RBI Governor Sanjay Malhotra has reopened the debate over establishing a unified Financial Sector Appellate Tribunal (FSAT) to handle appeals against central bank penalties. According to reports from Business Standard, this initiative revives a proposal originally recommended by the Financial Sector Legislative Reforms Commission (FSLRC) under Justice B N Srikrishna in March 2013. The FSLRC had proposed setting up a unified FSAT that would have subsumed the current Securities Appellate Tribunal (SAT), which currently adjudicates cases across the financial services universe including appeals from Sebi, Irdai, PFRDA, and the Forward Markets Commission (FMC).
RBI penalties on regulated entities remain significantly lower than global standards, with ₹26.33 crore imposed in FY26 across 241 instances compared to ₹54.78 crore in FY25 and ₹86.11 crore in FY24. As reported by Business Standard, Governor Malhotra acknowledged in January that current penalty amounts are not deterrent enough, stating that regulated entities treat them as part of operating expenses. The highest penalty imposed by India's banking regulator to date was ₹58.9 crore on ICICI Bank in March 2018 for failure to adhere to securities directives from its held-to-maturity portfolio.
Industry experts remain divided on the FSAT proposal's merit. According to Business Standard, R Gurumurthy, serving on boards of multiple financial institutions, supports the model, arguing it would reduce regulatory overlaps and compliance complexities. However, Ravi Duvvuru, member of RBI's advisory group on regulation, believes the current enforcement process is well-structured with transparent discussions before the Panel of Executive Directors. Rishi Agrawal from Teamlease Regtech raises concerns about jurisdictional ambiguity, citing examples like Sebi's 2010 ban on 14 insurance companies selling ULIPs, where regulatory jurisdiction required presidential intervention to resolve.
The complexity of India's financial regulatory landscape has grown significantly with digital finance, as reported by Business Standard. Karthik Sharma from Saxena Singhal & Vaid notes that while the Financial Stability and Development Council (FSDC) provides coordination since 2010, regulatory responsibilities remain fragmented across RBI, Ministry of Electronics and Information Technology, and the Enforcement Directorate. Financial conglomerates face additional complexity with multiple business units under different regulators, including the Digital Personal Data Protection Act 2023 penalties ranging from ₹50 crore to ₹250 crore.
A Union Budget 2026 proposal to establish a high-level committee for banking sector reforms aligns with the Viksit Bharat 2047 vision, as reported by Business Standard. This follows RBI's establishment of a Regulatory Review Cell in October 2025 with a mandate to review regulations every 5-7 years. Nishith Mehta from Trilegal emphasizes the need for forward-looking system-wide reforms that maintain banking sector strength while enabling credit delivery through the evolving financial ecosystem including non-banking financial companies and technology platforms. He notes that banks will continue to remain the foundation of financial stability and credit delivery, while the structure of financial intermediation has evolved with credit now flowing through a wider ecosystem.
