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Informist, Wednesday, Oct. 1, 2025

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--RBI Malhotra: Changes to banking norms well thought out, will consult

--RBI Malhotra: Urban co-op bank new licences only after adequate consultation

--RBI Malhotra: Loan policy of 2016 was to derisk banking system as a whole
--RBI Malhotra: Seeing share of coporates' banking exposure fallen over yrs

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--RBI Malhotra: Banks were allowed to fund M&As for infra cos

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NEW DELHI - The Reserve Bank of India is working to develop a software to pre-empt and curb fraudulence in banking transactions, Governor Sanjay Malhotra said Wednesday. The software is similar to RBI's artificial intelligence-powered tool--MuleHunter.ai--designed to identify and flag suspicious bank accounts, known as "mule accounts".

The software is currently in "experiment stage", Malhotra said at post policy press conference, adding that the RBI's wholly-owned subsidiary RBI Innovation Hub is working on developing the software. The software will help bring down instances of bank fraud significantly as it will alert the users if a transaction is risky, based on the location and other available details of the receiver's bank account, RBI Deputy Governor T. Rabi Sankar said. 

Further, shedding light on the rationale behind the RBI's decision to withdraw the guidelines on enhancing credit supply for large borrowers through market mechanism, Malhotra said the share of banking exposure of corporates has come down over the years. "The risks are not so many. So that's the primary reason why we have proposed to remove the large exposure frameworks for specific borrowers at banking system level," he said. 

The RBI had in August 2016 issued the guidelines on enhancing credit supply with an objective to address the concentration risk arising from the aggregate credit exposure of the banking system to a single large corporate and encourage such large corporates to diversify their sources of funding. 

The banking system's ability to handle risk has also improved over the period, Deputy Governor Rajeshwar Rao pointed out. He said the decision to withdraw the norm is measured and calibrated and the RBI will also invite public consultation on the matter, Rao said.

The economy has evolved significantly since 2016 and now the RBI can consider the review. "The 2016 policy was more about mitigating risk and limiting exposure to large corporates at the banking system level, not at the bank level," Malhotra said.

The RBI will review all its regulations every 5–7 years to lower the compliance burden and promote ease of doing business, Malhotra said. The review will be well-thought through and include public consultation, Malhotra added. The RBI will also decide on issuing new licences to urban co-operative banks only after adequate consultation, he said. 

At the same time, Malhotra clarified that review of norms should not be seen as relaxation of norms. Customers' interests have to be protected when they take loans, the governor said. "Even a single episode of financial instability can take us back many years."   End

Reported by Krity Ambey

Edited by Vandana Hingorani

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