“No Regulator Can Or Should Substitute For Boardroom Judgements” Says RBI Governor.

Mumbai: Indian banks are much more mature today than they were a decade ago and the central bank does not aim to micromanage them, Reserve Bank of India (RBI) governor Sanjay Malhotra said on Friday.

Speaking in the context of far-reaching reforms announced during a review of monetary policy in October, Malhotra said: “No regulator can or should replace board decision.
especially in a country as diverse as ours.”

“Every case, every loan, every deposit, every transaction is different, with varying risks and opportunities. We must allow regulated entities to make decisions based on the merits of each case, rather than setting a one-size-fits-all rule. This will allow regulated entities to experiment and innovate, learn and improve,” he added.

Last month, the RBI had announced 22 reforms, including allowing banks to finance acquisitions, increasing loan limits against shares and setting draft norms for loan loss provisioning, shifting to expected credit loss (ECL) framework.

Malhotra was delivering the keynote address of SBI Banking and Economics Conclave 2025 here. He cited the example of SBI, which was at a loss in 2018 and became a $100 billion company thanks to the regulatory and structural reforms implemented in 2018.
last ten years.

“Removing restrictions (on banks purchasing financing) will benefit the real economy and given that the draft includes guardrails such as limits on bank financing of 70 percent of the deal value.
Total risk limits for the bank’s Tier 1 capital; Eligibility criteria will ensure security while allowing banks and their stakeholders to benefit from additional business.”
He said recent regulatory measures should be seen in the context of better financial health of banks, such as higher capital adequacy ratio, asset quality and improved profitability.

Meanwhile, speaking at the same conference, RBI Deputy Governor T Rabi Sankar said that frauds per number of transactions detected by banks have increased since July this year.
It has recorded a steady decline since the beginning of the year. He said the increase could be periodic or seasonal. He said the digital infrastructure was deployed by the regulator as follows:
Mule chaser designed to monitor channel accounts to clear money received through fraud.