"Our banking sector stands out as strong and stable," says RBI Governor

Mumbai: Reserve Bank of India Governor Shaktikanta Das has said the Indian banking sector "stands out as strong and stable" in the face of extreme stress originating from the Covid pandemic, the continuing war in Europe and the banking sector crisis in certain advanced economies.

In his inaugural address at the Conference of Directors of Banks, organised by the central bank for public sector banks on May 22 in New Delhi and for private sector banks on May 29, the RBI Governor said, "Today our banking sector stands out as strong and stable with CRAR (capital-to-risk weighted assets ratio) at 16.1 per cent, gross NPA (non-performing asset) at 4.41 per cent, Net NPA at 1.16 per cent and provision coverage ratio at 73.20 per cent at the end of December 2022." The conference was titled, ''Governance in Banks: Driving Sustainable Growth and Stability'.

CRAR is the ratio that compares capital to risk-weighted assets and is watched by regulators to determine a bank's risk of failure.

Acknowledging the key role played by the banks, the Governor said, "Over the years and especially in the recent period, banks have been able to maintain financial and operational resilience in the face of extreme stress originating from the COVID-19 pandemic, the continuing war in Europe and the banking sector crisis in certain advanced economies (AEs)."

Das said it is in such times that complacency may set in.

"We have to bear in mind that risks often get overlooked or forgotten when things are going well," he said, adding, "Therefore, boards of directors of Banks and their senior management should maintain a constant vigil on external risks and build-up of internal vulnerabilities, if any."

The RBI Governor said the Reserve Bank has significantly strengthened regulation and supervision of the entire financial sector in the last few years.

He said the central bank issued guidelines on governance in banks and also rationalised the regulatory architecture for banks, non-banking finance companies (NBFCs), including microfinance institutions (MFIs), and urban cooperative banks (UCBs).

"Our supervisory approach and methods have become much stronger and deeper. Our priority is the protection of depositors' money and ensuring a robust financial sector for the country to progress," the governor said, adding, "As you are aware, banks do their business primarily with depositors' money and it is, therefore, the responsibility of Boards of Directors and Management of Banks to keep the interest of depositors uppermost in their mind."