 "Shaktikanta Das, Shaktikanta, RBI Governor")
Das acknowledged the challenge posed by climate change to economic growth. | Photo: PTI
India’s financial landscape is undergoing a structural shift and the Reserve Bank of India (RBI) is encouraging innovations to make it more inclusive, said Governor Shaktikanta Das on Friday, listing deposit mobilisation and frauds as issues being tracked.
The slow growth in deposits could expose the financial system to structural liquidity issues, he said at the ‘Modern BFSI Summit 2024’ organised by Financial Express newspaper in Mumbai. Regulatory actions are emerging in response to such challenges.
There has been a noticeable trend of households increasingly shifting their investments to capital markets and other financial intermediaries. The trend has led to a decline in the share of bank deposits, said Das.
He called the lag in deposit mobilisation compared to credit growth a “critical issue” and urged banks to focus on robust credit underwriting.
He highlighted the rise in digital frauds, particularly those involving the so-called mule bank accounts. The RBI is monitoring accounts that have unusual activity at odd hours or sudden volume increases in previously inactive accounts, he said. He urged banks to enhance their monitoring systems to detect and prevent such fraudulent activities.
The increasing share of retail portfolios poses potential risks, said Das. The RBI has taken steps to mitigate these risks, focusing on delinquency levels and limits on small unsecured loans, which remain a point of concern. Excessive interest rates in microfinance loans were also flagged as another significant worry, he said.
Das acknowledged the challenge posed by climate change to economic growth. The RBI is preparing plans to tackle climate-related risks and provide climate financing. He cautioned against the risk of green washing and emphasised the need for vigilance in this area.
He ruled out the possibility of allowing large business houses into banking, saying there is no such consideration now. He stressed the need for sound, healthy, and well-governed banks that can meet credit requirements through technological innovations.
The financial system is healthy though there are challenges that the RBI is committed to addressing and ensuring stability, he said.
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