Indian Cenbank: Banks must stop repayment slippages and support credit growth

A worker walks past the Reserve Bank of India (RBI) logo inside its office in New Delhi, India July 8, 2019. REUTERS/Anushree Fadnavis

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MUMBAI, May 27 (Reuters) – Indian banks should monitor the credit behavior of restructured loans and the possibility of increased repayment slippages from sectors most exposed to the pandemic, the central bank said in a report on Friday.

With the unwinding of support measures, some restructured accounts could face solvency issues, with the impact on banks’ balance sheets becoming clearer over the coming quarters, the Reserve Bank of India said in its annual report.

“As the economy recovers and demand for credit increases, banks will need to focus on supporting credit growth while being vigilant of evolving risks,” he said.

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He also recommended that banks ensure that further repayment slippages are stopped and banks’ balance sheets are strengthened to avoid future stress buildups.

However, banks’ gross non-performing asset ratio moderated to a six-year low, helped by recovery efforts and technical write-offs, while credit growth began to pick up, following growth. of nominal GDP, RBI said.

Its own balance sheet rose 8.46% to 61.9 trillion rupees as of March 31 from the same period last year. The increases on the asset side came from higher foreign investment, domestic investment, gold and loans, while on the liability side, the increase was due to higher deposits and notes issued.

The central bank also transferred 1.15 trillion rupees to a provident fund to maintain the risk buffer at the lowest prescribed level, one of the main reasons for the drop in surplus transfer or dividend paid to the government.

RBI’s balance sheet also showed a significant increase in foreign exchange trading gains and interest income on the rupee and foreign securities during the year.

On the macroeconomic front, RBI said overall financial conditions remain supportive of a recovery, but cost pressures from high commodity prices, transport costs and supply chain bottlenecks will continue to affect core inflation.

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Additional reporting by Nupur Anand; Editing by Hugh Lawson

Our standards: The Thomson Reuters Trust Principles.

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