Operational resilience: How banks can shift from survival to success

As a result of RBI's dedicated focus on financial risks, particularly credit risk, Indian banks' balance sheets have improved to the best in over a decade.

- Deep Narayan Mukherjee & Abhinav Bansal

System-wide gross non-performing assets (GNPA) ratio has improved to a decadal low of 2.8%. While some worries have emerged in unsecured lending, its limited overall exposure is unlikely to present an immediate systemic risk. Appreciably, the banking regulator has started focusing on strengthening Non-Financial Risk (NFR) management.

RBI has resorted to more stringent penalties for NFR violations than before. For institutions that had exhibited issues of technological lapses, high disruptions in customer services or non-compliance to operational guidelines, the regulator severely penalised them by suspending specific operations or barring them from onboarding new customers. These penalties not only reduced the profits of the FIs but also impacted their reputation and market capitalisation. The era of petty regulatory fines is history!