In a recent address, RBI Governor Shaktikanta Das emphasized the critical need for banks to maintain a vigilant stance against potential risks looming within the banking system. The call for heightened awareness comes amidst discussions on various challenges and opportunities facing the financial sector.
Governor Das conducted meetings with Managing Directors and CEOs of both public sector and select private sector banks, underscoring the importance of continuous dialogue between the RBI and the banking industry’s leadership.
While acknowledging the improved financial performance of banks and the overall sector, Governor Das stressed the absence of room for complacency. He emphasized the necessity for banks to remain vigilant and proactive in identifying and addressing any emerging risks that could undermine financial stability.
Key highlights from the discussions include:
Business Model Viability: Governor Das flagged concerns regarding the sustainability of banks’ business models, emphasizing the need for resilience and adaptability.
Outlier Growth in Personal Loans: The governor highlighted the need for banks to closely monitor personal loan portfolios, particularly instances of outlier growth that could pose risks to financial health.
Adherence to Co-lending Guidelines: Banks were reminded of the importance of adhering to co-lending guidelines, ensuring responsible lending practices.
Bank Exposure to NBFC Sector: The governor underscored the significance of managing bank exposure to the Non-Banking Financial Company (NBFC) sector, given its potential impact on systemic stability.
Liquidity Risk Management: Effective liquidity risk management strategies were emphasized to mitigate potential liquidity shocks and ensure smooth functioning of financial markets.
Furthermore, Governor Das addressed critical areas such as IT and cyber security preparedness, operational resilience, and digital fraud prevention. He emphasized the importance of robust customer grievance redressal mechanisms and the protection of customers’ interests to uphold the safety and stability of the financial system.
Encouraging banks to actively engage in RBI’s fintech initiatives and bolster Digital Banking Units (DBUs), Governor Das highlighted the pivotal role of technology in driving innovation and enhancing customer experience.
The meetings, attended by Deputy Governors M Rajeshwar Rao and Swaminathan J, along with executive directors-in-charge of regulation and supervision functions, underscore the collaborative efforts aimed at strengthening the resilience and efficiency of the banking sector in navigating evolving challenges and opportunities.
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