Indian banks have made great strides in financial stability, with the rate of bad loans now at its lowest in a decade, sitting at just 2.8%. This improvement is largely due to the strong oversight from the Reserve Bank of India (RBI) regarding financial risks. Now, the RBI is focusing on managing Non-Financial Risks (NFR), and is putting stricter penalties in place for issues like tech failures and operational mishaps. The recent recommendations on managing operational risk and boosting resilience mark a new approach that values results over specific procedures.
Operational resilience (OpRes) builds on traditional methods of managing risks and planning for business continuity, but it puts more emphasis on making sure that essential banking services keep running smoothly. This approach is being adopted worldwide as banks face more risks from complex systems and reliance on third parties. To improve their operational resilience, banks need to focus on identifying their most important services, determining how much disruption they can tolerate, tracking operations in real-time, and running different scenario tests.
While there are definitely challenges ahead, boosting operational resilience can give banks a competitive advantage and help support India’s goal of creating a strong and trustworthy financial system.
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