RBI’s 'North Star' is financial stability, says Governor Sanjay Malhotra at SBI Conclave

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday (November 7) reaffirmed that the central bank’s "North Star" remains financial stability, stressing that short-term growth must not come at the cost of long-term resilience.

"Our North Star is financial stability," Malhotra said on the second day of the SBI Conclave. "Short-term growth at the cost of stability hurts long-term growth. Financial instability can wipe out gains from fast growth."

He highlighted the need to balance innovation with prudence, noting, "Innovation matters, but there are no free lunches in regulation. We balance innovation with the duty to protect consumers."

Calling the RBI’s approach responsive regulation, Malhotra said, "Every regulation is framed after weighing costs and benefits. In a tech-driven banking system, we cannot freeze the system in time. Our role is to guide evolution, not stop it."

Reflecting on the past decade, he said the central bank has focused on the long-term health of the banking system. "Post-GFC, India faced the fallout of aggressive fiscal and monetary stimulus. From 2014 onward, we focused on the long-term health of the banking system," he said.

Malhotra credited the 2015 Asset Quality Review (AQR), bank consolidation, recapitalisation, and the 2016 Insolvency and Bankruptcy Code (IBC) for strengthening the sector.

He added that fintechs and NBFCs now play a larger role in credit, while capital markets and securitisation have improved risk transfer. New project finance norms and expected credit loss (ECL) provisioning, he said, would ensure early recognition of stress.

"Indian banks today are stronger and far more resilient than before," Malhotra concluded.

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