RBI Holds Rates Steady, Warns Banks on Risks to Financial Stability

Mumbai, Aug 8 (PTI) The Reserve Bank's decision to keep the benchmark rate unchanged was on the expected line and the four banking sector concerns it raised are directed at safeguarding financial stability, top bankers said on Thursday.

"RBI has kept the repo rate and stance of the policy unchanged and this is on the expected lines," Indian Banks' Association chairman and Central Bank of India's CEO M V Rao said.

RBI Governor Shaktikanta Das, while unveiling the bi-monthly monetary policy, also highlighted four potential risks to the banking sector. These are structural liquidity issues arising out of banks' recourse to short-term non-retail deposits; excessive leverage through retail loans for consumption purposes; end-use of top-up housing loans; and risk arising from IT outages.

Stating that these issues are significant for the overall financial stability, Rao said that the policy delivered "a nudge to all financial institutions on the potential risks to financial stability which warrants close monitoring".

It can be noted that the RBI's rate-setting Monetary Policy Committee opted to hold rates for the ninth consecutive time in the policy review citing risks on the inflation and the need to align the retail inflation with the target of 4 per cent.

SBI chairman Dinesh Khara said food inflation needs to be monitored carefully even as monsoon rains could provide relief, and welcomed the regulatory changes proposed in the policy.

"The decision to have a public repository of digital lending apps would ensure an orderly development of the digital lending market. The decision to increase the frequency of reporting of credit information would enable borrower risk assessment on a real-time basis. The changes to UPI transaction limits and delegated payments would further deepen the use of digital payments. The new cheque clearing norms will ensure 'on realisation settlement'," he said.

Shriram Finance's executive vice chairman Umesh Revankar said RBI has cautioned banks and financial institutions about the need to build strong frameworks to ensure operational resilience to buffer themselves from global volatility.

Tata Capital's Rajiv Sabharwal said prudent lending practices, maintaining rigorous underwriting standards and post-sanction monitoring are crucial for NBFCs to mitigate risks and achieve sustainable growth.

State-owned Indian Overseas Bank's Ajay Kumar Srivastava said the decision to keep the repo rate unchanged at 6.5 per cent as well as project a GDP growth for FY25 at 7.2 per cent is a well-balanced measure.