Reserve Bank of India (RBI) Deputy Governor Swaminathan J urged that banking-sector resilience should be deliberately built rather than left to chance, laying out five pillars of ‘resilience by design.’ Drawing on India’s post-2015 banking reforms, he argued that transparent stress recognition, stronger balance sheets, sharper supervision, adaptive regulation, and resilient internal bank practices have made the system sturdier- and that work must continue as new risks emerge.
Transparent recognition of stress
The first pillar, Swaminathan J said, is the transparent recognition of stress. He cited the post-2015 Asset Quality Review as a turning point, “Recognition required banks to provision, owners to recapitalise, borrowers to negotiate, supervisors to intervene, and markets to reassess risk. Transparency changes incentives.” He argued that delaying recognition weakens credit discipline and raises the eventual cost of resolution.
Designing resilience, not waiting for shocks
Swaminathan J in a speech at Columbia University’s School of International and Public Affairs opened by noting that resilience is ‘not an accident of growth but must be designed’ through a sequence of deliberate actions. He said India has entered a period of global uncertainty with ‘strength with vigilance,’ pointing to geopolitics, supply-chain disruptions and volatile commodity markets as ongoing external pressures. Despite these challenges, he said domestic activity remains resilient, inflation stays within tolerance, external vulnerabilities are manageable, bank balance sheets are healthier, capital buffers comfortable and non-performing assets are at multi-decade lows.
He warned, however, that the best time to build resilience is when conditions are favourable because “risk builds quietly in good times and surfaces loudly when conditions change.”
Resilience within banks and preparing for next wave of risks
Finally, Swaminathan J stressed that frameworks set by governments and regulators are necessary but not sufficient: durability depends on everyday decisions inside institutions. He said resilience must be reflected in routine choices on pricing risk, managing liabilities, monitoring stress and governing technology.
Looking ahead, Swaminathan J warned that the next tests for the financial system will come from complexity driven by artificial intelligence (AI), cyber threats, climate-related risks and heightened financial interconnectedness. “Resilience is not a fixed achievement; it is a continuing institutional project,” he concluded, urging continuous adaptation of supervisory practices, regulation and internal governance to keep pace with evolving threats.
Balance sheet strengthening
Recognition, he added, must be followed by credible corrective action. India’s response included the Insolvency and Bankruptcy Code, recapitalisation of public sector banks and consolidation to achieve scale, alongside depositor protection and expansion of digital public infrastructure. At the bank level, institutions improved provisioning, raised capital and diversified portfolios away from lumpy corporate exposures toward more granular retail, Ministry of Micro, Small and Medium Enterprises of India (MSME) and better-rated corporate segments.
Stronger supervision and prudential discipline
Swaminathan J described a shift in the RBI’s supervisory stance from compliance checks to a forward-looking assessment of governance, business models, technology risk, cyber resilience and conduct. “Modern supervision is not merely about checking compliance with rules. It is about asking whether governance is effective, whether risks are understood and priced correctly, whether control functions have stature,” he said, underscoring the need for supervisors to evaluate banks’ risk culture and preparedness.
The deputy governor highlighted the changing structure of credit and payments, where banks, Non-bank financial institutions (NBFCs), fintech’s and tech partners increasingly interact. That complexity calls for regulations that are both entity-aware and activity-aware. He pointed to steps such as scale-based regulation for NBFCs, digital lending guidelines, IT governance rules and Covid-era relief measures with sunset clauses designed to avoid long-term weakening of discipline.
Swaminathan J’s remarks framed India’s post-2015 reforms as a successful template for making the banking system more robust, while also calling for vigilance and ongoing reform. Policymakers, he implied, should prioritise clear stress recognition mechanisms, maintain credible resolution and recapitalisation tools, keep regulation adaptive to new players and activities, and encourage banks to embed resilience in their day-to-day decision-making.