RBI Policy
Aim is to ensure orderly conduct of business by banks - Swaminathan
This story was originally published at 15:56 IST on 6 December 2024
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--RBI Swaminathan on gold loans:To ensure fairness by NBFCs, bks to customers
--RBI Swaminathan: Aim is to ensure orderly conduct of banks' lending ops
--RBI Swaminathan:To ensure NBFC, bks portfolio mix made in responsible way
--RBI Swaminathan: Urged banks, NBFCs to strengthen underwriting standards
--RBI Swaminathan: Slippages in micro fin not a big concern at system level
MUMBAI – The Reserve Bank of India's focus is to ensure orderly conduct of business by banks, and it is for them to decide on growth and product mix, Deputy Governor Swaminathan J. said on Friday. "Our instructions are aimed towards ensuring orderly conduct of this business. Growth and product mix is something which is essentially left to the banks' wisdom to pursue," Swaminathan said at the post-monetary policy committee press conference.
"What is more important for us is to ensure that there is fairness in their conduct towards customers and the appropriate norms relating to LTV (loan-to-value), repayment obligations, among others, are being adhered to in a fair and transparent manner," the deputy governor said responding to a question on rising gold loans.
Swaminathan said the RBI will remain watchful of incoming data and if some action is warranted, then it will be taken at the appropriate time. As per the RBI's sectoral deployment data, growth in loans against gold jewellery jumped 56.2% on year as of Oct. 18 from 13.1% a year ago.
While reviewing the guidelines and practices followed by regulated entities in September, the RBI had found instances of valuation of gold being done without the presence of the customer and shortcomings in the use of third parties for sourcing and appraisal of loans and asked companies to closely monitor their gold loan portfolios and review their policies and to identify gaps.
On rising delinquencies in the microfinance sector, Swaminathan said the RBI has asked banks to strengthen their underwriting standards and to step up their collection efforts to ensure that the stress does not translate into non-performing assets. "At the system level it is still not a big concern, 20-30 bps uptick in stress is something which we are confident that the entities will be able to handle. And, in certain entities, where the numbers are little higher, we will deal with it on a bilateral basis. We will examine the steps they are taking and ensure that the stress is not widespread," he said.
Swaminathan said the self-regulatory organisations in the microfinance segment are taking adequate steps to adhere to the prudential guidelines laid down by the central bank. "They (microfinance institutions) need to ensure that the household income assessment and the repayment obligation towards monthly income are strictly adhered to. They also need to avoid the 'push' effect and respond to the demand rather than give loans to achieve some target," he said. End
Reported by Kshipra Petkar
Edited by Saji George Titus
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