SBI transformed from being in loss in 2018 to USD 100 bn company, due to regulatory reforms by RBI: Governor Malhotra

Core Insights - The transformation of India's banking sector is attributed to a strong regulatory framework and key policy measures introduced by the Reserve Bank of India (RBI) and the government, exemplified by the State Bank of India's (SBI) growth from a loss in 2018 to becoming a USD 100 billion company [1][9] Regulatory and Structural Reforms - The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 and the establishment of resolution mechanisms have fundamentally transformed India's credit culture, promoting greater discipline among borrowers and improving asset quality across the banking system [2][5][9] - Major reforms aimed at strengthening monetary and macroeconomic stability include the adoption of a flexible inflation targeting regime, deepening of forex markets, and gradual liberalization of the capital account [5][9] Historical Context and Recovery - The period from 2014 onwards marked a foundational restructuring of the financial system, guided by the principle of "never waste a good crisis," particularly during a time when India was categorized among the "fragile five" economies [6][9] - The transformation was driven by measures focused on recognition, resolution, and recapitalization of banks, including the Asset Quality Review (AQR) initiated in 2015, which compelled banks to recognize the true state of their loan books [7][10] Banking Sector Consolidation - The consolidation of 27 public sector banks into 12 by 2020, along with massive recapitalization programs, significantly strengthened balance sheets, enhanced capital buffers, and revived the capacity for healthy lending [8][10] - The evolution of India's financial system necessitates that prudential rulebooks evolve in a calibrated manner, as banks are now stronger, supervision is more alert, and market-based risk transfer is more effective [8][10]