RBI cautions banks, NBFCs against complancency

Reserve Bank of India (RBI) governor Shaktikanta Das has asked banks to be on guard against complacency and be vigilent around build-up of risks in the financial sector.

Das along with deputy governors M Rajeshwar Rao and Swaminathan J met CEOs of public sector banks on Tuesday, the first such meeting since July last year.

The governor highlighted issues relating to business model viability, the outlier growth in personal loans and also urged adherence to co-lending guidelines. He complimented banks on their improved financial performance, but also cautioned against rising risks.

Bank exposure to NBFC sector, liquidity Risk management; IT and cyber security preparedness, operational resilience, digital frauds and strengthening of the internal rating framework were also discussed according to a press release on the RBI website.

The central bank had increased risk weights on unsecured consumer loans of banks and NBFCs as well as bank lending to NBFCs in order to curtail the runaway growth in these sectors in November.

Earlier this month the RBI kept interest rates unchanged even as it reiterated that it will inject or absorb funds in the banking system in a flexible manner, depending on deficit or surplus conditions.”He (Das) stressed that customer grievance redress mechanism and protection of customers’ interests are of paramount importance for the safety and stability of the financial system and that of individual financial institutions,” RBI said in the release.Das also encouraged banks to actively participate in RBI’s FinTech initiatives and give a further push to Digital Banking Units (DBUs), the central bank said.

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