RBI governor urges banks to lower intermediation costs, improve efficiency

Reserve Bank of India (RBI) Governor Sanjay Malhotra called upon Managing Directors and Chief Executive Officers of public and select private banks to reduce intermediation costs and enhance operational efficiency. This follows a cumulative 125 basis points (bps) reduction in the policy rate since February.

A statement from the RBI noted: “The Governor emphasized that this monetary easing—coupled with increased technological adoption—should drive down intermediation costs and boost efficiency, fostering sustainable growth and expanded financial inclusion.”

These discussions reflect the Reserve Bank’s regular engagement with leaders of regulated entities, continuing dialogues initiated in January 2024.

Governor Malhotra acknowledged improvements in banking sector health during 2024 but cautioned against complacency, urging institutions to remain proactive amid evolving market dynamics.

He further directed banks to prioritize grievance resolution while reinforcing internal controls. Highlighting rising digital fraud risks, Malhotra advocated for upgraded, intelligence-powered security frameworks.

Commending progress on re-KYC protocols and unclaimed deposit management, Malhotra encouraged intensified customer outreach and sustained awareness initiatives. He reiterated the RBI’s collaborative regulatory approach, citing recent simplification and consolidation measures.

Bank executives reportedly shared feedback on policy, supervisory, and operational challenges during the meeting.

The dialogue followed the Monetary Policy Committee’s (MPC) decision to cut the benchmark repo rate by 25 basis points to 5.25%—the lowest level in three years.

RBI data revealed a 102-basis-point reduction in banks’ weighted average domestic term deposit rates between February and September, alongside a 73-bp decline in new rupee loan rates.

During its December review, the RBI announced a two-month campaign effective January 1, 2025, to expedite resolution of complaints pending beyond one month with its Ombudsman.

(With inputs from IANS)