Governance failures, rather than lack of knowledge, are at the root of many financial crises, Reserve Bank of India (RBI) Deputy Governor J. Swaminathan said, emphasising that misaligned incentives often lead institutions to ignore warning signs until risks escalate into full-blown problems, reported TOI.
Speaking at the 3rd International Finance and Accounting Conference (IFAC) at the Indian Institute of Management Jammu, Swaminathan highlighted the human and organisational factors behind financial collapses. “People knew what was going wrong, but they did not speak up. Or they spoke up, but no one listened. Or everyone noticed red flags, but incentives pushed them to look away,” he said.
Swaminathan stressed that strong leadership, judgment, and discipline, not just technology or capital, are essential to realising India’s 2047 vision of Viksit Bharat. “It is about what you choose to reward, what you choose to question, and what you choose to fix early,” he added, underlining the importance of proactive governance.
He warned that in today’s financial landscape, scale and speed can be double-edged swords if not anchored in sound controls. Modern products, platforms, and credit models can now reach millions of users within months, amplifying weaknesses rather than containing them. “Harm can scale quickly if design is poor, controls are weak, or incentives are misaligned,” Swaminathan said.
The deputy governor explained that technology acts as a force multiplier. A flawed underwriting model, an inadequately tested digital product, or poorly aligned sales incentives does not just affect a few customers — it can impact millions almost simultaneously.
Swaminathan’s remarks serve as a reminder that robust governance, disciplined leadership, and careful incentive structures are critical to ensuring the stability of India’s rapidly evolving financial system.
