Rising data discipline reflects maturing banking oversight, tech-led supervision, and improved risk monitoring
Mumbai (Economy India): India’s banking sector has recorded a notable improvement in regulatory compliance and reporting standards, with the Supervisory Data Quality Index (SDQI) rising to 90.7 in the July–September 2025 quarter, according to the Reserve Bank of India (RBI).
The index, which measures the quality, accuracy, consistency, and timeliness of data submitted by scheduled commercial banks (SCBs) to the central bank, improved from 89.9 in the April–June quarter, underscoring sustained progress in banks’ internal data governance frameworks.
The RBI said the improvement reflects better internal controls, enhanced digital reporting systems, and closer supervisory engagement, at a time when financial regulation is becoming increasingly data-driven and risk-focused.
Why the SDQI Matters More Than Ever
In modern banking supervision, data is the first line of defence against financial instability. Regulators rely on large volumes of granular data to monitor:
- Asset quality and non-performing loans
- Capital adequacy and liquidity positions
- Exposure to stressed sectors
- Market, operational, and cyber risks
The Supervisory Data Quality Index acts as a barometer of how reliable this data is. A higher SDQI score means regulators can identify risks earlier, act faster, and design more precise policy interventions.
“Inaccurate or delayed data can mask vulnerabilities in the banking system,” a former RBI official told Economy India. “Improving SDQI is not a technical exercise—it is fundamental to financial stability.”
Understanding the SDQI: How Banks Are Evaluated
The SDQI assesses banks on multiple parameters, including:
- Accuracy: Correctness of reported figures
- Completeness: Submission of all mandatory data fields
- Consistency: Alignment across different regulatory returns
- Timeliness: Adherence to reporting deadlines
Each parameter is scored, and the combined outcome forms the SDQI. Scores closer to 100 indicate high-quality, dependable supervisory data.
Over the past decade, the RBI has tightened norms for data submission, introduced automated checks, and increased accountability at the senior management level within banks.
Gradual but Consistent Improvement
The September quarter’s SDQI score of 90.7 represents a continuation of a steady upward trend.
Banking analysts point out that even incremental improvements at higher levels of SDQI are significant because gains become harder as standards rise.
“Moving from the high 80s to above 90 suggests a structural improvement in systems and processes, not just temporary compliance,” said a senior banking analyst.
This improvement has come despite rising reporting complexity, driven by new regulations, stress-testing frameworks, and enhanced disclosures.
Role of Technology in Boosting Data Quality
A key factor behind the improvement has been technology adoption across India’s banking system.
Banks have invested in:
- Centralised data repositories
- Automated reconciliation tools
- AI-enabled validation checks
- Real-time reporting dashboards
The RBI itself has modernised its supervisory infrastructure, moving toward SupTech (Supervisory Technology) solutions that enable advanced analytics and pattern recognition.
Recently, the regulator also announced the development of AI-driven inspection tools, further increasing the need for high-quality input data.
Governance and Accountability at the Core
Beyond technology, the RBI has emphasised governance accountability for data quality.
Banks are now required to:
- Assign senior executives responsibility for regulatory reporting
- Conduct periodic internal audits of supervisory data
- Certify data accuracy at the board or top management level
Penalties and supervisory actions have also been used to deter lax reporting practices.
“Data governance has moved from the IT department to the boardroom,” said a compliance head at a public sector bank.
Public vs Private Banks: Closing the Gap
While the RBI does not disclose bank-wise SDQI scores publicly, market participants note that the gap between public sector banks (PSBs) and private sector banks has narrowed significantly.
PSBs, once criticised for weak data systems, have upgraded their core banking platforms and reporting frameworks as part of broader reforms.
Private banks, meanwhile, have focused on improving consistency and reducing manual interventions as transaction volumes grow.
Implications for Risk-Based Supervision
The improvement in SDQI strengthens the RBI’s shift toward risk-based supervision, where regulatory attention is focused on institutions and activities posing the greatest systemic risk.
High-quality data allows the RBI to:
- Reduce routine inspections
- Conduct targeted, analytics-driven supervision
- Improve early warning systems
- Enhance stress-testing accuracy
This approach not only improves efficiency but also reduces compliance burdens for well-managed banks.
Impact on Financial Stability and Market Confidence
For the broader economy, better supervisory data enhances confidence in the banking system.
Accurate data:
- Improves transparency for investors
- Strengthens confidence in regulatory oversight
- Reduces the risk of sudden financial shocks
Market participants say that consistent improvements in SDQI signal a maturing financial system capable of supporting India’s long-term growth ambitions.
Challenges Still Remain
Despite progress, experts caution that data quality challenges remain, especially in areas such as:
- Consolidated group-level reporting
- Exposure tracking across complex corporate structures
- Cyber risk and operational loss data
- Climate and ESG-related disclosures
As regulatory expectations expand, maintaining high SDQI scores will require continuous investment and training.
The Road Ahead: From Compliance to Intelligence
Going forward, the RBI is expected to push banks beyond basic compliance toward data intelligence.
Future priorities may include:
- Real-time supervisory reporting
- Predictive risk analytics
- Integration of AI and machine learning
- Stronger data security frameworks
In this environment, data quality will not just support supervision—it will define regulatory credibility.
The rise in the Supervisory Data Quality Index to 90.7 in the September 2025 quarter marks a significant milestone for India’s banking sector. It reflects stronger governance, deeper technological adoption, and a growing culture of regulatory discipline.
As India’s financial system becomes more complex and interconnected, sustained improvements in data quality will be essential for safeguarding stability, protecting depositors, and supporting economic growth.
(Economy India)
