Urgent need for regulatory reforms and strong governance in the banking sector

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MUMBAI: The Reserve Bank of India was also held partly responsible for the bad loan problem in the banking system after the global financial crisis. It appears to have learned lessons from the crisis and is improving the monitoring process so that problems can be detected in time. Thus there is an urgent need for regulatory reforms and strong governance in the banking sector.

MK Jain, the outgoing Deputy Governor of the Reserve Bank, outlined how the system of supervision in the banking sector has evolved. Now RBI is working with more forward thinking. So instead of justifying the variance, the regulator now aims to address the root cause of the problem in a timely manner.

RBI is now relying more on data analysis. It also intends to expand the scope of analysis of information coming from various news and social media posts. The regulator has also enhanced bilateral communication with stakeholders of the banking system.

More importantly, it is building human resource capacity to improve supervision. With such an aim and initiative, it is to be hoped that potential problems in the banking sector will be dealt with in time. Everyone knows that it takes a long time for the banking system to recover from a crisis.

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