Fault line in banking sector raises concerns
There was a fault line in the Indian banking sector, given the sluggishness in recovery and injudicious lending, among other things, President Pranab Mukherjee said on Tuesday.
At an event to mark the first year of Bandhan Bank’s operations, the President said, “There is a problem with managing and financing. There is a sluggishness in recovery and (a problem of) injudicious advances, which clearly shows there is a fault line in the banking sector.”
Mukherjee further said that lending to the rural and unorganised sectors was still very low in India.
Reserve Bank of India (RBI) Deputy Governor N S Vishvanathan, who was also present at the event, said sound internal governance, good risk management practices and strong internal, independent audit were important ingredients for the success of any bank.
“If a bank is not taking risk, it is not doing business. However, taking risk does not mean being reckless. It means identifying risk, measuring it and mitigating it, so that it is consistent with risk tolerance,” Vishvanathan said.
The RBI deputy governor also said that banks need to be customer-centric on account of a proposed line-up of new banks. He further said, the regulator, over the past few years, was moving towards deregulation, which meant it was more important that banks have good policies to function in a deregulated way.
Chandra Shekhar Ghosh, managing director and chief executive officer, Bandhan Bank, underlined the importance of growing with caution.