Proactively monitor portfolios, address potential risks: RBI Governor to bank boards
The Hindu
RBI Governor urges banks to strengthen governance, monitor portfolios, and address risks to ensure stability and sustainability.
RBI Governor Shaktikanta Das on Monday (November 18, 2024) asked banks to proactively monitor their portfolios, identify areas of over-concentration, and take pre-emptive measures to address potential risks and challenges.
The Governor also asked bank boards to strengthen the internal governance framework to curb unethical practices, such as mis-selling of products or opening of accounts without proper KYC verification.
In a keynote address at the Conference of Directors of Private Sector Banks, Mr. Das said bank boards need to continuously assess external factors like regulatory changes, shifting market winds, overall macroeconomic changes and advances in technology.
"Boards should also be fully cognisant of the organisation’s internal strengths, vulnerabilities, and operational conditions so that they have a clear situational awareness,' he said.
The Governor stressed that boards must be cognizant of build-up of concentrations in their business model.
Excessive reliance on specific sectors, markets, or customer segments can expose the bank to amplified risks, particularly in times of economic stress or industry shifts, he said.
"Boards can play a proactive role by regularly monitoring the bank’s portfolios, identifying potential areas of over-concentration, and taking pre-emptive steps to maintain a balanced approach," Mr. Das added.
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