Special Address - Shri Challa Sreenivasulu Setty TUCIBIL Credit Conference 2026

It's a great privilege to join you today on the TransUnion CIBIL annual credit conference 2026. My best wishes to Sri V. Anand Raman, Chairman TransUnion CIBIL, and to the joint managing director and CEO of TransUnion CIBIL, the directors on the board of TransUnion CIBIL, and Mr. Nay, of course, is a good friend of mine, and I would like to acknowledge their presence today. So my compliments to CIBIL for bringing together such an exceptional gathering of thought leaders who collectively shape the future of India's credit ecosystem. The theme of this year's conference, "Growth on a Foundation of Resilience," could not have been more timely. It is also timely because RBI has just released the Financial Stability Report yesterday, and as I mentioned, you're also celebrating a foundation of an institution like State Bank of India, which is synonymous with resilience in the financial ecosystem. History teaches us an important lesson. Financial systems rarely falter because they aspire to grow. They falter when resilience fails to keep pace with ambition. In many ways, the quality of India's future growth will depend upon the quality of India's credit decisions. Resilience is not built during periods of stress. It is built during periods of success. These stronger institutions prepare for uncertainty when the environment appears most benign and comfortable. This is true not only for banks, it is true for economies. The world around us reminds us of the reality every day. The last decade has demonstrated how rapidly the global landscape can change. A pandemic reshaped economic activity across continents. Geopolitical tensions altered trade routes and commodity markets. Supply chains became increasingly vulnerable. Climate related events began influencing production patterns and financial stability. Cyber threats evolved from operational risks into systemic concerns. Artificial intelligence has started transforming every aspect of finance, from customer acquisition to underwriting, fraud detection and portfolio monitoring. The pace of change has been extraordinary. So is the pace at which risks now travel across borders, institutions and markets. Fortunately, India's banking sector approaches this new phase from a position of considerable strength. The lessons of previous credit cycles have reinforced an enduring principle. Growth and prudence are not competing objectives. They are complementary forces. Increasingly, creditworthiness is moving beyond collateral, giving increasing importance to cash flows, repayment trends, digital transactions, credit history, behavioral insights backed by data analytics. This represents a profound shift. It is in this context that I would like to share a few thoughts on four interdependent pillars that in my view will define resilient growth in the years ahead. First, the importance of strong capitalization and adequate liquidity buffers as the bedrock of confidence. Second, the evolution of risk management from measuring risk to anticipating it. Third, the transformative role of data-driven early warning systems in building predictive institutions. And finally, the importance of constructing diversified balanced portfolios that combine the stability of granular retail lending with the productive power of responsible corporate finance. Together, these four pillars can help build a credit architecture worthy of India's aspirations.

Let me begin with the first pillar. The enduring importance of capital, liquidity, and financial strength. Every institution is built upon foundations that are largely invisible. A magnificent building draws attention to its architecture. Very few pause to admire its foundations. Yet in times of adversity, it is the foundations and not the facade that determines whether the structure endures. The same principle applies to banking. Capital and liquidity may not generate headlines. They do not attract customers or create market excitement, but they represent the inherent strength that enables banks to inspire confidence, absorb shocks, and continue supporting the economy when uncertainty emerges. History has repeatedly demonstrated that banks rarely fail because they stop lending. They fail because confidence evaporates. Once confidence is impaired, liquidity tightens, markets react swiftly, and even fundamentally sound institutions can face significant stress. That is why capital should never be viewed merely as a regulatory requirement. It is a strategic necessity. It ensures the ability to finance tomorrow's opportunities without compromising today's stability. Stronger balance sheets, enhanced provisioning, and healthier capital positions have significantly increased the sector's capacity to withstand stress. This is also established by the Financial Stability Report. I think under serious stress scenarios, the Indian banking system is shown to be resilient. The greatest mistake many institutions make is to view favorable conditions as permanent. Buffers must be built before they are required because risk has an interesting characteristic. It accumulates quietly during periods of optimism but reveals itself abruptly when circumstances change. Liquidity is another key lever. While capital enables a bank to absorb losses, liquidity enables a bank to respond. In the corporate world, businesses that consistently generate strong cash flows are generally perceived as presenting lower default risk. This confidence allows them to negotiate more favorable borrowing terms and lower funding costs. Banking operates on the same principles, albeit at a systemic scale. Liquidity is the lifeblood of banking. It sustains confidence by assuring depositors and markets that obligations can be honored promptly, thereby preventing the loss of trust that can quickly trigger a bank run. The institutions that inspire confidence are those that can reassure customers, investors, and markets alike that they possess both the financial strength and the operational agility to navigate uncertainty.

