Regulations Must Be Targeted With Precision, Not Hurt Investments, Says RBI Governor
As policy makers, there is a need to be mindful that the measures are not overzealous and do not stifle investments, Malhotra said.
There is a need to have laws and regulations which, with surgical precision, target only the illegitimate and the illicit, rather than use very broad and blunt tools to unintentionally hurt even the honest. Reserve Bank of India Governor Sanjay Malhotra said.
“…While making the policy, it's important to have very precise and balanced regulations. It's equally important that while we are implementing them, we keep the impact that they are going to have on the person in mind. A risk-based approach is recommended in this regard,” he said at the FATF Private Sector Collaborative Forum 2025.
As policymakers, there is a need to be mindful that the measures are not overzealous and do not stifle investments, Malhotra said, while laying out the agenda for the forum.
The private sector and the government must continuously refine and improve the risk assessment models to improve them and make them more robust.
For this, improvement of data quality and being able to harness the evolving technologies that are coming in, whether it is artificial intelligence or blockchain technology or machine learning, is crucial.
Further, he also said that anti-money laundering and countering the financing of terrorism risk assessments can be further fine-tuned and refined with the adoption of new technology, tools and models.
"I would urge you all to kindly discuss and share best practices in identification, mitigation and supervision of AML-CFT risks. This will not only help the businesses and the persons involved in reducing the compliance burden; it is also helpful for the private sector and the supervisors in the optimal allocation of their resources," he said.
Coming to financial inclusion, Malhotra said that discussions on factors and standards to promote financial inclusion need to find answers to the challenge of aligning financial inclusion and financial integrity, especially for the developing economies.
It must be ensured that regulations do not create 'unintended barriers' to financial inclusion. "We need to be mindful of customer rights and convenience while fulfilling the due diligence requirements."
Moreover, he said that there is a lot of scope for improvement from the regulated entities and from regulators on know-your-customer processes.
"...we all together need to put our heads together as to how we can make the system more robust, effective and efficient so that all regulated entities can coordinate and make it easier for everyone to do this KYC process," he said. This is to ensure that there is no repetition of unnecessary KYC multiple times by different regulated entities for the same person.
