. in the specific area of cyber security, the rbi has recently conducted phishing simulation exercises for select supervised entities ( ses ) to assess their email security standards and cyber security preparedness. we have also initiated the process of conducting cyber reconnaissance exercises this year. this will provide pre - emptive information on the cybersecurity risk vectors of ses. besides, cyber drills which are conducted periodically are being further enhanced in terms of coverage and periodicity. 20. the increasing use of technology and digital services has led to more incidents of digital frauds and customer dissatisfaction. the recommendations of the rbi working group on digital lending in this area are under examination for issuance of guidelines. 21. in the context of customer service, another area which is engaging the attention of the rbi is the harsh recovery methods used by certain lenders, without having adequate checks and controls over their recovery agents. we have received complaints of customers being contacted by recovery agents at odd hours, even past midnight. there are also complaints of recovery agents using foul language. such kind of actions by recovery agents are unacceptable and pose reputational risk for the financial entities themselves. we have taken serious note of such instances and will not hesitate to take stringent action in cases where regulated entities are involved. such complaints against unregulated entities will have to be taken up with appropriate law enforcement agencies. 22. we have recently set up of a committee for review of customer service standards in the rbi regulated entities ( res ) which would inter alia review the emerging and evolving needs of the customer service landscape, especially in the context of evolving digital financial products and their distribution, and suggest measures for strengthening the overall consumer protection framework. governance and risk management 23. i have often spoken about the importance of good corporate governance in banks and financial institutions. a good governance structure will have to be supported by effective risk management and compliance functions. the cost of compliance to rules and regulations should be perceived as an investment, as inadequacy in this regard can prove to be highly costly. compliance culture should ensure adherence to not only laws, rules and regulations, but also integrity, ethics and codes of conduct. 24. the global financial crisis was preceded by a wave of financial innovations related to securitisation and other innovative financial instruments. these allowed the financial system to grow at a pace that was beyond its capacity to manage, especially from the point of view of the connected risks. given such past experience, prudence demands that introduction of innovations in

with the bank. it is, therefore, crucial that while driving various tech - enabled initiatives, the existing systems and processes do not see frequent disruptions and non - availability. we have already seen instances of the damage that disruptions in technology systems can bring and the reputation risk they carry for financial entities. a casual approach to handling technology issues even as basic as wrongful deletion of a single system file or inadequate care in patch updating often lead to financial and operational losses. 10. the it systems and platforms are also exposed to obsolescence and require frequent upgradation. this calls for adequate investment in it infrastructure by all financial sector entities. this is one of the important focus areas of rbi ’ s supervision of its regulated entities, especially the banks and the nbfcs. 11. it has also to be recognised that human resource can turn out to be the weakest link in technology enabled financial services. there is thus a vital need for ongoing training and skill building programmes. 12. at end of the day, the bottomline is how technology improves the financial system in terms of efficiency, effectiveness, resolving bottlenecks in economic functions and provide value addition to the customers. collaboration between finance and technology firms 13. large technology companies ( bigtech ) which have entered into provision of financial services could potentially be another source of disruption to the financial system. as you would be aware, such companies, whether from e - commerce, social media and search engine platforms, ride hailing and similar businesses have started to offer financial services in a big way on their own or on behalf of others. these companies have an enormous amount of customer data which has helped them to offer tailored financial services to entities and individuals lacking credit history or collateral. even the banks and other lenders are sometimes utilising platforms provided by fintech companies in their internal processes for credit risk assessment. such large scale use of new methodologies in credit risk assessment can create systemic concerns like over - leverage, inadequate credit assessment, etc. authorities and regulators have to strike a fine balance between enabling innovation and preventing systemic risks. 14. the big techs also pose concerns related to competition, data protection, data sharing and operational resilience of critical services in situations where banks and nbfcs utilise the services of big tech companies. these concerns can also materialise in sectors other than financial services. the provision of financial services through the digital channel, including lending through online platforms and mobile apps, have brought in issues