Mumbai: The Reserve Bank of India (RBI) has called on policy initiatives that ensure effective risk management and healthy corporate governance for the credit cycle to get traction, which is said to be important to support economic recovery.
Observations by the RBI came during credit growth by the bank had slowed for two years due to lack of demand and risk aversion.
“Credit slowdown reflects the effects of scissors.
Industrial and investment activities are restricted to credit demand, while bank balance sheet stress is limited.
Therefore, policies aimed at increasing aggregate demand need to be added to the strengthening of the bank’s balance sheet to reduce stress for sustainable encouragement for credit growth , “RBI said on Tuesday in his report entitled ‘Trend and Progress of Banking in India’.
The bank faces slow credit growth even because the system is flat with liquidity and interest rates at a new low.
“Over the past three years, private non-financial companies have become net savers, increasingly increasing their deposits with SCB (scheduled commercial banks), while their credit deprivation remains anemia,” RBI said.
However, bank finance, show a real increase when they cleaned bad loan books and collected capital.
The capital’s weighted asset ratio (CRAR) strengthened from 14.8% at the end of March 2020 to 16.3% by the end of March 2021 and further to 16.6% by the end of September 2021, partly assisted by profit and capital Detained higher.
maintenance.
Their gross asset ratio (GNPA) decreased from 8.2% by the end of March 2020 to 7.3% at the end of March 2021 and further became 6.9% at the end of September 2021.
Gross bank loans grew 6% at 5.4% on FY21.
In the first six months of current fiscal, it has increased to 6.8%, which is still lower than the long-term average.
Compared to this, the mobilization of deposits by SCB in FY21 is the highest in seven years, mainly contributed by account deposits & low-cost savings account (CASA).
In the first half of FY22, there is moderation in the growth of deposits with the normalization of economic activities and increasing inflation.
“Exchange between short-term liquidity and regulatory support for proper borrowers and medium-term macro-financial risk needs to be carefully balanced,” RBI said further.
The central bank said that banks need to increase capital to absorb potential mosquito nets and to maintain credit flow, especially when monetary and fiscal steps relax.
“Although most of the regulatory relaxation steps have run their courses, the impact on banks has not been decomposed,” said the central bank.
“Banks need to strengthen their corporate governance practices and risk management strategies to build resilience in an increasingly dynamic and uncertain economic environment,” the report said.