The gross non-performing assets (GNPAs) of scheduled commercial banks (SCBs) and non-banking financial companies (NBFCs) have remained below 3% of total advances as of the end of March 2024. This highlights the resilience and soundness of India’s financial system, as emphasized in the Monetary Policy Statement by RBI Governor Shaktikanta Das.
Governor Das provided a detailed overview of the financial health of the banking and non-banking financial sectors. The stability in asset quality, enhanced provisioning for bad loans, sustained capital adequacy, and increased profitability have contributed to this robust performance. NBFCs have mirrored the strong financials of the banking sector, indicating overall sectoral strength.
Despite these positive indicators, the Governor emphasized the need for Regulated Entities (REs) to continue enhancing their governance standards, risk management practices, and compliance culture across their organizations.
Addressing concerns flagged earlier, Governor Das said, “In November last year, we had flagged certain concerns on excessive growth in the unsecured retail loans and over-reliance of NBFCs on bank funding. Recent data suggests that there is some moderation in these loans and advances. We are closely monitoring the incoming data to ascertain if further measures are necessary. The Boards and top management of REs should ensure that risk limits and exposures for each line of business are kept well within their respective risk appetite framework. The persisting gap between credit and deposit growth rates warrants a rethink by the Boards of banks to re-strategize their business plans. A prudent balance between assets and liabilities has to be maintained.”
Customer Protection: Customer protection remains a top priority for the Reserve Bank. While most REs follow the guidelines on the Key Facts Statement (KFS), some still charge unspecified or undisclosed fees. Further, high interest rates on small-value loans in certain microfinance institutions and NBFCs appear usurious. Governor Das stressed that regulatory freedom regarding interest rates and charges should be exercised judiciously to ensure fair and transparent pricing of products and services.
