Swaminathan J, Deputy Governor of the Reserve Bank of India (RBI), has raised serious concerns over the increasing tendency among certain banks and non-banking financial companies (NBFCs) to resort to unethical practices in pursuit of short-term gains. He cautioned that such behaviour, though not widespread, could undermine public trust in the integrity of the financial system.
Addressing the 109th foundation day of Karur Vysya Bank earlier this week, Swaminathan said, “Driven by intense competitive pressures and a desire to project short-term success, the management of certain banks and NBFCs appears to believe that the ends justify the means.” His remarks were uploaded on the RBI’s website on Tuesday.
He cited examples such as creative accounting, lenient interpretations of regulations, inadequate internal controls, and liberal policy frameworks being normalised in boardrooms, which has necessitated supervisory intervention from the central bank.
“Though such instances may be limited, they risk eroding the public’s trust in the integrity of the banking system,” he warned.
Swaminathan emphasised that genuine growth must be built on ethical practices, robust systems, and strong governance — from the boardroom to the last-mile branches. “It is the responsibility of every bank’s board and management to strengthen the trust of customers through responsive service, reliable systems, and responsible leadership,” he added.
With India aiming to become a developed economy by 2047, the Deputy Governor stressed that banks must evolve to meet the needs of a digitally savvy and mobile population. He advised banks to reassess their branch network, sectoral exposures, and product offerings to ensure they are aligned with the country’s economic and demographic transformation.
He noted that entering new markets or launching new products should be matched with adequate investments in people, processes, and local knowledge. “The most effective banks are those that understand both their own strengths and the environment in which they operate,” he said.
Swaminathan also underlined that regulatory compliance alone is not sufficient. More critical, he said, is how financial resources are deployed — whether they support inclusive lending, long-term investments, or transparent business practices. “Every rupee must carry intent, not just interest,” he said.
Calling for a customer-centric approach, he urged banks to focus on trust-building, loyalty, and long-term value creation. He also highlighted the rising importance of reputation as a bank’s “most valuable asset.”
Touching on the rapid digitisation of the banking sector, Swaminathan warned that technological advancement must be backed by strong cybersecurity measures, sound data governance, and ethical safeguards. He pointed out that recent global and domestic experiences have shown how unmanaged technology risks can lead to systemic vulnerabilities.
‘Technology must never outpace an organisation’s capacity to manage it,’ he said, adding that boards and senior management must ensure risk, compliance, and internal audit functions are adequately resourced and empowered.
The speech serves as a pointed reminder to the banking industry of the critical need for integrity, resilience, and customer trust, particularly in an era of heightened competition and digital transformation.
