Regulators and regulated entities are on the same team and not opposite each other, says RBI Governor Malhotra

Reserve Bank of India (RBI) Governor Sanjay Malhotra (file photo) | Photo credit: PTI/KUNAL PATIL

Moreover, the purpose of enforcement actions is generally not punitive, but primarily intended to be corrective, he noted.

The governor noted that the central bank measures its success as a regulator not only by stability, but also by the dynamism and vibrancy in the financial sector. Likewise, stability is essential to the long-term success of regulated entities.

“Fundamentally, the objectives of the regulator and the regulated are the same: to ensure the long-term growth, progress, stability, integrity and credibility of the financial system. The regulators and the regulated are on the same team and not against each other. We are partners in the development of the country. Therefore, we must work together to find the right balance between growth and systemic stability on the one hand and between responsible innovation and consumer protection on the other,” Malhotra said in his Keynote address at the Third Annual Meeting. Global Conference of the Board of Supervisors, Mumbai.

He noted that the function of regulation and supervision is a joint effort. Almost every regulation is drawn up through a consultative approach.

In addition, regulated entities also self-regulate through their own internal rules, controls, controls and procedures.

“Regulated entities have their own, if you can put it that way, in a broad sense, oversight – through their boards of directors, senior management and assurance teams – both internally and externally,” the governor said.

While the legal mandate to regulate and supervise lies with RBI, the obligations to maintain systemic resilience, better serve customers and facilitate growth of the economy are shared responsibilities. It is a collaboration with a collective ambition.

“Let us all remember that regulation works best when banks and other regulated entities see regulators not as inspectors who catch mistakes, but as partners in resilience. For a country like India, where banks play a crucial role in financial intermediation and inclusive growth, this joined-up approach is not only desirable, but essential,” he said.

Enforcement actions

Malhotra emphasized that supervisory measures and enforcement by the Reserve Bank should be viewed as part of a continuum of supervisory tools, and not as a standalone response. This continuum starts with training and capacity building and progresses through dialogue and guidance, off-site and on-site supervision.

“Enforcement, restrictions and penalties are measures of last resort. Our aim is to have a robust financial ecosystem where supervision encourages self-correction and enforcement only acts as a safety net,” he said.

Furthermore, the purpose of the Reserve Bank’s enforcement actions is generally not punitive. The intention is largely to correct.

“They serve two purposes: (i) to send a message to those against whom such measures have been taken; and (ii) to sensitize others to our acceptable standards of behavior and expectations,” the governor said.

Effective use of data

Malhotra noted that while RBI has made good use of this data, there is scope for more effective use of data through platforms like CIMS and DAKSH. There is room for more effective use of this data.

For example, the Department of Supervision can build stronger analytics and surveillance dashboards for improved off-site surveillance, supporting more continuous monitoring and early risk detection.

The Governor noted that the RBI’s aim should be to make monitoring more off-site than on-site and close to real-time and not periodic. Increasingly, this will also mean using SupTech and AI tools more deeply, while maintaining judgment and accountability to regulators.

Likewise, the Department of Regulation can use this for evidence-based regulation. It should be the aim of the RBI to use data better and more effectively.

Published on January 9, 2026