RBI Governor Shaktikanta Das cautions lenders over rise in unsecured loans
India's central bank Friday flagged the need for greater scrutiny of the financial sector's rising unsecured loan exposure, warning both high-street lenders and non-banking finance companies (NBFCs) to strengthen their risk management systems in what is seen as a precursor to tightening capital requirements for such advances.
In his statement accompanying the monetary policy review, central bank Governor Shaktikanta Das said that though banks and NBFCs continue to be resilient, certain components of loans are recording very high growth.
«We have to be mindful of what can, going forward, pose a challenge and become a future risk. In certain segments of retail credit, we saw high growth,» Das said after the monetary policy review meeting in Mumbai.
«So, it is only to caution banks to strengthen their internal surveillance systems, watch the trends and take whatever measures are required.»
Governor Das urged banks to monitor the incoming data on advances more closely to pre-empt systemic risks stemming from a loan segment that is considered more vulnerable than those backed by adequate collateral. To be sure, unsecured loans make up less than a tenth of the formal credit mechanism in India.
«The Reserve Bank's supervision department monitors it very intensively, but the first line of defence is banks and NBFCs themselves,» Das said during his media interaction after the policy announcement.
