New Delhi: Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said that while digitalisation has transformed India’s financial system by expanding access and efficiency, it has also reshaped risks in ways that demand a more collaborative, data-driven and agile regulatory approach.
Delivering the keynote address at the Third Annual Global Conference of the College of Supervisors in Mumbai, Malhotra said the pace and scale of technological change in finance are unprecedented, requiring regulators and regulated entities to work “as partners in resilience” rather than as adversaries.
“Digitalisation is widening access, enhancing efficiency and enabling tailored financial services. At the same time, it is accelerating the transmission of disruptions and risks,” the Governor said, underlining the need for quicker and more adaptive supervisory responses.
Outlining five key priorities—systemic resilience, supervisory enforcement, effective use of data, customer-centricity and capacity building—Malhotra stressed that regulation and supervision must be seen as collaborative efforts. “The objectives of the regulator and the regulated are the same: long-term stability, integrity and growth of the financial system,” he said.
On enforcement, the Governor sought to dispel the perception that regulatory action is primarily punitive. He said supervisory measures should be viewed as part of a continuum that begins with guidance and dialogue, with penalties and restrictions used only as a last resort to correct behaviour and signal acceptable standards.
A major focus of the address was the growing importance of data and technology in supervision. Malhotra noted that platforms such as CIMS and DAKSH have significantly strengthened RBI’s oversight capabilities, while initiatives like the Supervisory Data Quality Index have improved reporting standards. He added that the central bank aims to make supervision increasingly off-site, near real-time and analytics-driven, leveraging SupTech and AI tools without diluting human judgment and accountability.
Customer protection, particularly in the digital ecosystem, was flagged as a cornerstone of a resilient financial system. Malhotra warned that while digital channels improve convenience and inclusion, they can also enable opaque pricing and weak disclosures if not properly regulated. He called for collective action by banks and financial institutions to tackle the rising threat of digital frauds, including the misuse of mule accounts.
The Governor also highlighted the need for continuous capacity building within both the RBI and regulated entities, urging institutions to move beyond a “tick-box” compliance mindset and imbibe the spirit of regulation. He said platforms like the College of Supervisors play a critical role in building a shared language of oversight and closing information gaps.
Concluding his address, Malhotra said regulation in the digital age must remain risk-based, proportionate and technology-neutral. “Technology should embed compliance, not bypass it, and accountability must remain human,” he said, signalling the RBI’s intent to balance innovation with systemic stability as India’s financial system rapidly digitises.