Mumbai: Reserve Bank of India (RBI) Governor Sanjay Malhotra highlighted the remarkable turnaround of the State Bank of India (SBI), noting its transformation from a loss-making entity in 2018 to a $100 billion company. Speaking at the SBI Banking & Economics Conclave 2025 in Mumbai, Malhotra attributed this success to the decade-long regulatory and structural reforms implemented by the RBI and the government.
Malhotra emphasized that a strong regulatory framework and key policy measures introduced by the RBI and the government enabled the transformation of India's banking sector. He noted that the SBI Chairperson mentioned the bank was in a loss in 2018, but it has since become a $100 billion company.
Several key measures were credited with strengthening India's banking system. These include the Insolvency and Bankruptcy Code (IBC) implemented in 2016, Prompt Corrective Action (PCA), Asset Quality Review (AQR), and bank consolidation. The IBC, in particular, was highlighted for fundamentally transforming India's credit culture by instilling greater financial discipline among borrowers and improving the quality of banks' assets. Experts suggest that this code has improved borrowers' financial discipline and enhanced banks' asset quality.
Malhotra also pointed out broader economic reforms that have bolstered both monetary and economic stability. These include adopting a flexible inflation targeting system, deepening the foreign exchange market, and gradually liberalizing the capital account. He said that these reforms have promoted transparency and accountability in the financial system, further strengthening the Indian banking sector.
Furthermore, Malhotra addressed India's economic journey, recalling when it was considered one of the "Fragile Five" economies, facing significant pressure on its financial system. He stated that since 2014, India has operated on the principle of "never waste a good crisis," focusing on long-term strengthening of the financial system.
In addition to praising SBI's growth, Malhotra mentioned the RBI's recent move to allow banks to fund mergers and acquisitions. He clarified that this measure aims to support the real economy, with appropriate safeguards in place, such as limiting bank funding to 70% of the deal value and setting debt-to-equity ratio limits. While the RBI is proceeding with caution, Malhotra affirmed that the decision to ease certain regulations demonstrates a willingness to show courage in policy reform.
