Shaktikanta Das
| Photograph Credit score: Thulasi Kakkat
RBI Governor Shaktikanta Das on Monday (November 18, 2024) requested banks to proactively observe their portfolios, establish farmlands of over-concentration, and rush pre-emptive measures to handle doable dangers and demanding situations.
The Governor additionally requested storehouse forums to support the interior governance framework to curb unethical practices, equivalent to mis-selling of goods or opening of accounts with out correct KYC verification.
In a keynote cope with on the Convention of Administrators of Personal Sector Banks, Mr. Das stated storehouse forums want to regularly assess exterior elements like regulatory adjustments, moving marketplace winds, total macroeconomic adjustments and advances in generation.
“Boards should also be fully cognisant of the organisation’s internal strengths, vulnerabilities, and operational conditions so that they have a clear situational awareness,’ he said.
The Governor stressed that boards must be cognizant of build-up of concentrations in their business model.
Excessive reliance on specific sectors, markets, or customer segments can expose the bank to amplified risks, particularly in times of economic stress or industry shifts, he said.
“Forums can play games a proactive function via ceaselessly tracking the storehouse’s portfolios, figuring out doable farmlands of over-concentration, and taking pre-emptive steps to uphold a balanced way,” Mr. Das added.
The boards, he said must also remain vigilant to operational risks, particularly those arising from IT outsourcing and reliance on third-party vendors.
He also said that the incentives for bank staff should be carefully structured so as not to encourage them to indulge in unethical practices.
“Future such practices would possibly giveover temporary beneficial properties, they in the long run reveal the storehouse to important long-term dangers, together with reputational injury, supervisory scrutiny, and monetary consequences,” he stated in a keynote cope with on the Convention of Administrators of Personal Sector Banks.
He additional stated the Indian banking sector is transitioning via a era which is satiated with alternatives in addition to dangers and demanding situations.
“The banking sector remains strong and stable. All the financial indicators have improved since we met in May last year, reflecting the efforts of the various participants of the banking sector, including their management and boards,” Mr. Das stated.
To stock the resilience of the banking gadget intact, the Governor emphasized that sturdy basics must be leveraged to beef up and improve the defences.
“Good times, after all, are the best times to reinforce resilience and grow sustainably,” he added.
Mr. Das also said that in the rapidly evolving and technology-driven environment, organisations face significant challenges and risks.
Factors like technological advancements, the rise of new-age fintech entities, third-party dependencies and climate change are reshaping the economic landscape, he added.
Amid these shifting tides, bank boards should serve as a lighthouse for lenders and provide steady guidance to help navigate these challenges and steer towards safe and prosperous shores, he said.
Printed – November 18, 2024 10:32 pm IST
