Retail loans likely to become a source of systemic risk, warns RBI
Retail loans, long considered a panacea for the banking system, may become a systemic risk, the Reserve Bank said on Tuesday.
The central bank, however, was quick to add that it is well-equipped with its policy toolkit to handle any systemic risk that may arise.
"Empirical evidence suggests that a build-up of concentration in retail loans may become a source of systemic risk," the RBI said in its trends and progress in banking report for FY22.
It can be noted that in the recent past, banks which faced huge loan reverses on the large exposure front had switched focus towards the retail assets building front to avoid any major reverses in asset quality as done after the asset quality review.
According to experts, the granularity of loans, coupled with the clearer sight of end use and better diligence and monitoring, given the progress on the credit information companies front, made retail a safer bet for banks all this while.
The report said in recent years, Indian banks appear to