RBI governor Shaktikanta Das calls for stronger governance structure in banks, NBFCs

17 Janvier, 2021, 10:42 | Auteur: Auguste Feret
  • Budget 2021 has to be prudent and growth oriented says reserve bank of india RBI governor shaktikanta das

If there is any proposal on bad banks, the Reserve Bank of India (RBI) will examine the proposal, RBI governor Shaktikanta Das during 39th Palkhiwala Memorial lecture on Saturday.

While delivering the 39th Palkhivala Memorial Lecture this morning, RBI governor Shaktikanta Das said, "Our scale-based regulation for NBFCs as you know we announced in our last policy on December 4th... the discussion paper is nearly ready. It will come out in next few days, perhaps in the next week".

The RBI was focused on strengthening supervision of financial entities, he said, adding the thrust of supervision was identifying the root causes of stress rather than addressing symptoms.

Earlier in December while announcing the monetary policy, the governor had hinted that a scale-based regulatory approach linked to the systemic risk contribution of NBFCs could be the way forward. "Risk management in banks and NBFCs should evolve with changing technology and worldwide best practices", Das said.

NPAs of the banking sector are expected to shoot up to 13.5 per cent of advances by September 2021 from 7.5 per cent in September 2020 under the baseline scenario, the Financial Stability Report of the Reserve Bank of India (RBI) said earlier this week.

Looking ahead, Shaktikanta Das said that integrity and quality of governance are key to good health and robustness of banks and NBFCs.

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"This (ensuring god governance structure) constitutes the first line of defence on financial stability".

"Financial stability is a public good and its resilience and robustness need to be preserved and nurtured by all stakeholders".

Cautioning about the rising non-performing assets (NPA) he said the current COVID-19 pandemic-related shock will place greater pressure on the balance sheets of banks in terms of non-performing assets, leading to erosion of capital.

Das also stressed the need for proper internal audit in banks, calling it an important component in ensuring the financial stability of these institutions and the larger financial system.

He further stated that primary estimates suggested that potential recapitalisation of banks' requirements for meeting regulatory norms, as well as for supporting growth capital, maybe to the extent of 150 basis points of Common Equity Tier-I capital ratio, for the banking system. While a few large public sector banks (PSBs) and major private sector banks (PVBs) have already raised capital, and some have plans to raise further resources taking advantage of benign financial conditions, Das said the process would have to be put on the fast track.

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