Reserve Bank Governor Shaktikanta Das on Thursday said the "trend" of using top-up loans for speculative use has been found in certain banks and is not a systemic level problem.
RBI Governor Shaktikanta Das mentions the trend of using top-up loans is not a systemic level problem. The entities involved in it will be dealt bilaterally
Reserve Bank Governor Shaktikanta Das on Thursday said the "trend" of using top-up loans for speculative use has been found in certain banks and is not a systemic level problem.
The RBI will deal with the problem on a bilateral basis with the entities which have not been following the laid down requirements, Das told reporters.
Earlier in the day, he had said that there has been a high growth in home equity loans, or top-up housing loans, wherein lenders have been offering top-up loans on other collateralized loans like gold loans and housing loans.
Regulatory prescriptions relating to loan to value (LTV) ratio, risk weights and monitoring of end use of funds are not being strictly adhered to by certain entities, he had said.
"This is not a system level problem. In some entities, we have seen this problem, we will deal with them bilaterally at the supervisory level but there is no systemic problem," Das told.
He added that because the RBI saw the "trend", it thought of flagging the issue by giving out a message to banks to be proactive in managing this by monitoring end use of funds and ensuring that prudential norms are followed.
Meanwhile, on the outage in payments services at several regional rural banks and cooperative banks last week, Das said the National Payments Corporation of India decided to block further transactions to prevent any possible system-wide problem.
"The NPCI action to block further transactions wherever this particular service provider has been engaged was to isolate the problem and if it had not been done, it could have produced a system wide impact which could have been far more costly," he told reporters.
Without naming SBI and TCS joint venture C-Edge, Deputy Governor Swaminathan J said third party systems were impacted and because there was a likelihood of the risk transmitting to other systems, it was decided to shut them off as a proactive measure.
"It lasted for about 3-4 days, apart from their own internal root cause analysis, there is an external party study was also conducted. Certain remedial measures were also recommended," he said, underlining the importance of disaster recovery and business continuity plans to be followed by all service providers.