Compliance in regulated financial institutions has become increasingly significant and complex. The volume of regulatory requirements across banks, non-banking financial companies (NBFCs), insurance firms, and fintechs has surged, with heightened interdependencies and a more rigorous supervisory approach.
However, the tools utilized to manage these obligations have lagged behind.
In January 2024, the Reserve Bank of India (RBI) formally addressed this issue. Following an assessment of select supervised entities, the RBI issued Circular RBI/2023-24/117, requiring all regulated entities to implement comprehensive, integrated, enterprise-wide compliance management systems. The RBI’s findings revealed a concerning trend: institutions employed a range of solutions from basic macro-enabled spreadsheets to complex systems, yet considerable manual intervention remained prevalent across the sector. This was noted as a structural rather than a marginal concern from the regulator.
These observations were not isolated; they represented a widespread pattern. While compliance activities such as acknowledgment of circulars, assignment of tasks, and completion of checklists were taking place, the overall compliance posture remained inadequately managed.
This distinction is crucial. As the RBI indicated, an institution may appear busy with compliance tasks yet still face significant unmanaged risks if its obligation inventory is incomplete, its evidence trail is fragmented, or its leadership lacks real-time insights into existing gaps.
“The question for every CCO is not whether we are working on compliance. It is whether we actually know our compliance position,” a statement reflects the urgency of the issue.
An illustrative case was the Paytm Payments Bank incident in early 2024, where the RBI restricted the bank from accepting deposits and conducting credit transactions due to persistent non-compliance, including gaps in Know Your Customer (KYC) and Anti-Money Laundering (AML) infrastructure. By the time regulatory action occurred, the compliance status had deteriorated beyond the point where corrective measures could suffice.
Globally, the Wells Fargo fake accounts scandal stands as a notable example of the consequences when compliance signals are not properly tracked. Over a decade, millions of unauthorized customer accounts were created, with penalties exceeding three billion dollars. The underlying issue was not a lack of intent but the absence of a governance framework capable of presenting known risks to leadership in a manner that mandated action.
The lessons from both cases are clear: compliance cannot be managed retrospectively.
Technological advancements change the dynamics of compliance management. AI-driven ingestion of regulatory circulars can reduce the time lag between the issuance of directives and their activation within an institution. Structured obligation registries ensure that every requirement is assigned, tracked, and version-controlled, as opposed to being merely indexed. Workflow-based evidence management provides the continuous audit trail necessary for compliance inspections, rather than a frantic preparation at the time of inspection. Furthermore, unified dashboards offer Chief Compliance Officers, Chief Risk Officers, and board members real-time, honest views of the institution’s actual compliance status rather than summaries prepared after the fact.
Privacy is another critical factor. As institutions assess AI-based compliance tools, concerns regarding the routing of sensitive regulatory and operational data through third-party platforms are warranted. The solution lies in deploying enterprise-bound systems: purpose-built, on-premises language models that handle institutional data within the organization’s infrastructure, eliminating external exposure. The technology is available; the decision comes down to disciplined procurement choices.
The role of the Chief Compliance Officer in 2026 has evolved significantly. Expectations from boards, senior management, and increasingly from regulators now extend beyond just working on compliance; there is a demand for governance backed by evidence, traceability, and institutional credibility to demonstrate ownership of obligations rather than mere acknowledgment.
Achieving this level of governance is not possible through effort alone; it necessitates systems specifically designed for that purpose.
As India’s regulatory landscape grows in complexity and intensity, institutions that view compliance technology as a strategic investment rather than a mere operational expense will hold a significant advantage.
The RBI has set forth a clear direction. The critical question remains how swiftly institutions will choose to adapt.
(Author: Dinesh Arora, Founder, FINNULATE)
Disclaimer: The views expressed are solely those of the author and do not necessarily reflect the views of ETCIO. ETCIO is not responsible for any damages caused to any person or organization, directly or indirectly.
Published On: Apr 30, 2026, at 08:00 AM IST
