The Reserve Bank of India RBI Governor said on Friday that the country continued to be resilient and stable, and the central bank had been engaging with domestic lenders on all fronts for the last few years to prepare for any future risks. His remarks came against the collapse of three in the US.
Recent developments in the US have brought the criticality of banking sector regulations and supervision to the fore, according to Das. He said these areas have a significant impact on preserving the financial stability of every country, as well as giving a K P Hormis Comm emorative lecture in Kochi. I am happy to report that the Indian continues to be resilient and stable, despite the way in which it has evolved and how it is positioned today. He said that the US banking crisis shows the importance of prudent asset management, robust risk management and sustainable growth in liabilities and assets, as well as regular stress tests and building up periodic buffers for any unanticipated future stress. He added that cryptocurrencies or assets could be a real danger to banks, whether directly or indirectly.
Das emphasised that the had been taking necessary steps in these areas. There is a reason for concern when there is excessive growth in deposits without a corresponding increase in credit. That is a call that has to take into account the question of risk management. When it is given out, the credit should be backed by a risk assessment, according to Das.
He went on to say that the risks and stress arising out of the interest risk needed to be properly assessed and appropriate stress tests done. In our engagement with banks over the last few years, we have been driving home this point to do internal stress tests, have robust internal risk management and be very careful with asset-liability management, Das said.
In recent years the RBI has strengthened its supervisory systems with measures that include a unified and harmonised supervisory approach for commercial banks, NBFCs and UCBs. The size and riskiness of institutions is now a factor in the frequency and intensity of on-site supervisory engagement. Das said that off-site supervision has become more intense and frequent. The focus is now on identifying the root cause of vulnerability rather than dealing with symptoms alone. At a time when India assumed the presidency of G20, Das said globalisation must produce better outcomes for all, not just a few. Even before the pandemic struck, the backlash against globalisation had started as globalisation created winners and losers. The international order could not provide cooperative solutions to make the process win-win for all. This is the biggest challenge for G 20 as a multilateral group. He said globalisation must lead to better and more equitable outcomes for all, including the global south.
Das warned that extreme weather events in the world due to climate change could lead to sudden increase in prices, leading to inflationary pressures. He said that it is essential that we take concerted climate action to safeguard the future of our planet and its inhabitants.