disruptions & opportunities in the financial sector address by shri shaktikanta das, governor, reserve bank of india - june 17, 2022 - delivered at the financial express modern bfsi summit in mumbai it is my pleasure to be here amongst such a distinguished gathering to deliver the inaugural address at the financial express modern bfsi summit. the theme of my address “ disruptions & opportunities in the financial sector ’ will resonate in the current context of technological innovations and fast evolving business models in the financial sector. 2. the impact of covid - 19 pandemic, the recent geo - political crisis and the all - pervasive technological innovations sweeping across economies are challenging the traditional financial intermediation processes. in my address today, i would like to focus more on the banking and the financial services space. i propose to share my thoughts on possible implications of technology on the financial services industry. the changing paradigm of banking 3. the edifice of growth and development in modern economies is built on the foundation of a vibrant, resilient and well - functioning financial sector. the core functions of the financial sector in an economy, viz. intermediation, asset price discovery, risk transfer and payments are globally undergoing a process of transformation. this is primarily driven by technological advancements. the indian financial sector has also been a part of this churning and is adopting and propelling these transformations. 4. over the past few years, the business of banking has witnessed a shift from traditional branch banking to digital banking. this paradigm shift has been possible due to innovations in information technology ( it ), growth in mobile and internet connectivity, market - based financial intermediation, and the advent of fintech. financial service providers are now devising new products and services and are adopting new business models for reaching out to the target customers. 5. improvements in technology have also enhanced the cause of financial inclusion and tech - enabled public goods delivery. direct benefit transfer ( dbt ) through the digital mode is among the best examples of tech - enabled public goods delivery. digital - mobileanywhere - anytime banking is becoming the order of the day. the indigenously developed unified payments interface ( upi ) and aadhaar enabled payment service ( aeps ) have become the backbone of our retail payments system. 6. alongside these advancements, the reserve bank ’ s regulatory approach has been realigned to support and foster such innovations. the regulatory guidelines for account aggregators and peer - to - peer

principles enjoin upon the supervisors and oversight bodies to ensure an equitable and fair treatment of consumers, disclosure and transparency in product and service offerings along with promotion of financial education and awareness amongst the consumers. in this context, i would like to highlight some important aspects of consumer protection and risk management that banks need to imbibe in their business processes : bis central bankers ’ speeches • pricing of asset and liability products should be transparent and non - discriminatory. at a minimum, it must be ensured that poor do not subsidize the provision of banking services to the rich. • the business operations of banks should be customer - centric in nature. this should be reflected in all aspects of banking operations including creation of customized products and services, pricing of services, delivery channels, etc. banks should, inherently, be flexible in their operations so that they have the ability to meet the evolving stakeholder expectations. • banks should be able to appreciate the risk - return trade - off involved in various activities. the basic premise that greater return would invariably come from assumption of higher risk, needs to be appreciated and disseminated, both within the organization and to banks ’ customers. banks need to develop the ability to discern good risk from bad so that they selectively take on only those risks that are in alignment with the bank ’ s long term strategic vision. • the culture of efficient risk management needs to be imbibed in the organization ’ s ethos so that everyone from the top management to frontline managers in the field shares a common vision of risk management. a key related issue is the integrity of mis in banks. each bank claims to be oriented towards its customers. but, i have a simple poser. are the banks aware of the number of customers they have? i am not referring to the number of accounts but the actual number of customers that the bank serves across all business verticals by offering different products. moreover, most of the banks do not have a system of working out activity wise costs and returns. unless banks know the return on each and every product, they cannot arrive at a truly risk based pricing. c ) impaired assets another issue which is generating considerable concern and is likely to impact banks ’ ability to serve its stakeholders is the rising portfolio of non - performing assets ( npas ) and restructured loans. while the downturn in business environment globally and in india has contributed to this rise, we need to reflect on why our risk management practices during boom time