MUMBAI: Reserve Bank of India Deputy Governor J Swaminathan has warned that governance lapses – not a lack of knowledge – lie at the heart of many financial failures, and said institutions often ignore red flags because incentives discourage speaking up, allowing risks to fester until they erupt into crises.In her keynote address at the third International Finance and Accounting Conference (IFAC) at the Indian Institute of Management in Jammu, Swaminathan said: “People knew what was going wrong, but they didn’t speak up. Or they spoke up, but no one listened. Or everyone noticed the red flags, but the incentives made them look away.” Swaminathan stressed that it is leadership, not just technology or capital, that will determine whether India achieves its 2047 aspirations set by Vixit Bharat.
He said leadership in finance is about judgment and discipline. “It’s about what you choose to reward, what you choose to question, and what you choose to fix early.”In his speech, Swaminathan repeatedly warned that the scale and speed of modern finance could become a double-edged sword if it is not based on management and discipline. Swaminathan noted that India’s financial system operates in an era where products, platforms and credit models can reach millions within months.
In such an environment, vulnerabilities can no longer be contained, but are magnified. “The damage can spread quickly if the design is poor, controls are weak, or incentives are misaligned,” he said.The Deputy Governor’s view was that technology acts as a force multiplier. A flawed underwriting model, an insufficiently tested digital product, or a poorly aligned sales incentive doesn’t just impact a handful of customers — it can impact millions at almost the same time.