RBI showing serious commitment to improve governance, transparency in finance cos, banks.

S&P Global Ratings acknowledged the Reserve Bank of India's (RBI) dedicated efforts to enhance governance and transparency within India's financial sector. Recent regulatory actions, such as restrictions imposed on specific lenders like IIFL Finance Ltd. and JM Financial Products Ltd., along with directives to Paytm Payments Bank Ltd. regarding customer onboarding, signify the RBI's commitment to curbing over-exuberance among financial institutions and prioritizing customer protection. While these measures are expected to bolster compliance standards, they may also elevate capital costs for institutions.

Notably, S&P highlighted the RBI's departure from past practices of imposing nominal penalties for breaches, signalling a shift towards stricter enforcement. Ms. Geeta Chugh, a credit analyst at S&P Global, emphasized that while these initiatives strengthen the financial sector's resilience, they may hinder growth and increase the cost of capital for financial entities. Additionally, S&P emphasized the RBI's heightened focus on governance, transparency, and regulatory compliance, underscoring their significance in assessing India's financial landscape. Moreover, the RBI's commitment to disclosing key issues leading to regulatory actions and its proactive stance against conduct detrimental to customers and investors further solidifies its commitment to fostering a robust and transparent financial ecosystem.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.