banking system credit grew 19.8% from a year ago in the fortnight ended 25 August. Net interest margins are averaging around 3.8%, below the 5% threshold, Patra said.
Beyond that, it could have had implications for financial stability.The current episode of bank credit expansion is led by retail loans and since these are being distributed across a wider borrower base, they mitigate the accumulation of systemic risk, he added. “We are, however, watchful as herding by banks in retail loans space may lead to potential cascades across the system if defaults do occur," he said.
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