The Reserve Bank of India (RBI) is vigilant and dedicated to acting swiftly and decisively to prevent the accumulation of risks, according to RBI Governor Shaktikanta Das on Thursday.
He stated that the recent implementation of macroprudential measures, specifically aimed at dampening lenders' enthusiasm in certain segments of retail loans, reaffirms the central bank's commitment to maintaining financial stability while ensuring the continued availability of funds for the economy's productive needs.
"We remain vigilant and committed to acting swiftly and decisively to prevent any risk accumulation." Our recent macroprudential measures to rein in lenders' enthusiasm for certain segments of retail loans underscore our commitment to preserving financial stability without jeopardizing the availability of funds for the economy's productive needs," he wrote in the foreword to the Financial Stability Report (FSR).
On November 16 of this year, the regulator boosted the risk weighting for such loans from 100% to 125% after issuing warnings to banks and non-banking financial institutions (NBFCs) about the rising levels of unsecured loans, including personal loans and credit card debt. Furthermore, the risk weighting of bank loans granted to higher-rated NBFCs was increased by 25 percentage points.
Das went on to say that, despite global headwinds and emerging concerns such as technology disruptions, cyber dangers, and climate change, the central bank's commitment is steadfast. The emphasis continues to be on strengthening the financial system, encouraging responsible innovation, and promoting equitable growth.
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He emphasized that the Indian financial sector is in good shape, with multi-year high profitability, a low level of stressed assets, and strong capital and liquidity buffers inside banking institutions. Since the start of the Covid-19 epidemic, significant progress has been achieved in directing both the economy and the financial system. Now is the time to build on these accomplishments, moving the economy forward while maintaining macroeconomic and financial stability.
