No systemic risk in banking sector: Jio Financial Services’ KV Kamath

There is no reason to anticipate any kind of systemic danger in the Indian banking sector, with financial institutions appearing much healthier than ever before, claimed KV Kamath, independent supervisor and non-executive chairman of Jio Financial Services, on Friday at the Business Standard BFSI Insight Top in Mumbai.

Attending to the health of the NBFC sector, Kamath observed indications of a “pyramid” forming, with several borrowers taking several finances– frequently to settle earlier borrowings– while still looking for additional credit history.

Kamath made these remarks in action to an inquiry from Bandyopadhyay about whether the stress pertaining to unsecured financing was restricted to the non-banking economic firm (NBFC) field or had likewise influenced the broader banking industry.

Concurring with Bandyopadhyay that cash is leaving the financial system and entering the marketplaces, Kamath pointed out RBI Guv Shaktikanta Das’s alerting regarding the dangers of retail participation in the Options and futures (F&O) market. He estimated that in between Rs 1.5 trillion to 1.7 trillion has actually been shed in the markets due to such tasks, with unsecured loaning accounting for almost the whole amount.

“The RBI was dead-on in elevating a red flag on unsafe lending, boosting threat weights, and encouraging lending institutions to scrutinise the borrower’s end-use of funds,” Kamath said, commending the RBI for acting at the correct time.

Describing that lending activity goes through cycles and that pain is inevitable at some time, Kamath noted that no such pain is shown in the present quarter’s numbers. He added that he did not see any modification in the banking industry’s cycle presently.

Highlighting the strong health and wellness of Indian banks, Kamath pointed to the top-four financial institutions reporting returns on equity of 16-20 per cent in the last quarter– degrees formerly unusual. He kept that the Indian financial system is presently better positioned than it has actually been in the previous half a century.