RBI Governor Calls for Stronger Bank Governance to Curb Unethical Practices

RBI Governor Shaktikanta Das has urged bank boards to enhance governance frameworks to prevent unethical practices like mis-selling and improper account openings. He emphasized the importance of carefully structured staff incentives and highlighted the evolving challenges in the technology-driven banking environment.

RBI Governor Shaktikanta Das has called for enhanced governance frameworks among bank boards to address unethical practices such as mis-selling of products and improper opening of accounts without thorough KYC verification. He emphasized the need for bank staff incentives to be structured to prevent such behavior.

Das warned that while these practices might offer short-term profits, they expose banks to long-term risks including reputational damage, increased supervisory scrutiny, and financial penalties. His comments were made during a keynote speech at the Conference of Directors of Private Sector Banks.

He noted that the Indian banking sector is currently experiencing both opportunities and challenges. Despite improvements in financial indicators since last year, the banking industry still faces risks from technological advancements, new-age fintech entities, and climate change. Das urged bank boards to provide stable guidance to navigate these evolving challenges.

(With inputs from agencies.)