Amid India’s adept handling of economic uncertainties and the period of global volatility – 2020 to 2023, RBI Deputy Governor Swaminathan J presented a critical evaluation at the SBI Banking & Economics Conclave – banks are falling short in committing to their allocated IT budgets. Against the backdrop of a decade marked by a worldwide pandemic, the Russia-Ukraine crisis, and widespread monetary tightening, the Deputy Governor emphasised the importance of building the resilience of Brand India in the financial sector.
Swaminathan J states, “Recently, there have been a few incidents of unscheduled downtimes inconveniencing several customers. Banks have to proactively commit adequate resources for augmenting their IT infrastructure, commensurate with their business plans, and also monitor them for their continued availability and stability.”
The series of incidents has brought the operational resilience of the banking ecosystem under scrutiny. The Deputy Governor highlighted the critical importance of maintaining a robust IT infrastructure and advised banks to commit sufficient resources to ensure stability. Banks owe their existence to the customers they serve. It is imperative to prioritize the enhancement of systems that not only safeguard customers from any inconvenience but also place a strong emphasis on efficient grievance redressal mechanisms. Strengthening these aspects fortifies the foundation of the banking sector but also fosters lasting relationships with customers.RBI Dy Governor Swaminathan J delved into various facets of the financial sector, offering insights and advice on interest rate risks, business models, operational resilience, outsourcing risks, managing third-party dependencies, climate risk, and customer protection. He also noted, “Today, as compared to the situation five years ago, the Indian banking sector stands tall, reflecting its strength and viability.”
Contrary to the challenges posed, the Deputy Governor accentuate the positive indicators in the Indian banking sector. “As of September 2023, the Capital to Risk Weighted Assets Ratio of Scheduled Commercial Banks stood impressively at 16.79 percent, underscoring the sector’s resilience,” he stated. Non-performing assets were at a decadal low, with a notable uptrend in profitability over the past four years.
The Deputy Governor urged banks and NBFCs to exercise caution in relying solely on preset algorithms. “Banks and NBFCs should exercise caution in relying solely on preset algorithms, ensuring that these models are robust, regularly tested, and recalibrated as needed to maintain robust underwriting standards,” he advised.
