RBI Governor meets bank CEOs, asks them to maintain vigil around build-up of risks

Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday met top bank CEOs in Mumbai and asked them to be vigilant about any build-up of risks in the sector. Speaking at an interaction, Das told the bank's top officers that there is no scope for any complacency.

The Governor in his remarks complimented the banks on their improved financial performance and that of the whole banking sector. While noting the resilience of the domestic financial system with healthy balance sheets of banks, he said banks should be cautious around this time.

“While noting the resilience of the domestic financial system with healthy balance sheets of banks, he observed that there is no scope for any complacency and banks should continue to maintain their vigil around build-up of risks, if any,” the regulator said in a statement. Das complimented the banks on their improved financial performance and that of the whole banking sector.

Governor Das also mentioned the issue of high growth in personal loans, which has been an outlier among other categories. He also talked about banks’ exposure to non-banking finance companies. Worried over the growth of such loans, the RBI increased risk weights for unsecured loans and bank loans to NBFCs in November.

One of the key developments in 2023 was the RBI applying the brakes on unsecured and small-ticket loans. This has been seen as the central bank proactively managing the excess growth of small loans before asset quality worsens in this category.

In the sixth edition of the BankBazaar Moneymood Report, RBI highlighted that retail lending grew by 18 per cent year-on-year (YoY), with unsecured lending (loans not backed by collateral) continuing to see high growth in 2023. Personal loans and credit card spending grew at 22 per cent and 28 per cent respectively.

The RBI raised risk weights on loan categories including credit cards, personal loans, consumer durable loans, and loans to non-banking financiers in 2023 to curb excessive lending in these riskier segments.

In today's meeting, he also highlighted the issues relating to Business Model viability, adherence to co-lending guidelines, bank exposure to NBFC sector, liquidity risk management, IT and cyber security preparedness, operational resilience, digital frauds; and strengthening of the internal rating framework.

RBI regularly engages with the senior management of its regulated and supervised entities. Today's meeting was attended by Deputy Governors M. Rajeshwar Rao and Swaminathan J, along with Executive Directors-in-Charge of Regulation and Supervision functions.

In 2023, there was a high demand for credit, despite heightened interest rates. Some segments continued to grow faster than others. Housing loans, which make up 47 per cent of the retail pie, grew 14.5 per cent YoY to Rs 2.14 lakh crore. Auto loans capped another year of 20 per cent YoY growth to Rs 5.53 lakh crore.

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