In order to stop unethical acts like misselling goods or creating accounts without the required KYC verification, RBI Governor Shaktikanta Das on Monday urged bank boards to fortify their internal governance system.

Das said that bank employees’ incentives had to be properly crafted to prevent them from engaging in unethical behavior. He said in a keynote speech at the Conference of Directors of Private Sector Banks here that “although such practices may yield short-term gains, they ultimately expose the bank to significant long-term risks, including reputational damage, supervisory scrutiny, and financial penalties.”

Das said that the Indian banking industry is going through a period of transformation that is full with risks, possibilities, and difficulties. “The banking industry is still robust and steady. Since our meeting in May of last year, every financial indicator has improved, which reflects the efforts of the different banking sector players, including their boards and management,” he added.

The governor emphasized that solid fundamentals should be used to strengthen and enhance the defenses in order to maintain the resilience of the financial sector. “After all, the best times to strengthen resilience and develop sustainably are during good times,” he said. Das said that organizations confront many risks and problems in the quickly changing, technologically advanced world.

He noted that the economic environment is changing due to factors including third-party dependence, technological improvements, the emergence of new-age fintech companies, and climate change.