Can RBI Governor Motivate Banks to Reduce Intermediation Costs and Boost Efficiency?
Synopsis
In a significant move, RBI Governor Sanjay Malhotra has urged banks to cut intermediation costs and enhance efficiency, leveraging recent policy rate cuts and technology. This initiative aims to foster sustainable growth and bolster financial inclusion, making it a critical focus for the banking sector.
Key Takeaways
Call for Efficiency: Banks are encouraged to lower intermediation costs.
Technology Integration: Increased use of technology is essential.
Focus on Customer Complaints: Reducing grievances is a priority.
Risks from Digital Fraud: Emphasis on robust protective measures.
Proactive Outreach: Banks should engage in awareness campaigns.
New Delhi, Dec 10 (NationPress) The Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, has called upon Managing Directors and Chief Executive Officers of both public and select private banks to reduce intermediation costs and enhance operational efficiency, referencing the 125 basis points (bps) decrease in policy rates since February.
“The governor emphasized that the 125 basis point reduction, along with increased technological adoption, should lead to lower intermediation costs and improved efficiency, ultimately aiding in sustainable growth and enhanced financial inclusion,” stated an official announcement from RBI.
Such dialogues are part of the Reserve Bank’s continuous engagement with the senior management of regulated institutions following similar meetings in January 2025.
The RBI Governor remarked that while the banking sector has shown steady progress in terms of health and operations in 2025, banks must remain proactive and vigilant in an ever-changing environment.
Additionally, Malhotra encouraged banks to prioritize reducing customer complaints and fortifying internal systems. He pointed out the escalating risks posed by digital frauds and advocated for more robust, intelligence-driven protective measures.
Commending efforts on re-KYC and unclaimed deposits, he urged banks to engage in proactive outreach and continuous awareness campaigns. He reaffirmed the Reserve Bank’s collaborative approach, referencing recent initiatives aimed at the consolidation and simplification of regulations, as noted in the statement.
Participants shared their insights and feedback on a variety of policy, supervisory, and operational issues, as highlighted in the statement.
This interaction followed the Monetary Policy Committee (MPC) of the central bank's decision to lower the benchmark repo rate by 25 basis points to 5.25 percent, marking the lowest rate in three years.
Data on monetary transmission from the RBI revealed that banks' weighted average domestic term deposit rates fell by 102 basis points between February and September, while interest rates on new rupee loans decreased by 73 bps.
In the upcoming December policy review, the RBI has proposed launching a two-month initiative starting on January 1, 2026 to address all complaints pending with the RBI Ombudsman for over a month.
Point of View
I believe that the RBI Governor's call to action is a crucial step towards enhancing the resilience of our banking sector. By urging banks to address intermediation costs and operational efficiency, we pave the way for a more inclusive and sustainable financial environment.
NationPress
11 May 2026
Frequently Asked Questions
What did the RBI Governor urge banks to do?
The RBI Governor urged banks to lower intermediation costs and improve operational efficiency.
What was the recent policy rate reduction by the RBI?
The RBI recently reduced the policy rate by 125 basis points.
Why is reducing intermediation costs important?
Lowering intermediation costs enhances efficiency, promotes sustainable growth, and supports financial inclusion.
What risks did the RBI Governor highlight?
The RBI Governor highlighted growing risks from digital frauds.
What is the proposed initiative starting in January 2026?
The RBI plans to launch a two-month campaign to address complaints pending with the RBI Ombudsman for more than a month.
