Page 26 - Banking Finance March 2025

ARTICLE

Reputational

Risk: A Double-

Edged Sword for

Indian Banking Praveen Kumar S V

Chief Manager
Union Bank of India
ZLC Hyderabad

The Indian banking sector has made significant strides in managing reputational risk. However,
the challenges and opportunities facing the sector are evolving rapidly. By proactively addressing
these challenges and embracing innovation, banks can continue to build trust, enhance their
reputation, and contribute to the growth of the Indian economy.

R eputational risk, a silent yet potent force in the has implemented stringent regulations to ensure the
business world, has taken on particular
stability and integrity of the banking sector. Non-
significance in the Indian banking sector. The
compliance or ethical lapses can result in severe
intricate interplay of cultural nuances,
scandals involving money laundering and fraud have
regulatory frameworks, and customer expectations has penalties and damage to reputation. The recent
created a unique landscape where reputational damage can underscored the importance of regulatory compliance
have far-reaching consequences. for Indian banks.
Customer Expectations: Indian customers have
The Indian Banking Landscape: increasingly high expectations for ethical behaviour,
The Indian banking sector, a cornerstone of the country's transparency, and customer service. A single negative
economic growth, operates in a highly competitive and experience can quickly spread through social media,
dynamic environment. While this offers numerous impacting a bank's reputation on a national scale. For
opportunities, it also presents significant challenges when instance, a bank's failure to address customer
it comes to managing reputational risk. complaints promptly or provide satisfactory resolutions
Cultural Nuances: India's diverse cultural landscape can lead to a decline in customer trust.
necessitates careful consideration of local sensitivities Social and Political Factors: India's complex social and
and values. A misstep can quickly escalate into a public political landscape can influence public perception of
relations disaster. For example, a bank's advertising banks. Involvement in controversial issues or association
campaign that inadvertently offended a religious or with politically sensitive individuals can damage
cultural group could lead to widespread backlash. reputation. Banks that fail to navigate these challenges
Regulatory Scrutiny: The Reserve Bank of India (RBI) effectively may face public scrutiny and boycotts.

BANKING FINANCE | MARCH | 2025 | 23