The banking sector is facing some challenges as unsecured personal loans, digital transformation, and shifting customer ownership models disrupt traditional frameworks.

Unsecured loans digital risks RBI bank officials flag challenges

Regulatory oversight, declining CASA ratios, and third-party dependencies are putting pressure on banks to rethink their strategies.

RBI Deputy Governor M Rajeshwar Rao on Friday (February 21) pointed out rising concerns over unsecured personal loans.

While regulation is necessary, he said that finding the right balance remains a challenge.

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The rapid expansion of digital lending raises risks, making compliance a core part of any digital strategy.

He added that financial institutions must build a strong governance framework and reduce reliance on third-party vendors to mitigate operational risks.

Additionally, Srinivasan Varadarajan, Chairman of Union Bank of India, highlighted a key disruption in the banking sector—ownership of the customer.

Transactions are originating outside traditional bank systems, with fintech players and digital platforms driving engagement. Banks need to rethink how they provide value to such customers and monetize relationships effectively.

He also raised concerns about the future of bank employees as automation and technology take over key functions.

Rajneesh Karnatak, MD & CEO of Bank of India, further addressed the steady decline in the CASA (Current Account Savings Account) ratio.

CASA ratio is the proportion of a bank’s total deposits that come from current and savings accounts.

Public sector banks, in particular, are facing difficulties as corporates opt to keep lower balances in their accounts.

“The traditional concept of idle current account balances is fading, with customers preferring liquidity solutions like sweep-in and sweep-out accounts,” he said.

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