If banking is becoming “always-on”, supervision cannot remain episodic, even as the centre of gravity is shifting from the “branch and product” to the “pipes and code,” according RBI Deputy Governor Swaminathan J.
In the backdrop of banking becoming more digital, more connected, and more complex, there is a need for on-site and off-site (supervisory) teams to work more closely together, to pick up early signals and for faster follow-up, Swaminathan said at the Third Annual Global Conference of the College of Supervisors, RBI, Mumbai.
“SupTech can help supervisors identify patterns early, detect anomalies, and focus attention where it matters most. But data quality and data governance remain critically important. With better data quality and right analytics, supervisors can increasingly connect dots across silos,” he said.
Swaminathan emphasised that supervision must shift from periodic snapshots to continuous awareness. It also needs to move beyond a single institution and take a sharper view of its ecosystem.
“…we need to move from asking only “did you comply?” to also asking “can you withstand stress, recover quickly, and protect customers when things go wrong?,” he said.
He observed that four supervisory focus areas are becoming central in the digital age — operational resilience and cyber readiness; ecosystem and third-party dependencies; governance of data, models and AI; and technology-enabled, continuous supervision, including better use of SupTech and analytics.
The Deputy Governor observed that for decades, supervisors were trained to read balance sheets and inspect processes.
“We still do that. But today, a bank can look perfectly healthy on paper and still be one incident away from severe disruption. The reason is that the centre of gravity is shifting from the “branch and product” to the “pipes and code”. In other words, stability now depends as much on operational resilience, data integrity, and third-party dependencies as much it does on capital and liquidity,” he said.
Dwelling on the changed risk landscape in the digital age, Swaminathan noted that both growth and stress can travel faster.
“Customer acquisition can be exponential, but so can misinformation, panic, and outflows. Risks that used to take weeks to build can now crystallise in hours. This means supervisory feedback loops must tighten, with early triggers, faster follow-up, and clear escalation,” he said.
Flagging the risk of concentration and interdependence, the Deputy Governor noted that many institutions may rely on the same core service providers, cloud platforms, payment rails, data vendors, and cybersecurity tools.
“This creates a new form of common exposure. It is not always visible in traditional financial ratios, but it is very real. For supervision, we need to map dependencies more actively and assess concentration risk at the ecosystem level, not only at the individual institution level,” he said.
Referring to the growing role of algorithms, Swaminathan highlighted that AI and machine learning are entering credit underwriting, fraud detection, customer service, treasury, and even internal control functions. This improves efficiency but also raises new questions of accountability, explainability, and fairness.
So, Supervisors need to be able to ask, and entities need to be able to answer, a simple question: who owns the outcome when a model drives a decision?
The Deputy Governor cautioned that digital banking increases points of entry, and the adversary is no longer a random hacker. It is often organised, well-funded, and persistent.
“Even when a bank’s internal controls are strong, a weakness at a vendor, a partner, or a common technology component can spill over. Resilience and recovery must be treated as core capabilities,” he said.
Alluding to conduct risks in a “digital wrapper”, Swaminathan said digital lending, embedded finance, and platform-based distribution have significantly improved access and convenience.
“But we have also seen risks of mis-selling, opaque charges, aggressive recovery practices, and data misuse. In a digital environment, customer harm can quickly become a confidence issue, and that can quickly transform into a liquidity issue,” he warned.
Published on January 12, 2026
