Page 13 - Banking Finance February 2026

RBI CORNER

on banks. While the RBI found the in- The RBI noted that multiple overlap- Malhotra has emphasised the need for
formation disclosable under the RTI ping instructions issued over time often strong underwriting standards and
framework, the concerned banks ap- increase operational complexity and close monitoring of asset quality dur-
pealed, citing confidentiality and po- compliance costs for banks and finan- ing a meeting with chief executive of-
tential systemic implications. cial institutions. By harmonising and ficers of non-banking finance compa-
rationalising regulatory communica- nies (NBFCs). The interaction formed
Information Commissioner Khushwant
tions, the central bank aims to improve part of the RBI's ongoing engagement
Singh Sethi noted that similar matters
had earlier been examined by a double consistency, reduce interpretational with regulated entities and covered
bench of the CIC. Given the signifi- ambiguities and make regulatory ex- NBFCs accounting for about 53 per
cance of the issues raised, all cases pectations easier to implement. cent of the sector's total assets.
have now been referred to the Chief The proposed consolidation is also ex- As of March 31, 2025, India had nearly
Information Commissioner for consid- pected to support better governance 9,000 NBFCs, including 15 upper-layer
eration by a larger bench. Pending a and supervisory effectiveness, while al- entities and 656 in the middle layer.
final decision, disclosure of the infor- lowing regulated entities to focus more The sector is dominated by 15 upper-
mation has been stayed through in- on business operations and risk manage- layer NBFCs, including four housing fi-
terim orders. ment rather than navigating multiple nance companies, which together ac-
The outcome of the case is expected layers of regulatory instructions. counted for over 30 per cent of total
to have far-reaching implications for assets. Government-owned NBFCs
transparency, regulatory accountabil- RBI governor asks NBFCs largely drive the middle layer, which
ity and public access to supervisory in- to closely monitor asset represents nearly two-thirds of sector
formation in the banking sector. assets.
quality Malhotra highlighted the critical role
RBI to consolidate more Reserve Bank of India Governor Sanjay played by NBFCs and housing finance

circulars to ease compli-
ance burden Reserve Bank to develop 'Mule Hunter' system to
After consolidating more than 9,000 curb digital fraud
circulars and guidelines of the Depart- The Reserve Bank of India (RBI) has urged banks to actively participate in
ment of Regulation into 244 function- the Mule Hunter initiative, reiterating that even declining fraud levels are
wise Master Directions, the Reserve "not acceptable" and that the financial system must strive for a zero-fraud
Bank of India plans to undertake a simi- environment to preserve trust in digital banking. Speaking at the IBA Bank-
lar exercise for other departments.
ing Technology Conference in Mumbai, RBI Deputy Governor T Rabi Sankar
The move is aimed at reducing compli-
noted that while fraud incidence in payment systems such as UPI has shown
ance costs, improving clarity of regu- a downward trend, the absolute number of cases remains significant due
latory instructions and enhancing ease to the scale of digital transactions.
of doing business for regulated entities.
The Mule Hunter platform, being developed by the RBI Innovation Hub in
In its Trend and Progress report, the consultation with banks, aims to identify mule accounts and improve recov-
RBI said the earlier consolidation exer- ery outcomes in fraud cases. Sankar said the platform could significantly en-
cise has already streamlined regula-
hance the ability to trace funds and limit losses even when fraud occurs. He
tions for 11 categories of regulated
called on banks to move beyond siloed approaches and collaborate on shared
entities by replacing a large volume of
platforms, including the proposed Digital Payments Intelligence Platform.
fragmented circulars with clearly struc-
tured Master Directions. Building on Highlighting the limitations of standalone bank-level fraud detection systems,
this initiative, the central bank has now Sankar emphasised the role of AI-led, system-wide data sharing. He said
begun work to consolidate circulars Mule Hunter should function as trusted digital public infrastructure, enabling
and directions issued by other depart- controlled intelligence sharing across banks while ensuring data security and
ments as well. privacy safeguards.

12 | 2026 | FEBRUARY | BANKING FINANCE