Kamath defends RBI's strict actions on banks, NBFCs: 'Better to clamp down now'

Amid mixed opinion on whether the Reserve Bank of India was a bit too harsh by halting businesses of banks and non-banks to ensure that some undesirable practices are weeded out, veteran banker KV Kamath believes the central bank’s approach is possibly the best way to find a solution to the problem.

“Without going into specifics of what could have driven this (stringent regulatory action), let me say that a regulator certainly has to tighten where it sees that practices are not appropriate or are lax. It's better to clamp down now and make sure that the counterparty is course corrected before proceeding,” he affirmed.

To put things in context, starting with HDFC Bank’s ban on digital on boarding of customers through its app and issuance of new credit cards, to the cease and desist order issued last month on four non-banks, including Sachin Bansal’s Navi Finserv, 14 banks and non-banks have faced strict action from the regulator for non-compliance between December 2020 and October 2024. Movers and shakers of the industry such as Bajaj Finance and Paytm Payments Bank - which was barred from accepting deposits - too weren’t spared during this period.

Speaking exclusively to Moneycontrol on this matter, Kamath said that it is possibly the best way to ensure that the rest of the players in the industry take corrective action by themselves.