Reserve Bank of India governor Sanjay Malhotra on Wednesday called for a balanced approach in policy making such that it does not stifle legitimate activities and investments while strengthening the financial system against money laundering.

The RBI governor was speaking at the FATF Private Sector Collaborative Forum 2025 in Mumbai. The Financial Action Task Force (FATF) is an intergovernmental organisation that sets global standards to combat money laundering and terrorist financing.

“While we all continue to make our financial systems safe and secure against money laundering and terror financing, we as policymakers need to be mindful that our measures are not overzealous and do not stifle legitimate activities and investments.”

“You would appreciate that multiple laws and rules, each with their own level of granularity, cast a high level of burden of compliance on the regulated financial service providers. This is relevant in the context of AML-CFT (Anti-Money Laundering and Countering the Financing of Terrorism) too. Therefore, we need to have laws and regulations which, with surgical precision, target only the illegitimate and illicit, rather than use them as blunt tools which unintentionally hurt even the honest,” said Malhotra.

The RBI governor said that while implementing the legal framework and regulations, the impact on persons and businesses has to be kept in mind.

“Risk-based approach is recommended in this regard. But let us keep in mind that this is only a step forward in reducing the compliance burden. Let us appreciate that it is not the ultimate solution, as any risk-based approach is not perfect; it would have false positives and false negatives. We need to continuously refine and improve our risk assessment models to make them robust,” Malhotra said.

He added that the focus of policymakers and regulators has to be towards understanding the latest trends and developments in the financial world that can be exploited by criminals and accordingly develop tools and enabling frameworks to detect suspicious transactions and activities and take pre-emptive action.

The governor also said that it is necessary to ensure that regulations do not create unintended barriers to financial inclusion.

“We need to be mindful of customer rights and convenience while fulfilling the due diligence requirements,” he said.

Malhotra further said it would be “desirable” to make the travel rule technology neutral.

The rule mandates that financial institutions and Virtual Asset Service Providers (VASPs) share specific information about the originator and beneficiary of financial transactions.

“We will work towards fulfilling our commitment to the effective implementation of the next phase of G20 roadmap towards inclusive cross-border payments by 2027,” he said.

Last year, India underwent the mutual evaluation by the FATF and the country was placed in the ‘regular follow-up’ category, which is the highest category by FATF.

The RBI on Wednesday announced the schedule for the monetary policy committee meetings for 2025-26. The first meeting of the fiscal is scheduled from April 7-9 and the next will begin on June 4.