The Reserve Bank of India has cautioned state-run lenders on overexposure to the retail sector. “It is not necessary that everything is hunky dory in retail,” S Vishwanathan, a deputy governor with the central bank, said on Tuesday.
There is a need to ensure that stressed asset buildup is contained so that banks get back to generate adequate internal accruals, he said at an Assocham event here. Vishwanathan said credit growth is more in private sector banks as opposed to the public sector banks and “then you have problem of the state run lenders also going for retail (loans)”.
“We believe that information asymmetry is the main bottleneck in some credit appraisal and strong credit monitoring,” he said, and called for a proper understanding of risk and mitigation of the risk so that the banks are lending to the right parties. Noting that businesses can get into financial difficulties, Vishwanathan said genuine business needs should be supported and malfeasance should be property dealt with.
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