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Informist, Thursday, Aug 8, 2024

--RBI Das: Financial system remains resilient, gaining strength 

--RBI Das: Emphasis can't shift away from identifying systemic risks 

--RBI Das: Banks facing challenges on funding front 

--RBI Das: Bks must focus more on leveraging household savings 

--RBI: Alternative invest avenues more attractive for retail investors 

--RBI Das: Alternate invest modes pulling away savings from bk deposits 

--RBI Das: Bks must attract more savings through new fincl products 

--RBI Das: India's financial sector remains stable, healthy 

--RBI: Certain segments of personal loans continue to see high growth 

--RBI Das: Necessary bks, fincl cos build apt risk mgmt framework 

MUMBAI – Reserve Bank of India Governor Shaktikanta Das said in the monetary policy statement today that banks should focus more on mobilisation of household financial savings through innovative products and service offerings and by fully leveraging their vast branch network. 

Das said retail customers are moving towards alternative investment avenues, like mutual funds and insurance, due to which banks are facing funding challenges with bank deposits trailing loan growth. Due to this, banks are resorting to short-term non-retail deposits and other such instruments to meet credit demand, Das said. "This, as I emphasised elsewhere, may potentially expose the banking system to structural liquidity issues," he said. Bank loans rose 14% on year to 168.12 trln rupees as on Jul 12, data released by the Reserve Bank of India today showed. Bank deposits grew 11.3% on year to 211.77 trln rupees as on Jul 12.

Das said that although the financial system is gaining strength and remains resilient, the emphasis cannot shift away from identifying potential systemic risks. He said that there are certain segments of personal loans which are seeing higher growth. Credit growth in unsecured personal loans such as 'credit card outstanding', though declining, remained high at 23.3% in June compared with 34.2% in November, as per RBI data.

Das said that due to the regulatory action taken by the RBI on unsecured consumer credit and bank credit to non-bank lenders, the total consumer loan growth moderated to 13.9% in June from 23.3% in November. In parallel, bank credit to non-bank lenders also declined to 8.2% from 18.5% during the same period, as per RBI data.

"Excess leverage through retail loans, mostly for consumption purposes, needs careful monitoring from macro-prudential point of view. It calls for careful assessment and calibration of underwriting standards, as may be required, as well as post-sanction monitoring of such loans," Das said. 

Pointing out the recent global IT outage, and the growing dependence on third-party solution providers, he reiterated that banks and financial institutions need to build appropriate risk management frameworks in their information technology, cyber-security and third-party outsourcing arrangements to maintain operational resilience.  End

Reported by Kshipra Petkar

Edited by Namrata Rao

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