Reserve Bank of India Governor Shaktikanta Das reiterated the importance of stress testing for banks, non-banking financial companies (NBFCs), and other financial entities, underscoring the need to fortify risk management practices during his address at the 'FIBAC 2023 Conference'. Pics/PTI
Updated On: 2023-11-22 05:04 PM IST
Compiled by : Sanjana Deshpande
Das's recent remarks followed the RBI's move to elevate the risk weight for consumer credit exposure, a step aimed at curbing the abrupt surge in unsecured consumer lending.
Emphasizing the resilience of the Indian banking system, Das highlighted improved capital ratios, enhanced asset quality, and robust earnings growth as pivotal factors in the sector's strength.
Emphasizing the resilience of the Indian banking system, Das highlighted improved capital ratios, enhanced asset quality, and robust earnings growth as pivotal factors in the sector's strength.
He urged financial institutions to reinforce risk management practices and create additional buffers, advocating preparedness in case of an adverse turn in the business cycle. Terming the risk weight increase a "prudential measure," he stressed its preemptive nature and overall benefit to sustainability.
The RBI reportedly raised the risk weightage for unsecured consumer credit exposure by 25 percentage points, potentially escalating lending costs for both commercial banks and NBFCs.
In the sphere of supervisory oversight, Das outlined comprehensive monitoring methods involving on-site and off-site tools, stress testing, vulnerability assessments, thematic studies, and data analysis. This proactive approach aims to ensure robust risk assessment and mitigation.
Addressing specific aspects of the banking sector, Das recommended sustained and sustainable credit growth while cautioning against any form of exuberance. He advocated stronger asset liability management, thorough evaluations of banks' exposure to NBFCs, and greater transparency in microfinance lenders' interest rate mechanisms.
