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Risks to banking sector have increased in past half-year, says RBI 

December 31, 2013
Business Standard

Major risk dimensions show increase in vulnerability in the sector

The Reserve Bank of India (RBI) believes that the risks to the banking sector have increased during the past half-year. “The risks to the banking sector have further increased during the past half-year. All major risk dimensions captured in the Banking Stability Indicator show increase in vulnerabilities in the banking sector,” said RBI's Financial Stability Report released on Monday.

As per the report banking stability measures, based on co-movements in banks equity prices, also indicate that the distress dependencies within the banking system have risen during this period.

RBI is of the view that failure of a major corporate or a major corporate group could trigger a contagion in the banking system due to exposures of a large number of banks to such corporates. “The analysis shows that interconnectedness in the banking sector could cause losses due to contagion, over and above the direct losses on account of failure of large corporate groups,” said RBI in the report.

Read more: Business Standard
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