Shri Tuhin Kanta Pandey, Chairman, SEBI; Shri Shyamal Majumdar, Editor, and friends from the Financial Express, distinguished leaders from banking, financial services and insurance; ladies and gentlemen. Good morning to all of you.

2. We meet as the festive season gathers momentum across the country— a period traditionally associated with celebration and elevated economic activity. Veterans amongst us here will recall that this was once known as the “busy season” for credit policy. For households and businesses, this is also a time when important financial decisions are often made, whether to spend or invest for the future, like purchase a home or expand an enterprise.

3. For the financial sector, this represents both opportunity and responsibility. Finance helps translate confidence into economic activity, but its ability to do so depends in turn on the confidence that customers place in financial institutions.

4. That makes the theme of today’s Summit — “The Next Balance Sheet: Growth. Trust. Resilience.” — particularly relevant. The Indian financial system enters its next phase from a position of strength, with improved asset quality and comfortable capital positions. The challenge is to preserve these strengths as the system grows, becomes increasingly technology-intensive and ever more interconnected.

5. In this context, I would like to make three propositions:

(i) First, as institutions pursue growth and remove friction, controls must evolve with the process.

(ii) Second, trust must be treated as an asset that requires continuous investment.

(iii) And third, resilience must increasingly be understood not only in terms of buffers, but also in terms of the speed with which an institution can detect, decide and recover.

Growth with discipline of control

6. Several sessions today deal with frictionless onboarding, digital public infrastructure, AI-led underwriting and autonomous workflows. These developments can indeed reduce costs, improve customer experience and extend financial services to customers who were previously difficult to serve.

7. However, from a supervisory perspective, not every friction in finance is inefficiency. Some frictions perform an important control function. An independent verification, a maker-checker arrangement or a cooling-off period may add time to a process, but they can also reduce the probability of error, fraud or adverse selection.

8. Technology may allow some of these steps to be delayered, redesigned or automated, but before removing them an institution should understand the function they were performing. If a manual check is replaced by an algorithm, or underwriting becomes instantaneous, the underlying risk does not disappear; the control must therefore evolve with the process. In supervisory terms, the control environment must remain commensurate with the pace and nature of growth.

9. The same principle applies when activities are carried out through third parties. A loan may be sourced through a fintech, a product distributed through an external platform, or a decision supported by a third-party model. The process may be outsourced, but the responsibility associated with the institution’s licence remains with the regulated entity.

10. A practical question, therefore, is that whenever a step is removed or modified in the name of speed, scale or customer convenience, what risk was that step controlling, and where does that control now reside? If the answer is not clear, process simplification may in fact be control dilution.

Trust as an asset

11. My second proposition concerns trust. Financial institutions depend upon it, yet it does not appear explicitly on the balance sheet. We do not recognise trust when it is built, but when it is impaired the effects can become visible quickly through customer attrition, litigation, regulatory penalties, and reputational damage.

12. The invisible nature of trust makes it easy to underinvest in during good times. When growth is strong, customer acquisition is healthy and profitability is comfortable, the return from investing in conduct, service quality or grievance handling may appear less immediate. Yet these are often the areas where early signs of weakness first emerge.

13. One area wherein trust is tested is the sale of financial products. Technology allows institutions to understand customers better, reach them more frequently and tailor products with finer precision. These capabilities can improve customer outcomes, but they can also sharpen the consequences of poor incentive design. When the pressure to complete a transaction becomes stronger than the obligation to assess whether it serves the customer’s needs, trust can deteriorate even while business volumes are rising.

14. A second area is the use of customer data. As institutions gain the ability to personalise products and services in real time, the question is not only whether consent has been obtained, but whether the use of that data is consistent with what the customer would reasonably expect. The more powerful the analytical capability, the greater the need for discipline in how that capability is exercised.

15. A third area is grievance handling. Complaints should not be seen merely as service issues to be resolved and closed; they can be an important source of risk intelligence. A pattern of complaints may reveal weaknesses in product design, incentive structures, digital journeys or third-party arrangements. Institutions that learn from grievances, rather than simply dispose of them, are likely to identify emerging problems earlier.

16. Trust also has a system-wide dimension. A customer who loses money through fraud may not distinguish between the institution where the fraud originated, the institution through which the funds moved, and the institution that may have hosted a mule account. From the customer’s perspective, the financial system has failed. Weak controls in one part of the system can therefore impose a trust cost on the whole system.

Resilience in an age of compressed time

17. My third proposition concerns resilience. Capital, liquidity and provisioning remain fundamental, but in a more digital and intermeshed financial system, resilience must also be measured in time. The key questions are increasingly how quickly an institution can detect a problem, comprehend its implications, decide and restore critical services.

18. Technology has compressed the time in which risks can develop and propagate. The 2023 banking stress in the United States showed how sharply such timelines can compress: US$42 billion of deposits moving in a single day is not something that could have happened through a queue outside a bank branch.

19. In a more digital financial system, resilience therefore depends not only on the capacity to absorb a shock, but also on the speed with which an institution can detect, assess and respond to it.

20. This places a premium on the speed and quality of internal information flows. In many cases, significant problems are not wholly invisible before they become serious. An auditor may have identified an exception, a compliance officer may have raised a concern, or a business unit may already have observed an unusual pattern. The challenge is whether that information gets to those with the authority to act, and whether it does so in time.

21. One useful measure of governance quality, therefore, is the time it takes for bad news to travel through the institution. Where risk, compliance and audit functions have sufficient stature, escalation is encouraged and Boards actively seek out emerging concerns, institutions are better placed to respond before problems become difficult to contain.

Conclusion

22. As we think about the next balance sheet, the festive season offers a useful analogy. In one interpretation¹, the nine days of Navratri are grouped into three triads — the first associated with Durga, the next with Lakshmi and the final with Saraswati.

23. The sequence is instructive: strength comes first, prosperity follows, and wisdom and discernment help sustain it. In financial terms, resilience provides the foundation for growth, while sound judgement and governance build the trust that allows that growth to endure.

24. A similar idea is reflected in the Diwali tradition of opening new account books and beginning them with the words ‘Shubh Labh’. The emphasis is not only on ‘Labh’ — gain or prosperity — but also on ‘Shubh’, that is, the quality and legitimacy of that gain are equally important.

25. For financial institutions, that is a useful test of the next balance sheet. Growth should not be judged only by its pace or scale, but also by the strength of the controls behind it, the fairness of the conduct that supports it, and the trust it is able to sustain.

26. As we move through this season of renewal and optimism, I wish the financial sector growth that is not only strong, but also sound, trusted and durable. The opportunities before us are considerable, but so too is the responsibility to ensure that innovation is matched by judgement, growth by sound controls, and ambition with resilience. If we can preserve that balance, the next balance sheet will not only be larger; it will also be stronger.

27. With this, I wish all of you a fruitful and successful summit. Thank you. Jai Hind.

¹ Swami Tejomayananda, “The Spiritual Significance of Navaratri,” Chinmaya Mission, May 1, 2025, https://www.chinmayamission.com/global/article/the-spiritual-significance-of-navaratri-swami-tejomayananda