RBI Governor Urges Stakeholders To Prioritise Governance For Financial Resilience

Reserve Bank of India Governor Shaktikanta Das emphasised the importance of governance, urging financial system stakeholders to prioritise it, citing studies that demonstrate improvement in asset quality and resilience to handle stress scenarios.

"The highest priority must be assigned to governance—strong governance is at the core of resilience of stakeholders in the financial system," the Governor said in his foreword to the half-yearly Financial Stability Report published by the central bank.

According to him, the report highlights the improvement of financial institutions' balance sheets through minimal impairments, strong profit, and solid reserves. He also mentioned that RBI stress tests indicate that both banks and non-banks will maintain capital levels above the required minimum, even during extreme stress situations.

Currently, the financial stability framework is considered to be in a prime state. However, the primary task lies in sustaining and enhancing it even more, Das highlighted. Within this "secure setting", the RBI remains vigilant regarding potential threats stemming from cyber vulnerabilities, climate shifts, and worldwide impacts, the Governor said.

He also asked banks to invest adequately on the technology front and affirmed the central bank's commitment to promote innovation.

"New technologies offer gains in efficiency and customer experience, but they can also bring with them sudden and widespread disruptions to the financial system. This requires that all stakeholders not only invest adequately to take full advantage of technological advancements but also take steps to safeguard the security and soundness of their systems," he said.

He also asked for customers' interests to be put at the forefront, pointing out that preserving the trust of the customer is the cornerstone of safeguarding systemic stability.

(With inputs from PTI)