RBI Governor urges bank boards to curb mis-selling practices

Reserve Bank of India (RBI) Governor Shaktikanta Das has asked bank boards to strengthen the internal governance framework to curb unethical practices, such as mis-selling products or opening accounts without proper KYC verification. Das also said that the incentives for bank staff should be carefully structured to avoid encouraging mis-selling or unethical practices. He was delivering a keynote address at the Conference of Directors of Private Sector Banks in Mumbai on Tuesday. The governor has also urged bank boards to proactively manage concentration risks by monitoring portfolios, identifying over-concentration, and addressing potential vulnerabilities.
Further explaining his concerns, the governor said, “While such practices may yield short-term gains they ultimately expose the bank to significant long-term risks, including reputational damage, supervisory scrutiny, and financial penalties.” The governor also urged boards of banks to proactively manage risks by monitoring portfolios, identifying over-concentration, and addressing potential vulnerabilities. He emphasised the need to strengthen internal governance to curb unethical practices and adapt to evolving challenges like technological advancements and climate change. He also highlighted the banking sector's strength while advocating for leveraging favourable conditions to enhance resilience and sustainability.
It was the second annual conference organised by the Reserve Bank with the boards of private sector banks as part of a series of engagements with them. The conference had the participation of over 200 directors of private sector banks, including chairmen, managing directors and chief executive officers.