Discover 5 key takeaways from RBI Governor Sanjay Malhotra’s January 2026 keynote on adapting regulation to the digital age—collaboration, data use, customer protection, and more for resilient Indian banking.
By Rusen Kumar
The speech by Sanjay Malhotra, Governor of the Reserve Bank of India (RBI), delivered on January 9, 2026, at the Third Annual Global Conference of the College of Supervisors in Mumbai, titled “Regulation and Supervision – Adapting to the Digital Age“, offers profound insights into how India’s financial regulators and institutions must navigate the rapid digital transformation.
I find this address particularly inspiring. It reflects a balanced, forward-looking vision that prioritizes collaboration, customer welfare, and sustainable growth—values that resonate deeply with our mission to empower businesses and promote inclusive economic development.
Regulation at the Crossroads of Technology and Stability
The transformation of banking and finance through technology has reached a scale and speed that fundamentally alters the way regulation and supervision must function. Digitalisation has introduced new products, partners, delivery models, and risk vectors, making traditional supervisory approaches insufficient if left unchanged.
In his address, the Governor stated that advancement in technology is impacting all spheres of human activity – personal, business and public, and that the financial system is no exception. He explained that technology has revolutionised banking over the years, but that the present landscape is distinct because the pace and scale of change are unprecedented. He noted that technology has introduced new products, partners, and processes.
He further stated that digitalisation is widening access, enhancing efficiency, improving convenience, and enabling far more tailored financial services. At the same time, he cautioned that it is reshaping the nature and scale of risks and accelerating the transmission of disruptions and risks, underscoring the need for agility in regulatory and supervisory response.
Against this background, he structured his address around five key messages that together form the core pillars of modern banking regulation in the digital era.
In this article, I distil five core learnings from the Governor’s keynote—each representing a pillar of modern banking regulation in a digital era.
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Pillar One: Systemic Resilience as a Collaborative Effort
The Governor emphasised that the Reserve Bank of India views its regulatory and supervisory roles vis-a-vis regulated entities as collaborative and not adversarial. He stated that the success of a regulator is measured not only in terms of stability but also in terms of dynamism and vibrancy in the financial sector. He added that for regulated entities to succeed in the long term, stability is essential.
He explained that the objectives and purposes of the regulator and the regulated are the same, namely to ensure the long-term growth, advancement, stability, integrity, and credibility of the financial system. He stated that regulators and regulated entities are in the same team and not in opposite camps, and that they are partners in the nation’s development.
According to him, this partnership requires working together to strike the right balance between growth and systemic stability on the one hand, and between responsible innovation and consumer protection on the other.
He further explained that regulation and supervision themselves are collaborative efforts. He stated that almost every regulation is finalised through a consultative approach. He also noted that regulated entities self-regulate through their own internal rules, controls, checks, and procedures, and that they have their own supervision through boards, senior management, and assurance teams, both internal and external.
He clarified that while the statutory mandate to regulate and supervise lies with the Reserve Bank, the obligation to uphold systemic resilience, better serve customers, and facilitate economic growth are shared responsibilities. He described this as collaborative work with a collective aspiration.
He stated that regulation works best when banks and other regulated entities view supervisors not as fault-finding inspectors, but as partners in resilience. He highlighted that for a country like India, where banks play a critical role in financial intermediation and inclusive growth, this collaborative approach is not just desirable but essential.
Key factual insight
Systemic resilience in modern banking is a shared responsibility between the regulator and regulated entities, built on consultation, internal governance, and partnership rather than confrontation.
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Pillar Two: Supervisory Action and Enforcement as Corrective Measures
The Governor stated that supervisory action and enforcement are often viewed as the most visible aspect of regulation and supervision. He explained that it is therefore important to clarify that such actions by the Reserve Bank must be seen as part of a continuum of supervisory tools and not as a standalone response.
He described this continuum as beginning with training and capacity building and moving through dialogue and guidance, off-site and on-site supervision. He stated that enforcement, restrictions, and penalties are measures of last resort. He explained that the Reserve Bank’s endeavour is to have a robust financial ecosystem where supervision encourages self-correction and enforcement acts only as a backstop.
