Reserve Bank of India (RBI) Deputy Governor M. Rajeshwar Rao has said that India is in a sweet spot to grow robustly amid global turmoil and monsoon risks to growth. However, he maintained that developing credit markets was essential
He was inaugurating the first annual seminar on ‘Banking regulation, intermediary soundness and systemic stability’ organised by the Indian Institute of Management, Kozhikode (IIM-K) here on Tuesday.
To address credit risks, Mr. Rao said financial intermediaries should consider credit risk as a core element in their strategies. He called for a framework based on five elements of Ms - measuring, monitoring, managing, mitigating, and migrating.
He said credit risk management tools, “especially for risk transfer or migration, the role of markets is extremely important”. A deep and vibrant market to offload credit exposure could mitigate credit risk, he said, and added that the credit market must get nimbler. A dynamic secondary market for loan instruments, a wider base of participants and asset classes in the market and a robust framework for risk assessment would help, said Mr. Rao.
The Secondary Loan Market Association (SLMA) platform, which became operational in 2022, has onboarded many major banks and is in the process of onboarding other major players, including non-banking financial companies (NBFCs). The basic idea of the SLMA platform made operational in 2022 was to enable easy transfer of loans at a fair price through market-based auctions rather than bilateral arrangements.
The market for securitisation products is quickly catching up in India and is poised to grow manifold in the years to come, he said and hinted that the RBI could prune the negative list for asset securitisation.
All the panellists who spoke were of the view that India was on the path to become a solid global player due to robust financial regulations.
Debashis Chatterjee, Director of IIM-K; Mridul Saggar, professor and head of the Centre for Excellence in Macroeconomics, Banking and Finance; Murali Ramakrishnan, MD and CEO, South Indian Bank; P.R. Ravi Mohan, chairman, ESAF Small Finance Bank; George Alexander Muthoot, MD of Muthoot Finance; Shyam Srinivasan, MD and CEO of Federal Bank; and Rudra Sensarma, professor, spoke.
