RBI Governor Shaktikanta Das has urged banks to innovate and leverage their extensive branch networks to mobilise deposits, amid concerns over household savings shifting towards alternative investments.
Das noted that banks are increasingly relying on short-term non-retail deposits and other liability instruments to meet rising credit demands, which could pose structural liquidity issues for the banking system.
He highlighted that banks are struggling to attract deposits as alternative investment options become more appealing to retail customers. To counter this, banks should focus on creative financial products and services.
Das also raised alarms over the rapid growth in 'top-up' housing loans and non-compliance with regulatory standards on loan-to-value ratios, risk weights, and fund utilisation monitoring.
He warned that such practices could lead to funds being used for unproductive or speculative purposes, urging banks and non-banking financial companies (NBFCs) to reassess and correct these practices.
Additionally, Das expressed concern over the rising levels of personal loans and stressed the need for careful monitoring of credit growth in this segment. He observed that while credit growth has moderated in sectors with pre-emptive regulatory measures, some personal loan segments continue to grow rapidly, necessitating vigilant underwriting and post-sanction monitoring.
Das also addressed the recent global IT outages, emphasising the importance of robust business continuity plans to manage such incidents. He called for improved risk management frameworks in IT, cybersecurity, and third-party outsourcing to ensure operational resilience.
Finally, Das proposed increasing the frequency of banks’ reporting to credit information companies (CICs) to a fortnightly basis or shorter intervals. This change aims to provide borrowers with quicker updates on their credit information and help lenders make more accurate risk assessments. Currently, banks report to CICs on a monthly basis or as agreed with the credit bureaus.
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