RBI keeping a close watch on Top 20 Business houses

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RBI keeping a close watch on Top 20 Business houses.

The Reserve Bank of India (RBI) is stepping up its vigilance on the top 20 business houses with the largest borrowings from banks to identify risks in advance. This move is in addition to the routine monitoring of systemically important financial intermediaries and the Central Repository of Information on Large Credits (CRILC).

 

According to sources, the RBI is closely monitoring the financial performance of these conglomerates and their companies, including parameters such as profitability and the quantum of debt raised from external sources. The central bank is keen to identify any debt-servicing issues and take preventive measures swiftly to prevent transmission to banks’ balance sheets in the future.

 

One source stated that “a deep dive is undertaken into the data and information available to study their business models and loan portfolio along with various performance parameters.” The RBI is taking these measures to catch any build-up of stress and prevent future financial instability.

 

The gross non-performing assets (NPAs) of all scheduled commercial banks dropped to 5.8% of gross advances at the end of March 2022 from 11.2% at the end of March 2018. However, there have been media reports expressing concern about the exposures of Indian banks to a business conglomerate. The RBI maintains a constant vigil on the banking sector and individual banks to maintain financial stability.

 

In 2019, the banking regulator established a separate vertical for supervision and regulation to improve oversight for banks and non-banking finance companies (NBFCs) after a series of bank frauds as well as the IL&FS default. It also set up a Platform for Regulated Entities for Integrated Supervision and Monitoring, a web-based workflow automation system aimed at strengthening compliance of supervised entities (SEs).

 

As India’s central banking institution, the RBI is taking measures to prevent future financial instability and ensure the stability of the banking sector. With increased vigilance on the top 20 business houses with the largest borrowings from banks, the RBI hopes to identify risks in advance and prevent any build-up of stress that could lead to financial instability.

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