Shaktikanta Das: Governance in banks - driving sustainable growth and stability

Inaugural address by Mr Shaktikanta Das, Governor of the Reserve Bank of India, at the conference of Directors of Banks, organised by the Reserve Bank of India for Public Sector Banks on 22 May 2023 in New Delhi and Private Sector Banks on 29 May 2023 in Mumbai. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

I am very happy to be here in this maiden Conference of the Directors in the Boards of Banks organised by the Reserve Bank of India. At the outset, I would like to acknowledge the key role played by the Banks in the process of economic development of our country. Over the years and especially in the recent period, Banks have been able to maintain financial and operational resilience in the face of extreme stress originating from the COVID-19 pandemic, the continuing war in Europe and the banking sector crisis in certain advanced economies (AEs).

2. Today our banking sector stands out as strong and stable with CRAR at 16.1 per cent, Gross NPA at 4.41 per cent, Net NPA at 1.16 per cent and Provision Coverage Ratio at 73.20 per cent at the end of December 2022. It is in times such as these that complacency may set in. We have to bear in mind that risks often get overlooked or forgotten when things are going well. Therefore, Boards of Directors of Banks and their senior management should maintain constant vigil on external risks and build-up of internal vulnerabilities, if any.

3. In the last few years, the Reserve Bank has significantly strengthened regulation and supervision of the entire financial sector. We have issued guidelines on governance in banks and also rationalised the regulatory architecture for Banks, NBFCs (including MFIs) and UCBs. Our supervisory approach and methods have become much stronger and deeper. Our priority is protection of depositors' money and ensuring a robust financial sector for the country to progress. As you are aware, banks do their business primarily with depositors' money and it is, therefore, the responsibility of Boards of Directors and Managements of Banks to keep the interest of depositors uppermost in their mind.

4. I would like to take this opportunity to convey our expectations from the Boards of Directors of banks and explain the multi-dimensional responsibility of individual directors. My colleagues in the Reserve Bank and I also intend to have first-hand feedback from you on how to ensure that the Indian banking system remains resilient and future ready even in the face of risks and uncertainties. The entire effort has to be collaborative between the Bank Boards and the Reserve Bank. Let me now specifically dwell upon our expectations from Bank Boards one by one.