The Reserve Bank of India (RBI) Governor Shaktikanta Das, on Thursday said that the banks and non-banking finance companies (NBFCs) should not take “unacceptable risks” in the pursuit of growth and they must have robust risk mitigation frameworks.
“While business models may be designed to drive profitability and growth, they sometimes contain vulnerabilities that may not be apparent,” he said. Both regulated entities and supervisors need to be vigilant to risks, if any, in their business models.
“Pursuit of business growth is important, but it should never come at the expense of taking on unacceptable risks,” Das said.
While addressing the inaugural session of ‘Keeping the Financial System Resilient, Future-Ready and Crisis-Immune’, Governor Das said that India’s domestic financial system is now in a much stronger position than it was before we entered the period of the COVID crisis.
“Indian financial system is now in a much stronger position, characterized by robust capital adequacy, low levels of non-performing assets, and healthy profitability of banks and non-banking lenders, that is NBFCs,” he added.
He further complimented the banks and other financial sector entities for such a stellar performance in the year which has just ended on March 31.
“There is absolutely no room for complacency because the world is changing, challenges are coming, complexities are growing, and problems can originate from any corner of the financial system within the country, or the world because of something which may be completely unrelated to you and me,” he said.
He said robust risk mitigation ensures the long-term success and resilience of a regulated entity as well as of the overall financial system.
The governor said when serious problems appear in a financial entity, an RBI officer of the rank of executive director addresses the full board of that organisation and shares the regulator’s concerns.
On unsecured loans, he said, the timely action on unsecured loans has moderated the growth of such loans.
“We thought it is better to act in advance and slow down the credit growth in these segments,” the governor said.
