STRENGTHENING COMPLIANCE

By leveraging advanced technologies and adopting proven frameworks, financial institutions can cultivate a proactive, information-driven compliance environment

IN RECENT YEARS, India's financial services industry has seen a significant shift in regulatory compliance due to increased vigilance of the Reserve Bank of India (RBI). This aligns with a global trend where regulatory bodies prioritise financial stability, governance, and customer protection. Prompted by crises at major banks and financial institutions, this new approach underscores the need for stronger compliance frameworks. As a result, institutions face heightened scrutiny, stringent standards, and substantial penalties. In FY24, the RBI's monetary penalties more than doubled year-on-year-from ₹40.39 crore in FY23 to ₹86.1 crore.

BRIDGING THE GAPS

The compliance framework for regulated entities (RES) in India has evolved, transitioning from manual processes to automated systems.

Previously dependent on labourintensive methods prone to errors, the industry faced vulnerabilities, especially in the burgeoning digital payments ecosystem. Broad cybersecurity guidelines lacked the depth to counter emerging threats.

To counter these, the RBI has adopted a technology-driven approach to bridge compliance gaps.

The February 2024 mandate on automating compliance functions represents a major step forward.

This mandate standardises compliance monitoring for REs, allowing boards and leadership to ensure accountability and streamline operations. It highlights the need for automation and real-time monitoring to minimise data manipulation and human error.

The RBI has issued Master Directions and Circulars addressing IT outsourcing, cybersecurity, digital payment security, card tokenisation, and Incident Response protocols. These directives emphasise the regulator's focus on technology and customer protection.