Supervisors, held in Mumbai.
While telling banks and other regulated entities to continue to improve their tools, techniques and processes in preventing and tackling digital frauds, he urged for collaborations in building analytics and tools to detect mule accounts and suspicious transactions timely and pre-emptively.
Meanwhile, RBI plans to focus more on off-site and real time supervision using modern tech tools while keeping customer protection at the heart of its actions.
“Our endeavour should be to make supervision more off-site than on-site and as near real-time and not periodic. Increasingly, this will also mean using SupTech and AI-enabled tools more deeply, while retaining judgment and accountability, firmly with supervisors,” Malhotra said.
To be sure, digitalisation is widening access, bringing in convenience and efficiency and enabling far more tailored financial services. At the same time, the nature and scale of risks is also changing.
“It is also accelerating the transmission of disruptions and risks underscoring the need for agility in regulatory and supervisory response,” Malhotra said, adding that RBI’s fundamental architecture of regulation and supervision remains the same even in the digital era with the guiding principle being risk sensitivity. He said RBI’s not merely a fault-finding institution but a partner in developing a sustainable and resilient financial ecosystem. At the same time, he said that financial institutions need to follow the spirit of regulation rather than just develop a tick-box based compliance culture.
The Governor harped on the point that both the regulator and the regulated entities have the same agenda — to ensure the long term growth, advancement, stability, integrity, and credibility of the financial system.
He underscored the need to strike the right balance between growth and systemic stability on the one hand and between responsible innovation and consumer protection on the other hand.
“For a country like India, where banks play a critical role in financial intermediation and inclusive growth, this collaborative approach is not just desirable — it is essential,” the Governor said.
“Enforcement, restrictions and penalties are measures of last resort. Our endeavour is to have a robust financial ecosystem where supervision encourages self-correction and enforcement acts only as a backstop,” he added.