The second pillar is risk management. If capital represents the strength of an institution, risk management is the foundation of resilience. For decades, banking has measured success by the quality of assets created. Increasingly, however, success will be measured by the quality of adversity risk preempted. Traditionally, risk management focused on identifying problems after they became visible. Today, that is no longer sufficient. The modern financial system operates at extraordinary speed. In such an environment, institutions cannot afford to be merely responsive. They must become predictive. Risk management must therefore evolve from being a control function into a strategic capability embedded across the organization. When risk management participates at the beginning of strategic discussions, the quality of decision-making improves significantly. Yet we must also recognize that the nature of risk itself is changing. It may originate not from credit matters alone, but from cyber threats, climate events, operational disruptions, geopolitical tensions, or technological interdependencies. If stronger capital gives us the capacity to absorb uncertainty, better information gives us the ability to anticipate it.

This brings me to the third pillar of resilient growth, the transformative power of data, analytics, and early warning systems in shaping the future of credit risk management. Every credit decision is fundamentally a judgment about the future. We lend today based on our confidence in tomorrow. Therefore, the better our understanding of tomorrow, the fairer will be our decisions today. For decades, banking relied primarily on financial statements, collateral values, and repayment history to assess risk. Today's economy generates an extraordinary volume of information: digital transactions, GST filings, bureau inquiries, changes in customer behavior, each leaves behind a valuable signal. Individually, these signals may appear insignificant, but collectively they create a remarkably accurate picture of emerging credit behavior. The future of banking lies in generating better judgment from the data we already possess. That is where early warning systems assume transformative importance. Traditionally, banks identified problems after repayment delays, covenant breaches, or visible deterioration in financial statements. By then, valuable time had already been lost. The objective today is to identify behavioral changes long before financial impairment becomes evident. Technologies are making this transformation possible. Artificial intelligence, machine learning, and advanced analytics are enabling institutions to move beyond static credit assessment towards continuous credit intelligence. Closely linked to this technological transformation is another challenge that deserves our sustained attention. As banking becomes increasingly digital, operational resilience becomes inseparable from financial resilience. Cyber security is no longer simply an information technology concern. It has become a strategic imperative. While the digital economy has dramatically expanded convenience, it has also expanded vulnerability. Fraud has become more sophisticated, and cyber attacks have become more coordinated. Our response must therefore be equally nuanced and proactive. Artificial intelligence can help identify anomalies before fraud occurs. Shared intelligence across institutions can significantly strengthen collective resilience. Cyber resilience has therefore become a shared responsibility across banks, regulators, fintechs, payment operators, and technology providers. In an interconnected financial system, resilience is only as strong as the weakest link.

The fourth pillar to resilient growth concerns a question that lies at the heart of modern banking strategy. India has experienced periods when concentrated corporate exposures created significant stress. Equally, international experience reminds us that excessive enthusiasm in retail credit can generate vulnerabilities of a different nature. Neither concentration nor indiscriminate diversification provides lasting resilience. True consistency lies in balance. Granularity undoubtedly enhances stability. Millions of well-underwritten retail loans distribute risk across a broad customer base. MSME lending supports entrepreneurship, employment, and regional development. Whereas agriculture finance strengthens rural prosperity and food security. Having said that, corporate lending enables infrastructure creation, industrial expansion, and national competitiveness. As India progresses towards becoming a developed economy, our banking system must finance a much broader spectrum of opportunity, from large infrastructure companies to first-generation business owners. We need to build a credit ecosystem that is trusted enough to sustain that growth for decades to come.