He further clarified that the purpose of enforcement actions undertaken by the Reserve Bank is generally not punitive and that the intent is largely to correct. He stated that such actions serve two purposes: first, to signal to those against whom such measures have been initiated, and second, to make others aware of acceptable standards of conduct and regulatory expectations.
Key factual insight
Enforcement is positioned as a corrective and signalling mechanism within a broader supervisory framework, not as a primary or punitive tool.
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Pillar Three: Effective Use of Data in Regulation and Supervision
The Governor stated that his third point related to reports submitted by regulated entities and the data collected by the Reserve Bank for supervision and regulation. He explained that several initiatives have been undertaken to streamline reporting mechanisms and improve data quality, including the collection of large amounts of data through platforms such as CIMS and DAKSH.
He acknowledged that while this process places some burden on regulated entities, supervisory capabilities have been strengthened because of their support. He stated that the quality of data has improved recently following the introduction of the Supervisory Data Quality Index (SDQI) in the previous year, and expressed confidence that collaboration would continue to improve the system while reducing reporting burdens.
He stated that while data has been used effectively, there is scope for more effective utilisation. He gave the example that the Department of Supervision can build stronger analytics and supervisory dashboards for enhanced off-site surveillance, supporting more continuous monitoring and early risk detection.
He stated that the objective should be to make supervision more off-site than on-site and as near real-time as possible rather than periodic. He explained that this would increasingly involve deeper use of SupTech and AI-enabled tools, while retaining judgment and accountability firmly with supervisors.
He also stated that the Department of Regulation can use data for evidence-based regulation-making, and that the overall endeavour should be to make better and more effective use of data.
Key factual insight
Data, analytics, SupTech, and AI are central to future supervision, but human judgment and accountability remain integral.
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Pillar Four: Customer-Centricity in the Digital Financial System
The Governor stated that protecting customers’ interests must become the cornerstone of a sustainable and resilient financial system. He explained that digital channels facilitate inclusion and convenience but, without guardrails, can also facilitate opaque pricing, weak disclosures, and inappropriate recovery practices.
He stated that the objective should be to ensure that digitalisation and innovation are aligned with fair outcomes for consumers.
He highlighted the menace of rising digital frauds as an area of national concern. He stated that while banks and other regulated entities should continue improving their tools, techniques, and processes to prevent and tackle digital frauds individually, this is also an area requiring collective collaboration.
He explained that such collaboration is needed to build analytics and tools to detect mule accounts and suspicious transactions in a timely and pre-emptive manner.
Key factual insight
Customer protection, particularly against digital fraud, is central to regulatory sustainability and requires collective action across institutions.
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Pillar Five: Capacity Building Across the Financial System
The Governor stated that there are huge expectations from all stakeholders in the financial system and that delivering on these expectations requires improved effectiveness. He explained that this can only be achieved with the right mix of skills within the Reserve Bank across regulatory and supervisory domains and within financial institutions.
He stated, “A strong financial system requires supervisors, regulators, and regulated entities to provide feedback and learn continuously from each other.”
He explained that regulated entities need to better understand regulatory expectations, particularly where models, partners, data, and digital delivery create new forms of risk. He stated that they need to imbibe the essence of regulation and follow its spirit rather than merely adopting a tick-box compliance culture.
He also stated that supervisors and regulators need to provide timely inputs and clarifications and that supervision should not only enforce existing regulations but also help refine them by flagging regulatory gaps and inconsistencies observed during supervisory engagements.
He cited amendments to co-lending directions and lending against gold and silver jewellery as examples where stakeholder feedback helped refine regulations.
He emphasised that capacity building efforts need to be intensified and stated that institutions such as the College of Supervisors play a critical role. He explained that the College of Supervisors is not only a training institution but a platform for building a shared language of oversight, learning from case studies and practical scenarios, and bridging information gaps between the Reserve Bank and regulated entities.
He left the audience with three enduring guideposts:
“First, regulation and supervision must remain risk-based, proportionate, and technology-neutral;
Second, technology must embed compliance, not bypass it; and
Third, accountability must remain human, and automation should not dilute accountability — it should sharpen it.”
Key factual insight
Continuous learning, feedback, and institutional capacity building are essential for effective regulation in a rapidly evolving digital environment.
The Author: Rusen Kumar is the Promoter and Founder of the Ambedkar Chamber of Commerce and Industry. The national chamber is advancing economic democracy.
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