Context:
Reserve Bank of India (RBI) Governor Sanjay Malhotra emphasized that recent banking irregularities — including incidents at IndusInd Bank and New India Cooperative Bank should not be seen as systemic failures, but as isolated episodes within a broad and robust financial ecosystem.
Highlights from the Post-Policy Press Conference
Incidents Are Isolated, Not Failures
- RBI Governor Malhotra stated: “These are not total failures — they are episodes that can happen in a financial system with many players.”
- Emphasis was placed on multi-layered safeguards in banks: business units, compliance mechanisms, and audit frameworks all work in tandem to reduce the frequency and impact of such events.
Financial System Remains Resilient
- Malhotra assured that India’s financial system — spanning cooperative banks, NBFCs, and SCBs — remains safe, secure, and robust.
- The RBI has strong systems for early detection of non-compliance and risk, and undertakes both preemptive and corrective actions where necessary.
IndusInd Bank Derivative Discrepancy
- IndusInd reported internal discrepancies in its derivative portfolio, with an expected net worth hit of 2.35%.
- The bank has appointed PwC for independent validation and hired an external firm to conduct a comprehensive forensic review.
- The RBI has urged depositors not to act on speculation, assuring them that the bank’s financial health is stable and under close supervision.
New India Cooperative Bank Governance Concerns
- Due to fund misappropriation allegations, the RBI has superseded the bank’s board for 12 months and appointed an administrator.
- Business restrictions have been imposed, but Malhotra reinforced that such targeted interventions are meant to protect depositors and uphold systemic integrity.
Regulatory Tools in Place
- RBI continues to strengthen its toolkit of regulations, supervisory oversight, and enforcement actions to reduce the recurrence of such episodes.
- The governor emphasized the need for institutional cooperation and internal controls across the sector to improve risk governance and operational transparency.
While isolated disruptions may occur, the overall financial system in India is fundamentally resilient, with proactive steps from the RBI to mitigate risks and safeguard consumer interests.
