The financial regulator plans to conduct a deeper investigation into how banks conduct their business, rather than analyzing the ratios individually at each inspection, said the people, who asked not to be identified because the discussions are private.
The watchdog is also looking to add more officers to its supervisory department, with the hirings set to focus on cyber security audit specialists as digital risks proliferate in the banking system, according to those in the public eye. The overhaul is still under consideration and details may evolve, they said.
The Reserve Bank of India did not respond to an email from Bloomberg seeking comment.
The shake-up comes as India’s banking system expands at an unprecedented pace, putting pressure on supervisory tools designed for a simpler era. Periods of governance failure at lenders like IndusInd Bank and the now-defunct New India Co-operative Bank have underlined how traditional, forward-looking supervision – reliant on financial snapshots – can miss vulnerabilities masked by healthy-looking numbers.
The rapid growth of balance sheets and the expanding range of financial products across the Indian system make the proposed shift more urgent. The drive to build globally competitive banks is driving rapid credit expansion across the industry, raising the stakes for regulators. For the RBI, larger lenders could potentially mean more complex risk profiles and a smaller margin for supervisory error.
The RBI has started discussions with global advisors to assess how banks are generating and deploying credit, instead of relying largely on periodic inspections of financial statements.
The aim is to identify risks early, such as excessive borrowing in certain sectors or credit errors where credit costs are misleading, according to the population.
The refresh will outline how deviations are spotted and how penalties are determined, the people said. The RBI’s supervision includes commercial banks, non-banking finance companies and cooperative banks, all of which would come under the new regulatory approach.
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Published on February 4, 2026
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