Acknowledging that credit growth had moderated in the past few months, Reserve Bank Deputy Governor Rakesh Mohan today attributed the trend to the risk aversion of private and foreign banks.
While overall credit growth had slowed down to around 22 per cent in the past few months, that of public sector banks was about 28 per cent year-on-year, Mohan said at a seminar here.
"What has happened, very interestingly, in terms of risk aversion is that it's private sector and foreign banks whose credit growth is very very low," he said.
Noting that all Indian banks have capital adequacy far in excess of regulatory requirement, he said it is a fact so far that banks remain profitable without exception.
Growth in advances by public sector banks is high as these entities are subject to the government's exhortation. Besides, the effect of monetary policy is higher on these entities, he said.
"Credit growth so far has been relatively healthy but it is correct to say you have to watch how much risk aversion would be observed and how much it (risk aversion) is rational," he said.
"What is it we should be doing from policy point of view to preserve the financial systems' health while helping the real economy not to go down," he added.
