The report sheds light on how innovation and technology are transforming financial institutions as they navigate increasingly stringent regulatory landscapes. Maveric Systems, which calls itself a specialist in banktech, highlights key strategies banks should adopt. It explains the need for Indian financial institutions to adopt cross-functional teams and establish stronger regulatory compliance (regtech plus banktech) frameworks to remain in sync with trends in the global banking sector.
With regulatory bodies around the world advancing toward more strategic, data-driven supervision, Indian banks must institutionalise systemic risk reporting and align with emerging technology standards. Failure to do so could see them fall further behind on the global stage, the report cautions.
“Regulators are expanding their focus to cover both financial and non-financial risks, including emerging areas such as Basel IV, environmental, social and governance (ESG) metrics, and artificial intelligence (AI) guidelines,” says P Venkatesh, Director of Thought Leadership at Maveric Systems. “Indian regulators are making progress, but there is still a pressing need for banks to take proactive measures, including aligning with the stringent global standards set by leaders in Europe and the US.”
Europe is leading the charge in setting comprehensive technology standards, while India lags in digital financial ecosystems and crime prevention measures. Venkatesh also points out challenges in payment regulations and operational resilience that Indian banks must address by aligning with global best practices.
He suggests that Indian banks consolidate to become globally systemic players — a move that would subject them to more international regulations and enhance their influence in the global financial system.The report emphasises the importance of restructuring operations to ensure that Indian banks can meet the growing demands of regulatory alignment. This includes appointing a single leader responsible for overseeing compliance, implementing data structures that adhere to regulatory frameworks, and proactively engaging with regulators to understand evolving policies and technical standards.The report urges Indian banks to proactively strengthen their financial crime intelligence capabilities, including creating a common database with other institutions, to prevent and detect financial crimes more effectively. Additionally, it recommends leveraging innovation labs to digitise policymaking and improve compliance.
According to Venkatesh, global financial regulation has evolved, particularly in the wake of the 2008 crisis and the Covid pandemic, bringing to the fore the role of various “innovation labs” and the unification of banktech regulations in a digital context. There is an acute need for aligning financial institutions with regulators, including digitisation of policymaking for better intelligence and implementation. This becomes critical as there are growing challenges in payment regulation, operational resilience, AI guidelines and the need for proactive measures in financial crime prevention.
Venkatesh says analytical applications, including behavioral sciences, deep neural networks, blockchain, Web3 risk mitigation, and forensics are achieving significant results, especially in the financial crime arena, and regulators needs to focus on how to spur technology integration, cross-functional collaborations and banktech related projects’ implementations.
P Venkatesh, Director – Though Leadership, Maveric Systems
Regulators are also enhancing their monitoring efforts to detect and prevent unethical practices such as greenwashing and money laundering/terrorist financing. While there is some level of coordination, there are differences in approach and timing across the US and European landscapes.
The report adds that regulators are making significant advances in strategic data-driven supervision for new risk lenses, which require sharing information. It further emphasises that the next five years are shaping up to be the most strategic period of regulatory reform for industry data since the financial crisis. Meeting any regulatory requirement will demand sourcing, capturing, processing, and reporting information. Therefore, it is important to connect data from multiple sources — across business lines, enabling functions, and external data.
“In terms of best practices globally, India’s financial ecosystem has areas where it performs well, but also areas where it lags behind,” Venkatesh says. “For instance, how many banks from India are in the top 20 globally? Not many. China has six.”
According to the latest rankings, there are six Chinese banks and zero Indian banks among the top 20 banks in the world by total assets. Indian banks, while being significant in their own domestic domain, are yet to break into the top 20.
