Deputy Governor of the Reserve Bank of India (RBI) Swaminathan J has said that the central bank is working towards creating a robust data analytics ecosystem to support its supervisory functions and ensure that the approach remains forward-looking and agile in a rapidly changing world.
He said the supervision of banks and financial institutions is a relatively recent development — dating back around 50 years.
From the early days, central banks have fulfilled their role as the lender of last resort, ensuring that financial institutions remained solvent and protected against systemic crises, Swaminathan said.
As the world rapidly evolves, so does the nature of risks confronting the financial sector.
Besides incredible efficiencies, technological advancements have also brought significant vulnerabilities, such as cybersecurity threats and risks stemming from third-party dependencies, he said.
The Deputy Governor believes that supervision needs to evolve with time and can no longer be just about enforcing compliance.
Instead, it needs to anticipate risks, respond swiftly to both foreseeable and unforeseen risks and foster resilience in the financial system.
Explaining further his views on resilience, the RBI Deputy Governor said that while stability ensures that the financial system can withstand shocks without losing its capacity to function, resilience goes a step further.
“Resilience indicates that in addition to weathering the storm, the financial system can adapt to the newer realities and thrive in it so that it remains a pillar of trust and stability.”
Speaking on the effective banking supervision system, he said this requires the supervisor to maintain a continuous, forward-looking assessment of the risk profiles of individual banks, aligned with their systemic significance.
“We are dedicated to establishing a global model of risk-focused supervision, one that emphasises strong risk discovery and compliance culture, and builds a ‘through-the-cycle’ risk assessment framework, he said.
“Additionally, we are working towards creating a robust data analytics ecosystem to support our supervisory functions, ensuring that our approach remains forward-looking and agile in a rapidly changing world,” the Deputy Governor added.
He further said that to further strengthen supervisory capacity, the RBI is also investing in initiatives like the College of Supervisors, which aims to enhance the skills and expertise of supervisory staff.