Don't lower your guard despite strong performance, RBI governor tells bank CEOs

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Mumbai: Although Indian banks have performed well in a hostile global environment, they should not let their guards down, Reserve Bank of India (RBI) governor Shaktikanta Das told heads of private and state-owned banks on Tuesday.  Das met chief executives of public sector banks and some private sector lenders on Tuesday, RBI said in a statement.   “The governor, in his introductory remarks, while noting the good performance of the Indian banking system despite various adverse global developments, stressed that it is in times like these, banks need to be extra careful and vigilant," the statement said.  According to RBI, Das also emphasized the need for bank chiefs to pay special attention to strengthening governance and focus on the “tripod of banking stability consisting of compliance, risk management and audit functions".  Other issues discussed include strengthening of credit underwriting standards, monitoring of large exposures, implementation of external benchmark linked rate (EBLR) guidelines, and bolstering information technology (IT) security and IT governance. Das also highlighted the need to improve recovery from written-off accounts, and timely and accurate sharing of information with credit information companies.  Das has been pointing out the need for banks to strengthen corporate governance standards.

In a conference of directors on bank boards in May, Das said RBI has come across instances of banks using innovative ways to conceal the true status of stressed loans, raising concerns over attempts to evergreen loans. Evergreening of loans is a practice by which banks extend fresh loans to a borrower who is on the verge of a default, helping them repay old loans.  “To mention a few, such methods include