The use of credit cards and NPAs are both on the rise.
The use of credit cards and NPAs are both on the rise.
The release of the data comes at a time when there have been press reports claiming that the RBI has been warning banks about the dangers associated with their unsecured book of business, which includes microfinance, credit cards, and personal loans.
At the conclusion of the fiscal year 23 the percentage of public sector banks’ gross non-performing assets stemming from the credit card segment had doubled to 18%. The NPAs stood at 9% for the year that ended on March 31, 2022, but by September 2022, they had increased by 15%. The Reserve Bank of India included these numbers in the Financial Stability Report (FSR) that it publishes on a biannual basis.
The release of the data comes at a time when there have been press reports claiming that the RBI has been warning banks about the dangers associated with their unsecured book of business, which includes microfinance, credit cards, and personal loans. At the end of the fiscal year 23 (FY23), the total amount due on credit cards was more than 2 million billion rupees.
According to the FSR, there was a slight increase in the non-performing assets (NPAs) in the credit card receivables category for the banking system in FY23, reaching 2%. This was reported as an overall level statistic.
Even though state-run lenders exhibited signs of increased stress, non-performing loans from credit card receivables at private sector banks were relatively unchanged at 1.9 percent, while non-performing loans at foreign banks were 1.8 percent.
restrictions for financial corporations The Governor of the Reserve Bank of India, Shaktikanta Das, stated in his report that the central bank will continue to adhere to stricter restrictions for financial corporations in order to keep them stable. He stated that the most common time to plant the seeds of vulnerability is during prosperous times when hazards are more likely to be disregarded.
Banks that have sufficient capital.
The report went on to say that Indian banks have sufficient capital and are able to withstand any type of shock to the country’s macroeconomic environment. These findings are consistent with those obtained from the stress tests that were performed on the financial system. The gross nonperforming assets (GNPAs) of the banking sector reached a 10-year low of 3.9 percent at the end of fiscal year 23, and according to the RBI, they are likely to improve even further to 3.6 percent by the end of fiscal year 24, under the baseline scenario.
Regulation of cryptocurrencies
The central bank’s priority to establish a framework for global regulation, including the prohibition of crypto assets not backed by anything, reflects its recognition of the risks associated with such assets. Crypto assets, including cryptocurrencies, have gained significant popularity and attention in recent years, but they also pose various risks to financial systems and economies.
One of the primary concerns is that some crypto assets are not backed by any tangible asset or underlying value. Unlike traditional currencies that are typically backed by a central authority or government, these crypto assets derive their value from decentralized systems and algorithms. This lack of intrinsic value raises concerns about their stability and potential for speculative bubbles.
By establishing a framework for global regulation, the central bank aims to address the entire spectrum of risks associated with crypto assets. This includes considering macroeconomic factors, such as their impact on monetary policy, financial stability, and economic growth. Additionally, regulatory viewpoints encompass issues such as investor protection, anti-money laundering measures, and the prevention of illicit activities facilitated by crypto assets.
The central bank recognizes that unregulated or loosely regulated crypto assets can pose risks to individuals, financial institutions, and the overall economy. Without proper regulations, these assets may be prone to price manipulation, fraud, and other forms of market abuse. They may also contribute to increased financial instability and pose challenges to traditional monetary systems.
By implementing a global regulatory framework, the central bank aims to mitigate these risks and create a more transparent and secure environment for crypto asset transactions. This may involve setting standards for exchanges, imposing licensing requirements, and establishing mechanisms for monitoring and supervising crypto asset activities.
Furthermore, the central bank’s focus on global regulation indicates the need for international cooperation and coordination. Given the borderless nature of crypto assets, regulatory efforts need to extend beyond national boundaries to effectively address the challenges they present. Collaborative efforts among central banks, financial regulators, and international organizations can help ensure consistency, harmonization, and effectiveness in regulating crypto assets.
Conclusion
In, the central bank’s priority to establish a framework for global regulation and its intention to prohibit crypto assets not backed by anything underscore the need to address the risks associated with these assets. By considering macroeconomic and regulatory viewpoints, the central bank aims to create a more secure and stable environment for crypto asset transactions while safeguarding financial systems and protecting investors.
