INSUBCONTINENT EXCLUSIVE:
MUMBAI: The Reserve Bank of India (RBI) has red-flagged banks’ reliance of retail loans over slowing economic activity and negative
consumer sentiment.
The banking regulator called for a granular lending strategy to offset risk concentration in its annual publication on
trends and progress of banking in India.
“Lenders have been shifting their focus away from large industrial loans towards retail loans, as
bad loans of the latter have traditionally been low,” RBI noted in the report.
“This diversification strategy, while helpful as a risk
mitigation tool, has its own limitations: the slowdown in consumption and overall eco-nomic growth may affect the demand for and the quality
of retail loans.”
Household leverage and indebtedness need to be kept in focus in the context of overall financial stability, it further
With corporate loans rigidly at multi-year lows, risk-averse banks lapped up retail credit
Of late, retail asset quality is showing signs of stress as individual borrowers are delaying payments, especially in auto, two-wheeler and
loans taken to buy consumer durable products, data from credit rating CRIF High Mark shows
RBI also said that the need of the hour is to kick-start industrial credit and use that to regenerate a virtuous cycle of capex, investment
and growth.
“Some sector-specific pockets of stress will need policy attention
Proper risk pricing in lending is of prime importance so that the health of the banking sector is not compromised while ensuring adequate
credit to the productive sectors of the economy,” it said
The RBI said that slowing credit growth was an area of concern.
Banks’ credit grew 8.07% to Rs 98.47 lakh crore in the fortnight-ended Nov
In the previous fortnight ended Oct 25, bank credit had grown by 8.90% to Rs 98.39 lakh crore.