Indian banks have stayed resilient and bad loans have fallen substantially, according to Reserve Bank of India Governor Shaktikanta Das.
(Bloomberg) — Indian banks have stayed resilient and bad loans have fallen substantially, according to Reserve Bank of India Governor Shaktikanta Das.
The gross non-performing assets ratio of banks have fallen to 4.41% at end-2022, Das said Thursday at a conference on global financial resilience. This is the lowest since March 2015 and compares with 5.8% in end-March 2022 and 7.3% as of March 31, 2021. The capital adequacy ratio of banks stood at 16.1% at the end of December, well above the regulatory requirement.
“Macro stress test for credit risk imply that Indian banks would be able to comply with the minimum capital requirement even under severe stress situation,” Das added in the web-streamed address. Indian banks have “remained resilient and not been affected by the recent sparks of financial instability seen in some advanced economies.”
Nevertheless, the recent banking crises in US and Europe suggest that risks could crop up in banks even when they are considered relatively stable, the central bank chief said. “Hence, we expect the management and the board of directors of each bank to continually assess the financial risk and focus on building up adequate risk and capital buffers even beyond the minimum regulatory requirement.”
The RBI is now focusing more on “business models adapted by banks,” Das said. Banking liquidity is monitored very closely by the central bank and while it does not interfere in banks’ businesses, the regulator expects “prompt remedial actions” whenever it points out loopholes that need fixing.
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