RBI calls for continuous, tech-focused bank supervision

Reserve Bank of India (RBI) Deputy Governor Swaminathan J on Monday stressed that banking supervision must evolve from periodic checks to continuous monitoring, given the growing digital and operational risks in the sector.

Speaking at the Third Annual Global Conference of the College of Supervisors, he said banks can appear healthy on paper yet remain vulnerable to major disruptions due to weaknesses in technology systems, data integrity, or third-party dependencies. “The centre of gravity is shifting from branches and products to pipes and code,” he noted, making operational resilience as critical as capital and liquidity. Swaminathan highlighted that weak grievance redressal systems are often early warning signals. Regulators must assess not just the existence of complaint frameworks, but how effectively complaints are resolved, root causes addressed, and trends monitored at the board level. Proactive and timely remediation is key, he added.

He called for a shift in supervision from single-institution focus to an ecosystem-wide perspective. Regulators should ask not only whether banks comply, but whether they can withstand stress, recover quickly, and protect customers during failures.

Banks, he warned, cannot treat compliance as a quarter-end formality. Faster operational cycles demand strong operational discipline and data governance year-round. Prompt identification and correction of anomalies indicate control maturity.

He also stressed that third-party relationships must be treated as risk management, with accountability clearly defined. With AI and analytics increasingly embedded in banking, institutions should prepare for rigorous scrutiny on model risk, explainability, and fairness, Swaminathan added.