RBI Governor Sanjay Malhotra says fight against dirty money shouldn't choke investments

Reserve Bank of India governor Sanjay Malhotra, while addressing Private Sector Collaborator Forum 2025 in Mumbai, asserted that the measures taken to combat money laundering should not be overzealous which can stifle legitimate activities and investments.

"While we continue to keep our financial systems safe from money laundering and terrorist financing, policymakers must ensure that our measures are not overzealous and do not stifle legitimate activities and investments," Malhotra said on Wednesday.

India has made substantial progress on financial inclusion with 94 per cent of adults now having a bank account, Malhotra said, adding a word of caution for regulators.


Pitching for "balanced regulations", Malhotra said adopting a risk-based approach would be beneficial and added that assessing impact on people and businesses is essential. Malhotra said stakeholders also need to coordinate better and look at avoiding the "unnecessary" process of making people repeatedly undergo the know your customer (KYC) requirements.

Speaking about technology, Malhotra said while it has enabled ease of doing business, it has also led to sophisticated means of money laundering and illicit financing.

"We are determined to further strengthen our financial system to deter and combat illicit financial activities," he said.

Deliberations at the three-day seminar will help India better implement the new privacy law in our country, he said.

Impact on economy:

Money laundering (ML) and related underlying crimes, as well as terrorist financing (TF) and the financing of the proliferation of weapons of mass destruction (WMD) or proliferation financing (PF) are crimes with economic effects—they can threaten the integrity and stability of a country’s financial sector and a country’s external stability more generally, an IMF report said.

Additionally, such activites can result in destabilizing “hot money” resulting from inflows and outflows, as well as in banking crisis, ineffective revenue collection, broader governance weaknesses, reputational risks for international financial centers, and loss of correspondent banking relationships (CBRs).

RBI remains alert:

Recently, the central bank in a report had flagged that with the rise in digitisation it has seen an increased risk of cyber attacks, digital frauds, data breaches and operational failures. In its report on Trend and Progress of Banking In India, the regulator called upon banks, non-bank financial companies (NBFCs) and co-operative banks to strengthen their risk management standards.

It also said that there was a need to have tighter IT governance arrangements and customer onboarding and transaction monitoring systems to check unscrupulous activities, including suspicious and unusual transactions.

The central bank has also asked banks, NBFCs, and other entities regulated by it to use information obtained from all relevant internal and external sources for their risk assessment exercise.

In this regard, the central bank has issued 'The Internal Risk Assessment Guidance for Money Laundering/ Terrorist Financing' for the REs, particularly for the dealing staff and the Anti-Money Laundering (AML)/ Countering Financing of Terrorism (CFT) / Counter Proliferation Financing (CPF) practitioners of the REs.