MUMBAI: Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday asked bank chiefs to pay special attention to strengthening the governance in the banks and to be extra careful and vigilant amid volatility in the global economy.
The governor held meetings with the MDs and CEOs of public sector banks and select private sector banks in Mumbai. Deputy Governors M Rajeshwar Rao and Swaminathan J, along with a few senior RBI officials, also attended the meeting.
While noting the good performance of the Indian banking system despite various adverse global developments, he stressed that it is in times like these, banks need to be extra careful and vigilant. The governor emphasised the need for MDs and CEOs to focus on the tripod of banking stability consisting of compliance, risk management and audit functions.
He discussed issues relating to strengthening of credit underwriting standards, monitoring of large exposures and implementation of External Benchmark Linked Rate (EBLR) Guidelines. He asked bank chiefs to further bolster IT governance and to improve recovery from written-off accounts. He also stressed the need for timely and accurate sharing of information with credit information companies. The Indian economy has made a solid recovery and is among the fastest-growing economies despite heightened uncertainties and formidable headwinds, he said.
His remark comes at a time when the banking industry in India has seen a consistent decline in bad loans. The gross non-performing assets (NPAs) ratio of banks fell to a decade low of 3.9% in March 2023 from 11.5% in March 2018, as per RBI’s recent report.
The net NPA ratio has declined to 1% in March 2023 from 6.1% in March 2018. RBI expects the GNPA ratio to improve to 3.6% by March 2024 from 3.9% in March 2023, provided macroeconomic conditions do not deteriorate. The provisioning coverage ratio (PCR), which was as low as 40.1% in June 2016, has improved to 74%in March 2023.