Reserve Bank of India (RBI) Governor Sanjay Malhotra (file photo)
| Photo Credit:
PTI/KUNAL PATIL
The Reserve Bank of India (RBI) views its regulatory and supervisory roles vis-a-vis the regulated entities as collaborative and not adversarial, Governor Sanjay Malhotra said.
Further, the purpose of enforcement actions is generally not punitive, with the intent being largely to correct, he noted.
The Governor noted that the central bank measures its success as a regulator not only in terms of stability but also the dynamism and vibrancy in the financial sector. Similarly, for the regulated entities to succeed in the long term, stability is essential.
“Essentially, the objectives and purposes of the regulator and the regulated are the same — to ensure the long term growth, advancement, stability, integrity, and credibility of the financial system. The regulators and the regulated are in the same team and not opposite camps. We are partners in the nation’s development. Therefore, we have to work together to strike the right balance between growth and systemic stability on the one hand and between responsible innovation and consumer protection on the other hand,” Malhotra said in his Keynote Address at the Third Annual Global Conference of the College of Supervisors, Mumbai.
He observed that the function of regulation and supervision is a collaborative effort. Almost every regulation is finalised through a consultative approach.
Moreover, regulated entities also self-regulate through their own internal rules, controls, checks and procedures.
“Regulated entities have their own, if one can say so, in a broad sense, supervision — through their boards, senior management and assurance teams — both internal and external,” the Governor said.
Thus, while the statutory mandate to regulate and supervise lies with RBI, the obligation to uphold systemic resilience, to better serve the customers and facilitate the growth of the economy are shared responsibilities. It is a collaborative work with a collective aspiration.
“Let us all remember that regulation works best when banks and other regulated entities view supervisors not as fault-finding inspectors, but as partners in resilience. For a country like India, where banks play a critical role in financial intermediation and inclusive growth, this collaborative approach is not just desirable — it is essential,” he said.
Enforcement actions
Malhotra emphasised that supervisory action and enforcement by the Reserve Bank must be seen as part of a continuum of supervisory tools, not as a standalone response. This continuum begins with training and capacity building and moves through dialogue and guidance, off-site and on-site supervision.
“Enforcement, restrictions and penalties are measures of last resort. Our endeavour is to have a robust financial ecosystem where supervision encourages self-correction and enforcement acts only as backstop,” he said.
Moreover, the purpose of enforcement actions undertaken by the Reserve Bank is generally not punitive. The intent is largely to correct.
“They serve two purposes — (i) signal to those against whom such measures have been initiated; and (ii) make others aware of our acceptable standards of conduct and expectations,” the Governor said.
Effective use of data
Malhotra observed that while RBI has made good use of this data, there is scope for more effective use of data through platforms like CIMS and DAKSH, there is scope for more effective use of this data.
For example, Department of Supervision can build stronger analytics and supervisory dash boards for enhanced off-site surveillance, to support more continuous monitoring and early risk detection.
The Governor noted that the RBI’s endeavour should be to make supervision more off-site than on-site and as near real-time and not periodic. Increasingly, this will also mean using SupTech and AI-enabled tools more deeply, while retaining judgment and accountability, firmly with supervisors.
Similarly, Department of Regulation can use this for evidence based regulation making. It should be the RBI’s endeavour to make better and effective use of data.
Published on January 9, 2026
