Reserve Bank of India governor Shaktikanta Das on Friday called upon financial entities like the NBFCs, banks to be mindful of the fact that they are dealing with public money.
“Let me emphasise that banks, NBFCs and other financial entities must continue to give the highest priority to quality of governance and adherence to regulatory guidelines,” Das said.
“Financial sector players, by and large, operate with public money – be it of depositors in banks and select NBFCs or investors in bonds and other financial instruments. They should always be mindful of this,” Das added.
The RBI has kept a keen eye on evolving risks in the financial sector to mitigate few risks. Recently, the RBI acted stringently against fintech icon Paytm’s banking arm Paytm Payments Bank for due to non-compliance and supervisory concerns. Reports say certain accounts were created without proper identification, potentially for money laundering.
RBI also acted against IIFL Finance Ltd and JM Financial Products Ltd, asking them to cease and desist from disbursing gold loans and loans against shares, respectively.
In December 2020, the RBI suspended HDFC Bank from sourcing new credit card customers after repeated technological outages.
Rating agency S&P Global Ratings said in a report that the central bank is showing serious commitment to improving governance and transparency in the sector. These actions by the RBI, it said, will curtail lenders’ over-exuberance, enhance compliance culture, and safeguard customers.
However, these measures will lead to higher capital costs for institutions.
“India’s regulator has underscored its commitment to strengthening the financial sector,” said S&P Global credit analyst Geeta Chugh. “But the increased regulatory risk could impede growth and raise the cost of capital for financial institutions.”
According to S&P, the RBI has diminishing tolerance for non-compliance, customer complaints, data privacy, governance, know-your-customer (KYC), and anti-money laundering issues.
