Close X
Sunday, November 17, 2024
ADVT 
India

India’s financial sector gaining strength from macroeconomic stability: RBI chief

Darpan News Desk The Canadian Press, 08 Aug, 2024 11:08 AM
  • India’s financial sector gaining strength from macroeconomic stability: RBI chief

Mumbai, Aug 8 (IANS) RBI Governor Shaktikanta Das said on Thursday that the Indian financial system remains resilient and is gaining strength from broader macroeconomic stability.

He pointed out that the banking sector’s well-capitalised and unclogged balance sheet is reflective of higher risk absorption capacity while the NBFC sector and the Urban Cooperative Banks also continue to show improvements.

Das further stated that in the last few days, global financial markets have seen turmoil on concerns of a growth slowdown in a major economy, a flare-up in geopolitical tensions in the Middle East and the unwinding of the carry trade.

“These developments have implications for emerging market economies. In this context, it would be important for market participants to keep in mind the strength of India’s macroeconomic fundamentals, which remain robust. India has built strong buffers that impart resilience to the domestic economy from such global spillovers. The Reserve Bank remains committed to ensure the orderly evolution of financial markets in its regulatory domain,” the RBI chief said.

However, he also stated that amid the stable financial sector conditions, the emphasis cannot shift away from proactive identification of potential risks and challenges, if any.

In this context, the RBI chief highlighted four issues in the financial sector that need to be kept under close watch.

First, he observed that alternative investment avenues are becoming more attractive to retail customers and banks are facing challenges on the funding front with bank deposits trailing loan growth. As a result, banks are taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand.

“This may potentially expose the banking system to structural liquidity issues. Banks may, therefore, focus more on the mobilisation of household financial savings through innovative products and service offerings and by leveraging fully on their vast branch network,” Das suggested.

He further observed that the sectors in which pre-emptive regulatory measures were announced by the Reserve Bank in November last year have shown moderation in credit growth. However, certain segments of personal loans continue to witness high growth. Excess leverage through retail loans, mostly for consumption purposes, needs careful monitoring from the 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, he added.

The third issue he mentioned is related to home equity loans, or top-up housing loans, which have been growing at a brisk pace. Banks and NBFCs have also been offering top-up loans on other collateralised loans like gold loans. It is noticed that the regulatory prescriptions relating to loan-to-value (LTV) ratio, risk weights and monitoring of end use of funds are not being strictly adhered to by certain entities.

“Such practices may lead to loaned funds being deployed in unproductive segments or for speculative purposes. Banks and NBFCs would, therefore, be well-advised to review such practices and take remedial action,” he pointed out.

The fourth he raised pertained to the recent unprecedented IT outage globally, which affected businesses in many countries. The outage demonstrated how a minor technical change if it goes haywire, can wreak havoc on a global scale. It also showed the fast-growing dependence on big techs and third-party technology solution providers.

“In this background, it is necessary that banks and financial institutions build appropriate risk management frameworks in their IT, Cyber Security and third-party outsourcing arrangements to maintain operational resilience. The Reserve Bank has time and again emphasised the importance of robust business continuity plans (BCP) to deal with such incidents,” Das added.

MORE India ARTICLES

PM Modi to interact with Asian Games contingent tomorrow

PM Modi to interact with Asian Games contingent tomorrow
Modi will interact with the athletes at around 4:30 p.m. on Tuesday (October 10) at Major Dhyan Chand Stadium, New Delhi. India won its highest-ever medals tally of 107 medals, including 28 gold medals in Asian Games 2022.

PM Modi to interact with Asian Games contingent tomorrow

India’s decision to stop visas for Canadians proving costly for Punjab: Akali Dal

India’s decision to stop visas for Canadians proving costly for Punjab: Akali Dal
India’s decision to stop visas for Canadian citizens - and Punjab Chief Minister Bhagwant Mann’s silence on the issue - is proving too costly for Punjabis and the decision is badly affecting lives of thousands of Punjabis and the state is heading for big economic crisis due to this decision, Akali Dal leader Bikram Majithia said on Monday. In a statement released here, Majithia said the decision to stop visas for Canadian citizens has come at a time when wedding season is about to start.

India’s decision to stop visas for Canadians proving costly for Punjab: Akali Dal

Take stand against construction of SYL canal: Punjab Congress to Guv

Take stand against construction of SYL canal: Punjab Congress to Guv
Punjab Pradesh Congress Committee chief Amarinder Singh Raja Warring and senior members of the party on Monday took part in a march to the Governor’s office to hand over a memorandum demanding that he take a stand for Punjab against the construction of the Satluj Yamuna Link canal. A huge number of supporters joined the march, coming forward to fight against any decision that would lead to the construction of the SYL canal.  

Take stand against construction of SYL canal: Punjab Congress to Guv

Niramala Sitharaman to attend World Bank-IMF, G20 meetings in Morocco

Niramala Sitharaman to attend World Bank-IMF, G20 meetings in Morocco
Finance Minister Nirmala Sitharaman will leave on October 10 for an official visit to attend the annual meetings of the World Bank Group and the International Monetary Fund (IMF), along with G20 meetings at Marrakech in Morocco. During the visit, the Finance Minister will also hold bilateral meetings with Indonesia, Morocco, Brazil, Switzerland, Germany and France, besides other associated meetings, scheduled to take place from October 11-15 in Marrakech.

Niramala Sitharaman to attend World Bank-IMF, G20 meetings in Morocco

BSP fields five more candidates in Rajasthan

BSP fields five more candidates in Rajasthan
The BSP in Rajasthan came out with a list of five more candidates for the forthcoming Assembly polls on Monday, a few hours after the Election Commission announced dates for elections in five states and the BJP announced its first list of 41 seats. BSP officials, this time, are being extra cautious as its six MLAs became turncoats and joined the Congress soon after winning in the past.

BSP fields five more candidates in Rajasthan

Sikkim Floods: Army undertakes massive operation to reconnect isolated villages

Sikkim Floods: Army undertakes massive operation to reconnect isolated villages
In Sikkim, troops of Trishakti Corps of the Indian Army are undertaking operations at a massive scale to reconnect villages cut off post the flash floods on the night of October 3-4. An Army official said that the focus of the operations are on restoring connectivity to North Sikkim through Chungthang, which was the worst affected during the devastating floods. 

Sikkim Floods: Army undertakes massive operation to reconnect isolated villages