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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 

--RBI Das: Will finalise new LCR norms after inputs from bks, others 

--RBI Das: Banks to decide if deposit rates need to be raised 

--RBI Das: Banks to decide deposit rates based on their own needs 

--RBI Das: Banks must use branches, innovative 

--RBI Das: Banks must use branches, innovative pdts to garner deposits 

--RBI Patra: Household fincl savings being drawn down to normal levels 

--RBI Patra: Shift happening from fincl savings to physical savings 

--RBI Patra: Seeing return of normalcy in household savings 

--RBI Das: Already discussed F&O trading with SEBI 

--RBI Das: Not like all savings are going into F&O trade 

--RBI Das: SEBI to take apt action regarding F&O trading volume 

--RBI Das:Deposit-credit divergence may create liquidity mgmt issue 

--RBI Das:Not asking banks to go out of way for deposit mobilisation 

--RBI Das: Seen substantial improvement in banking governance 

--RBI Das: Bks to assess own risk inherent in deposit drive 

--RBI Swaminathan on IT outage: Bks should have alternatives 

--RBI Swaminathan:Premature to talk of changing unsecured loan norms 

--RBI Swaminathan: Will watch data on unsecured loan growth 

--RBI Das: Don't want to micro-manage bks on retail deposit growth 

--RBI Das: It is for bks to take required measures on deposits 

--RBI Das: Watchful of all incoming data from banking sector 

--RBI Das: As and when required, will act on deposit growth 

 

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

 

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 announcing the Monetary Policy Committee meeting outcome.

 

"This, as I emphasised elsewhere, may potentially expose the banking system to structural liquidity issues," the governor said. Later addressing a press conference, Das said it was up to banks to decide how to raise deposits as the RBI, as a regulator, doesn't want to micromanage. 

 

According to the latest RBI data, bank loans rose 14.0% on year to 168.12 trln rupees as of Jul 12, while deposits grew 11.3% on year to 211.77 trln rupees. 

 

"The crux of what I am saying is that the mismatch of the divergence between deposits and credit growth may create asset liability or liquidity management issues. So I am only flagging this issue now," Das said.

 

He also said that he was not asking banks to go "out of the way" to launch innovative products.

 

Addressing the press conference, RBI Deputy Governor Michael Patra said precautionary savings made by households during the COVID-19 pandemic are coming down to normal levels. "There is a shift going on from financial savings to physical savings. So physical savings are going up, due to which the total housing savings has stabilised at 20%. It was falling for some time now, but that has stabilised. So, all in all, we are seeing a return of normalcy in household-saving behaviour with these shifts," Patra said.

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 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 increasing the risk weights for unsecured consumer credit and bank credit to non-bank lenders, the credit growth in the two segments moderated. The total consumer loan growth moderated to 13.9% in June from 23.3% in November, whereas bank credit to non-bank lenders declined to 8.2% from 18.5% during the same period.

 

"Excess leverage through retail loans, mostly for consumption purposes, needs careful monitoring from a 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. 

 

Asked whether the regulator would re-look at the risk weight guidelines, RBI Deputy Governor Swaminathan J. said, it was still premature to say at this point. "We will watch out and see how it progresses. The growth has moderated but is still keeping a good pace. We don't see a need to moderate or revise the norms at this point in time, but we will keep monitoring the incoming data," Swaminathan said.

 

However, he added that once the feedback on the draft norms on project finance and liquidity standards norms are collated, the risk weights could be re-examined, but not now. 

 

Pointing out the recent global IT outage, and the growing dependence on third-party solution providers, Das said 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.  

 

On the rise in volumes in futures and options trading in the equity market, Das said the RBI has already put forth its points to the Securities and Exchange Board of India and the latter will take the appropriate action on it. In a consultation paper last week, SEBI proposed measures to strengthen the index derivatives framework for improving investor protection and market stability in derivatives markets. End

 

Reported by Kshipra Petkar

Edited by Namrata Rao and Saji George Titus

 

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