The resilience of banks will shift from fixing known balance-sheet stress to managing complexity and uncertainty, Reserve Bank of India Deputy Governor Swaminathan J said while speaking at Columbia University on Monday. The speech was uploaded on the regulator’s website on Wednesday.
“Recent years have shown that shocks can arise from very different sources: pandemics, geopolitical tensions, supply chain disruptions, commodity price volatility, cyber incidents or sudden shifts in market sentiment. The task, therefore, is not only to prepare banks for known risks, but also to make them adaptable to risks whose timing, form and transmission may be difficult to predict,” said Swaminathan.
He said growth in retail, digital and microfinance lending has widened access and thus requires stricter underwriting, fair recovery practices and close monitoring of borrower leverage.
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The deputy governor also pointed to emerging risks from fast-moving technology. “AI, cyber risk, third-party dependencies, climate-related risks and financial interconnectedness will therefore require ongoing attention from banks and supervisors.”
Though the geopolitical scenario remains uncertain, the Indian banking system is resilient with stronger balance sheets, comfortable capital buffers, improved profitability and asset quality. Having said that, Swaminathan added that the best time to build resilience is when conditions are favourable.
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He noted that central banks are often the cautious voice during bullish periods, raising tough questions when optimism is high. He added that risks tend to accumulate quietly in good times, and therefore buffers, governance and risk discipline must be strengthened when conditions are normal.
He emphasised the need for resilience by design. “India’s recent banking resilience reflects policy learning, supervisory vigilance, stronger prudential frameworks, transparent recognition of stress, credible repair mechanisms and improvements within banks themselves.”
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This article was first uploaded on June four, twenty twenty-six, at twenty-two minutes past seven in the morning.
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