REs must accord highest priority to governance, compliance: RBI Governor

Attempts to clear impression about widespread action; curbs only against outliers for major breaches

(This report has been updated)

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Giving top priority to quality of governance at regulated entities (REs), Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said financial stability of the system is a joint responsibility of the regulator and the REs.

He also said that the central bank was taking action only in outlier cases for major deviation from regulatory and compliance requirements.

Non-banking financial companies (NBFCs) and other financial entities must continue to give the highest priority to quality of governance and adherence to regulatory guidelines, Das said in his address during the monetary policy review.

 

Financial sector players, by and large, operate with public money — be it from depositors in banks and select NBFCs or investors in bonds and other financial instruments. He said they should always be mindful of this. He added that the RBI will continue to constructively engage with financial entities in this regard. It needs to be recognised that financial stability is a joint responsibility of all stakeholders, he said.

Later, in an interaction with the media, the governor said RBI’s machinery supervises regulated entities, including banks and NBFCs on a regular basis.

Wherever it sees any major deviation from compliance and regulatory requirements, the first effort is to directly sensitise on a bilateral basis and work with REs to impress upon them to take corrective action.

When a regulator observes that the progress is not up to the mark, only then it imposes certain regulatory restrictions.

“Among 90-odd banks and more than 9,000 NBFCs, the action is against only two finance companies and one payments bank.

So, spate of regulatory or supervisory action, I think, would not be a correct way of describing the situation. It has to be seen in the total context,” Das said.