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Informist, Tuesday, Jul. 29, 2025

 

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--RBI Swaminathan: Some banks, NBFCs normalising creative accounting 
--CONTEXT: RBI Swaminathan's remarks at Karur Vysya Bank event Fri 
--RBI Swaminathan: Some banks, NBFCs interpreting norms liberally 
--RBI Swaminathan: Some banks, NBFCs normalising lenient policy frameworks 
--RBI Swaminathan:Some banks, NBFCs normalising inadequate internal controls 
--RBI Swaminathan: Every bank's board, mgmt responsible for deepening trust 

 

NEW DELHI – Some banks and non-banking financial companies in India are interpreting regulations liberally and are normalising creative accounting, inadequate internal controls, and lenient policy frameworks, Reserve Bank of India Deputy Governor Swaminathan J. said. Even as such instances are limited, they risk eroding public's trust in the banking system, the deputy governor 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," Swaminathan said at the 109th foundation day of the Karur Vysya Bank on Friday. Swaminathan's speech from the event was made public on the RBI website Tuesday.

 

The deputy governor said financial institutions must pursue growth aligned with ethical practices from the boardroom to the branch. "Every bank board and management has a responsibility to deepen the hard-earned trust — through service that is responsive, systems that are reliable, and leadership that is responsible."

 

Swaminathan's comments come months after IndusInd Bank disclosed discrepancies in its derivatives accounting and microfinance loan portfolio in 2024-25 (Apr-Mar). The bank had said the irregularities in the microfinance portfolio were a result of fraud. Senior management including chief executive officer Sumant Kathpalia resigned after the disclosures, and the bank is currently being run by a 'committee of executives' cleared by the RBI. The bank said it had laid bare all discrepancies in its Jan-Mar and FY25 results.

 

Banks have a bigger role to play in supporting inclusive growth, maintaining financial stability, and driving innovation as India moves towards becoming a developed economy by 2047, Swaminathan said.

 

The deputy governor said just meeting regulatory thresholds or improving headline numbers is not enough. "What matters is how these financial resources are deployed—whether they support inclusive lending, long-term investment, or business models that promote trust and transparency," he said. "Every rupee must carry intent, not just interest."

 

Banks looking to scale up must use modern, agile, and continuously evolving tools, Swaminathan said. "More importantly, they must be well-governed." Technology must never outrun the organisation's capacity to manage it, he said. "Directors and senior management must lead this conversation, ensuring that risk, compliance, and internal audit functions have the resources and visibility needed to keep pace."  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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