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RBI wants Banks to go beyond bare minimum
April 28, 2023
The Reserve Bank expects bank managements and boards to assess financial risks and build up capital buffers regularly beyond minimum regulatory norms, governor Shaktikanta Das said.
“We expect the management and board of directors of each bank to continually assess the financial risks and focus on building up adequate capital and liquidity buffers even beyond the regulatory minimum for continued resilience and sustainable growth,” Das said in a speech in Mumbai.
The Indian banking system has remained resilient and unaffected by the financial instability seen in some advanced economies.
Das said that a resilient, future-ready bank needs to be financially, operationally and organizationally resilient.
“To be financially resilient, a bank should have adequate capital buffers and be able to generate earnings even in times of severe macroeconomic shocks. It should also have adequate liquidity to meet its obligations in various situations,” he said.
Das added that RBI has been closely looking at business models of banks closely, since deficiencies in these models can spark crisis later. “It should also have adequate liquidity to meet its obligations in various situations. Therefore, financial resilience is closely linked to a bank’s business model and strategy. The Reserve Bank has, therefore, started looking at the business models of banks more closely,” he said.
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