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MUMBAI: RBI deputy governor Swaminathan J asked banks to invest in IT and IT security ‘as if there is no tomorrow’. Swaminathan said that RBI’s root cause analysis of system downtime at some banks showed that their switch to disaster recovery was not smooth and did not uniformly support all channels.
Swaminathan was speaking at SBI’s 10th Economic Conclave in Mumbai on Thursday.Engaging in a Q&A with SBI MD Ashwini Tewari, the deputy governor said that banks could protect themselves against crisis by building risk buffers during good times and ensuring good governance and compliance. However, to guard against emerging challenges, they would have to invest heavily in technology.
“We find in certain institutions that when a crisis plays out, the switchover to disaster recovery is not that easy, and there is an escalation matrix. Even when the switchover happens, we find that all functions are unavailable,” said Swaminathan. He added that RBI is seeing a need for integrated business continuity plans in place of the channel-specific approach that banks were taking.
“When we do a root cause analysis, we find that the mirroring is not real-time, the applications are not identical, the versions are not uniform and updates are not applied. This can be mitigated only when we regularly test business continuity plans,” said Swaminathan. He added that there are significant reputation risks to the institution and the country.
Swaminathan acknowledged that RBI had received representation from banks for providing exemption from cash reserve ratio for deposits raised through green deposits and priority sector status for green lending.
However, since these products were in the early days, RBI would like to think through the issues as hasty decisions could have unintended consequences, he added. Earlier, Tewari had asked about exemption from the reserve requirement for green deposits on the grounds that the cost of compliance was high and depositors were not willing to bear the costs through lower returns.
Swaminathan said that RBI had tightened regulations for bank lending to NBFCs because credit to this segment was growing twice as fast as the industry.
Swaminathan was speaking at SBI’s 10th Economic Conclave in Mumbai on Thursday.Engaging in a Q&A with SBI MD Ashwini Tewari, the deputy governor said that banks could protect themselves against crisis by building risk buffers during good times and ensuring good governance and compliance. However, to guard against emerging challenges, they would have to invest heavily in technology.
“We find in certain institutions that when a crisis plays out, the switchover to disaster recovery is not that easy, and there is an escalation matrix. Even when the switchover happens, we find that all functions are unavailable,” said Swaminathan. He added that RBI is seeing a need for integrated business continuity plans in place of the channel-specific approach that banks were taking.
“When we do a root cause analysis, we find that the mirroring is not real-time, the applications are not identical, the versions are not uniform and updates are not applied. This can be mitigated only when we regularly test business continuity plans,” said Swaminathan. He added that there are significant reputation risks to the institution and the country.
Swaminathan acknowledged that RBI had received representation from banks for providing exemption from cash reserve ratio for deposits raised through green deposits and priority sector status for green lending.
However, since these products were in the early days, RBI would like to think through the issues as hasty decisions could have unintended consequences, he added. Earlier, Tewari had asked about exemption from the reserve requirement for green deposits on the grounds that the cost of compliance was high and depositors were not willing to bear the costs through lower returns.
Swaminathan said that RBI had tightened regulations for bank lending to NBFCs because credit to this segment was growing twice as fast as the industry.
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