RBI governor Shaktikanta Das speeches:
Banks and non-banking financial companies (NBFCs) should avoid taking “unacceptable risks” in their pursuit of growth and must implement robust risk mitigation frameworks, said Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday. Speaking at the Global Conference on Financial Resilience organized by the College of Supervisors, Das emphasized the importance of cautious growth strategies.
“Business growth is important, but it should never come at the expense of taking on unacceptable risks,” Das stated. He highlighted that while business models are designed to drive profitability and growth, they may sometimes contain hidden vulnerabilities. Both regulated entities and supervisors must remain vigilant to any risks in these models.
Das stressed that robust risk mitigation is essential for the long-term success and resilience of regulated entities and the overall financial system. He underscored the significance of ethics in governance, which includes compliance with laws and regulations in both letter and spirit, pursuit of sustainable business practices, and avoidance of the relentless pursuit of profit.
Strong governance, according to Das, is crucial for resilience in the financial sector, serving as the foundation for informed and strategic decisions that align with long-term goals and risk management principles. The RBI places great importance on the governance of regulated entities and has imposed business restrictions on some due to “material supervisory” concerns.
Das noted that when serious issues arise in a financial entity, an RBI officer of executive director rank addresses the full board of the organization to share the regulator’s concerns. If there are material discrepancies between an auditor’s report and RBI’s supervisory findings, or if certain material issues are not adequately addressed, the central bank invites the auditors for a direct discussion.
“We now focus on the sustainability of business models of banks and NBFCs. Root cause analysis of problems and vulnerabilities is undertaken,” he said, adding that the regulator initiates advance actions whenever it detects potential crises.
