RBI will continue to monitor activity, performance of shadow banking sector; final guidelines to be issued soon: Shaktikanta Das
The RBI chief also urged Indian public sector banks (PSBs) to not depend solely on government capital infusions to solidify their balance sheets.
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The looming trouble at DHFL comes nine months after a series of downgrades and defaults
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Das stressed the need for a higher level of supervision of such companies to ensure solid credit growth
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The RBI governor also urged public sector banks to not depend solely on government capital infusions
Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das said the central bank would closely monitor the health of non-banking financial companies (NBFCs) and it would not hesitate to take corrective measures, if needed, to address issues in the shadow banking sector.
“We will not hesitate to take any required steps to maintain financial stability in the short-, medium- and long-term,” Das said in a speech on Saturday at a convocation ceremony in Pune.
The comment comes at a time when there are fears that India may be facing a major crisis in its shadow banking sector after shares of Indian mortgage lender Dewan Housing Finance Corp Ltd (DHFL) plunged this week after two credit-rating firms cut their view of DHFL debt to “default” levels.
File image of RBI governor Shaktikanta Das. Reuters.
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The looming trouble at DHFL comes nine months after a series of downgrades and defaults at another major NBFC, Infrastructure Leasing and Financial Services (IL&FS), shook stock markets and stoked concerns of a malaise in the sector.
“The Reserve Bank will continue to monitor the activity and performance of this sector with a focus on major entities and their inter-linkages with other sectors,” he said, in a speech that was published on the RBI’s website late on Saturday.
The RBI will soon issue final guidelines for liquidity risk management and will put in place a comprehensive information technology framework to strengthen surveillance of NBFCs, the governor said.
Given the importance of NBFCs for the Indian economy, the governor stressed the need for a higher level of supervision of such companies to ensure solid credit growth and asset liability management.
The RBI governor said as part of initiatives to enhance supervision of NBFCs, the central bank is putting in place a system to ensure regular interaction with all stakeholders in the shadow banking value chain such as auditors, credit-rating agencies and banks.
The central bank on Friday issued new guidelines around the resolution of stressed assets after India’s Supreme Court in April struck down its earlier guidelines saying it had acted beyond its powers.
The new rules “will sustain the improvements in credit culture” and help in making India’s financial system strong and resilient, Das said on Saturday.
Das also urged Indian public sector banks (PSBs) to not depend solely on government capital infusions to solidify their balance sheets.
“Depending upon individual situations, PSBs should access the capital market for mobilisation of capital,” he said.
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