Top bankers have expressed support for the Reserve Bank of India’s (RBI) decision to keep the benchmark repo rate unchanged, stating that it was widely anticipated and aligns with efforts to maintain financial stability. The RBI also raised four key concerns regarding the banking sector, which are seen as crucial steps to safeguard the system’s overall health.

M.V. Rao, Chairman of the Indian Banks’ Association and CEO of Central Bank of India, noted that the central bank’s decision to maintain the current policy stance was expected. “RBI has kept the repo rate and stance of the policy unchanged, and this is on the expected lines,” Rao commented.

During the announcement of the bi-monthly monetary policy, RBI Governor Shaktikanta Das highlighted four potential risks facing the banking sector. These include structural liquidity issues stemming from banks’ reliance on short-term non-retail deposits, excessive leverage through retail loans for consumption, concerns over the end-use of top-up housing loans, and risks associated with IT outages.

Bankers have acknowledged the importance of these issues, emphasizing that addressing them is essential for ensuring the long-term stability of the financial system. The concerns raised by the RBI are seen as proactive measures to prevent systemic risks and maintain the resilience of the banking sector amid evolving economic conditions.

The RBI’s focus on these specific areas reflects its broader commitment to safeguarding financial stability, which remains a top priority as the economy navigates post-pandemic recovery and ongoing global uncertainties.