New Delhi: Acknowledging that the credit growth has moderated in a couple of months, Reserve Bank deputy governor Rakesh Mohan today attributed the trend to risk aversion of the private and foreign banks.
The credit growth has slowed down in couple of months,but that of public sector banks was about 28% year-on-year. Overall it was around 22%, Mohan said at a seminar here.
“What has happened very interestingly in terms of risk aversion. It’s private sector and foreign banks whose credit growth is very very low,” he said.
Noting that all Indian banks have capital adequacy far in excess of regulatory requirement, he said it is a fact so far that banks remain profitable without exception.
Growth in advances by the public sector banks are high as these entities are subject to government’s exhortation. Besides, the effect of monetary policy is higher on these entities, he said.
“So the credit growth so far has been relatively healthy but it is correct to say you have to watch how much risk aversion would be observed and how much it (risk aversion) is rational,” he said.
“What is it we should be doing from policy point of view to preserve the financial systems’ health while helping the real economy not to go down,” he added.