##equacy ratios of scbs have further improved in september 2021 from their levels in june 2021. banks have also been prudent in raising capital. profitability metrics of several banks are also at highest levels in several years. the improved parameters partly reflect regulatory relief provided to banks during covid - 19 as well as fiscal guarantees and financial support given by the government. going forward, there are risks and challenges which require serious introspection and action on the part of the banking system. 18. first, the covid - 19 episode provides a real - life experience to take a fresh look at certain aspects of existing prudential and regulatory norms for financial entities regulated by rbi. certain concerns have re - emerged from the crisis which warrant our attention. most importantly, we are faced with the question of capital and provisioning buffers of banks, their adequacy and resultant usability during a crisis. i would thus strongly urge the banks to focus and further improve their capital management processes with a forward - looking, scientific and prudent approach. the key point is to envisage the capacity for loss absorption as an ongoing responsibility of the lending institutions. it is expected that banks will exhibit prudent risk - taking behaviour and use their capital efficiently. 19. second, good governance is a necessary condition for having well - functioning, strong and resilient financial institutions. banks have the privilege of raising deposits from the public, which also puts the onus on them to conduct their business in a very responsible manner. the board of directors carry the responsibility of being guardians of the trust that depositors have reposed in a bank. a bank ’ s responsibility towards depositors should, therefore, be weighed against its responsibility towards shareholders of the bank. to ensure good governance, the reserve bank has high expectations from the oversight role of the board, its composition, directors ’ skill profile, strong risk and compliance structure and processes, more transparency and a robust mechanism of balancing various stakeholder interests. thus, business priorities need to be complemented with responsible governance and ethical actions. 20. third, banks should ensure that their business models and business strategies are conscious choices, following a robust strategic discussion in the board, instead of being driven by mechanical ‘ follow the market ’ approach. in their endeavour to grow, banks should avoid herd mentality and look for differentiated business strategies. at the rbi, we have started taking a closer look on the business models and strategies of banks. certain banks had

. 25. i wish to assure the fintech community that the rbi will continue to encourage and support innovation. at the same time, we would expect the ecosystem to pay attention to governance, business conduct, regulatory compliance and risk mitigation frameworks. the fintech road ahead will witness ever growing traffic in addition to the large number of existing players who are already there. it is, therefore, imperative that every player on this road follows the traffic rules for his / her own safety and the safety of others. conclusion 26. a sustainable financial world is not just for us, it is also for the future generations. it is up to us how we want to move forward in this journey. the rbi ’ s focus has always been on encouraging innovation by providing an enabling environment. simultaneously, as guardian of financial stability, the rbi also remains watchful of any undue risk build up and responds to them. the fintech players, i am sure, will join us in this endeavour. 27. with the amazing talent base that we have in india and the giant leaps we have taken in the digital and fintech space in recent years, i am confident that india is well positioned to shape the future course in this area. as we set sail for a brighter future, i wish you all a safe and fulfilling journey ahead. thank you.