RBI Governor Urges Banks to Strengthen Governance and Risk Management

On Wednesday, RBI governor Shaktikanta Das emphasized the need for banks to enhance their governance standards, risk management practices, and compliance culture. This directive was delivered during meetings with the managing directors (MDs) and chief executive officers (CEOs) of public sector banks and select private banks as part of the Reserve Bank’s ongoing engagement with regulated entities.

Key Points Addressed by the Governor

In his address, Governor Das highlighted the positive progress in areas such as asset quality, loan provisioning, capital adequacy, and profitability within the banking sector. However, he stressed the importance of further bolstering governance standards, risk management practices, and compliance culture. The discussions also delved into issues including the persistence of a gap between credit and deposit growth, liquidity risk management, ALM-related concerns, and trends in unsecured retail lending.

Emphasis on Security and Risk Management

Governor Das underscored the significance of robust cybersecurity controls, effective management of third-party risks, and proactive measures against ‘mule accounts’ to combat digital fraud. He also called for intensified customer awareness and education initiatives to address this issue.

Comprehensive Discussion Topics

The meetings also covered a wide array of topics, including cybersecurity, third-party risks, and digital frauds, strengthening of assurance functions, credit flows to MSMEs, increasing the usage of Indian Rupee for cross-border transactions, and banks’ participation in the innovation initiatives of the Reserve Bank. Notably, the meetings were attended by deputy governors and executive directors-in-charge of regulation and supervision functions.

Conclusion

These discussions mark the continuation of the Reserve Bank’s efforts to ensure the resilience and strength of the banking sector. The governor’s call for enhanced governance standards and risk management practices reflects the ongoing commitment to maintaining the stability and integrity of the banking system.