CHENNAI: Underscoring the importance of trust in banking, Deputy Governor of the Reserve Bank of India Swaminathan J on Thursday said that the sector’s long-term success hinges more on credibility than profitability.
Delivering the 12th G Ramachandran Memorial Lecture at the Madras School of Economics, Swaminathan said that banking must be viewed as a process of continuous learning, evolving from frontline operations to system-wide oversight.
The RBI official also emphasised the need for regulators to look beyond individual institutions to ensure the resilience of the financial system as a whole – a shift he described as critical to maintaining confidence amid rising complexity and risk.
Characterising banks as a “bundle of promises”, he said that they have a fundamental obligation to safeguard deposits, extend credit on fair terms and adhere to prudent regulatory standards. Strong governance frameworks, he added, remain essential to preserving financial stability.
While profitability matters, it is trust and credibility that ultimately determine a bank’s standing with depositors, regulators and the wider economy, Swaminathan concluded.
Addressing the gathering, former RBI governor C Rangarajan said that central banks must adopt more innovative responses as financial challenges evolve.
Stressing on the importance of balanced policymaking and institutional integrity, he said that effective administrators must present both the merits and drawbacks of policy choices to enable informed decisions. In a lighter vein, he observed that people are often trained “to do things right rather than to do the right things”. He also called for an approach that supports growth alongside stability.
