Supervision needs to shift from periodic snapshots to continuous awareness: RBI

Reserve Bank of India (RBI) Deputy Governor Swaminathan J has asked banks to put in place stronger operational discipline and data governance throughout the year, as supervision needs to shift from periodic snapshots to continuous awareness. Speaking on ‘Issues and Challenges in Banking Supervision in the Digital Era’, the deputy governor said for decades, supervisors were trained to read balance sheets and inspect processes, and it is still being done the same way.

But today, he said a bank can look perfectly healthy on paper and still be one incident away from severe disruption. “The reason is that the centre of gravity is shifting from the ‘branch and product’ to the ‘pipes and code’,” he said. In other words, stability now depends as much on operational resilience, data integrity, and third-party dependencies as much as it does on capital and liquidity, Swaminathan said at the at the Third Annual Global Conference of the College of Supervisors here on Friday.

In a digital environment, a weak grievance system is not a minor irritation, he said, adding that it is often an early warning. “From a supervisory angle, we need to look not only at whether a bank has a grievance framework, but at how it performs. Are complaints resolved on time? Do institutions identify root causes and close them, or do they only manage closures on paper? Do boards see a clear dashboard of complaint trends, repeat failures, and customer pain points? And, is there a proactive and swift remediation,” Swaminathan said.

He emphasised that supervision must shift from periodic snapshots to continuous awareness. It also needs to move beyond a single institution and take a sharper view of its ecosystem. “And finally, we need to move from asking only ‘did you comply?’ to also asking ‘can you withstand stress, recover quickly, and protect customers when things go wrong?’,” he said. For supervised entities, the deputy governor said compliance cannot be treated as a quarter-end activity.

With faster cycles, banks will need stronger operational discipline and data governance throughout the year. When an anomaly is flagged, the ability to explain it and fix it quickly becomes a marker of control maturity, he said. He further said third-party management must be treated as risk management. Institutions will need better oversight of partners, clearer accountability for incidents, and contracts that support audit, access, and resilience.

“The regulated entity cannot outsource responsibility,” he added. Also, as AI and analytics become more embedded, institutions should be prepared for more intensive supervisory questions on model risk, explainability, and fairness, Swaminathan said. RBI Deputy Governor Swaminathan J.