Banks, NBFCs need to be watchful of stress building up: Shaktikanta Das

New Delhi, Nov 22, 2023 

Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said that while Indian banks and non-banking finance companies (NBFCs) were in a healthy state, they need to be watchful of emerging stress on their books.

Das, speaking at an event organised by the industry body Federation of Indian Chambers of Commerce & Industry (FICCI) and the Indian Banks Association, urged banks and NBFCs to continue stress-testing their books.

"Banks and NBFCs must continue to do stress tests of their books. At the immediate juncture, there is no cause for worry," Das said.

"In fact, there is a strong case for companies in the real sector also to stress test their businesses and balance sheets. Many of them may already be doing so, but it would be desirable that many more also do this," he added. 

Das stated that while there may not be any immediate cause for concern, banks and NBFCs would be well advised to take certain precautionary measures to stay on top of things.

Last week, the RBI had increased the risk weight on consumer loans in an effort to control the rapid growth of unsecured loans on the books of banks and NBFCs.

The RBI governor further said that banks needed to be cautious of exposure to NBFCs, while NBFCs needed to diversify their funding sources to reduce risks. "Given the increasing importance of NBFCs in the financial system, the increasing interconnectedness between banks and non-banks merits close attention," he said.

Das also indicated that the RBI's last week decision to hike the risk weight for consumer credit did not apply to housing loans and other asset-backed loans since there was no buildup of stress on such borrowings.

[The Business Standard]