RBI Deputy Governor says banks must blend T20 innovation with Test-match discipline

Indian Financial System Needs to Combine Innovation and Prudence: RBI Deputy Governor

Swaminathan J, Deputy Governor of the Reserve Bank of India (RBI), has emphasized the need for the Indian financial system to combine the innovation and energy of T20 cricket with the prudence and resilience of Test cricket.

In a speech at the annual banking event "Reading the Pitch: Banking Strategies for a Long Innings" organised by Standard Chartered Bank, Swaminathan drew extensively from the game of cricket to illustrate his point.

Key Takeaways:

• Risk Management and Governance are Central to Strategy: Swaminathan emphasized that risk management and governance cannot be a back-office function and are central to the strategy of the financial system.
• Customer Expectations Remain Human: Customers want to be treated fairly, with products that are suitable for their needs, explained in simple terms, transparency in pricing and conditions, and prompt resolution of problems.
• Partnerships between Banks and Fintechs can be Structured Safely and Sustainably: Swaminathan suggested that partnerships between banks and fintechs could be structured to combine the strengths of each safely and sustainably, like a good batting partnership.
• Cyber Fraud and Digital Scams are Increasing: Swaminathan underscored the importance of strong digital safety, with customers feeling that their bank stood by them in a moment of stress.
• Responsible Use of Data is Essential: Customers must have confidence that their data is being used with care, that privacy is respected, and that there is no misuse or unauthorised sharing.
• Regulators and Banks Must Work Together: Swaminathan stressed that as a regulator, RBI sees banks as partners, with the role of the regulator like that of the umpire, setting and interpreting the rules, monitoring the game and calling out the occasional no-ball or wide when needed.

Swaminathan's speech highlighted the need for the Indian financial system to combine innovation and prudence, with a focus on risk management, customer expectations, partnerships, digital safety, responsible use of data, and collaboration between regulators and banks.