📷 Image Credits: Moneycontrol
The Reserve Bank of India governor, Shaktikanta Das, addressed the issue of unsecured loans during a global conference on financial resilience held in Mumbai on June 20. Das highlighted the importance of timely actions in moderating the growth of unsecured loans in the financial sector. He emphasized the need to proactively slow down credit growth in certain segments to avoid potential risks and vulnerabilities. Last year, the central bank increased the risk weight on consumer loans to address the high growth in specific types of consumer loans. This move aimed at strengthening internal surveillance mechanisms and instituting suitable safeguards to mitigate risks.
During his speech, Das underlined the pivotal role of supervisors in anticipating and addressing financial crises. He stressed the importance of staying ahead of crisis build-ups and urged for timely interventions to maintain financial stability. Das also acknowledged the central bank’s unique advantage in utilizing various tools to tackle crises effectively. He stated, “It is our endeavor to smell a crisis and remain in sync with the complex financial landscape.” Moreover, Das highlighted the potential of emerging technologies such as Artificial Intelligence (AI) and Machine Learning (ML) in enhancing predictive analysis for identifying risks accurately.
The governor reassured that the Indian financial system is now better positioned compared to the challenges faced during the Covid-19 pandemic. He mentioned that AI and ML technologies can bolster fraud detection by identifying unusual patterns and transactions in real-time, safeguarding institutions and customers from financial crimes and frauds. Furthermore, Das emphasized the central bank’s commitment to making regulatory changes only when necessary, indicating a strategic and cautionary approach towards financial regulations.
Das’s appointment as the governor of RBI comes at a crucial juncture, following the resignation of his predecessor, Urjit Patel, amidst concerns over the regulator’s independence and banking regulations. Tasked with normalizing relations with the government and reassuring financial markets, Das faces challenges in balancing government objectives with the central bank’s operational autonomy. As India’s growth slows down, currency markets fluctuate, and crude oil prices remain volatile, Das’s leadership will be pivotal in steering RBI’s policies to ensure financial stability and resilience. The market will closely observe his decisions on key issues, including the 12 February circular, liquidity support to NBFCs, and communication strategies to enhance transparency and accessibility.
