look news india
Mumbai: RBI Governor Shaktikanta Das has expressed concern over banks having heavy exposure to the large commercial real estate sector and warned that these banks could become targets of short sellers.
Banks have shown high sensitivity to expected and unexpected losses in commercial real estate loans. This sensitivity of banks has come given the high proportion of commercial real estate loans in the loan books. He said this while addressing the Bretton Woods Committee's Future of Finance Forum in Singapore.
Banks with large exposure to the commercial real estate sector could experience a liquidity crunch if targeted by short sellers and investor confidence could be further shaken.
Precautionary and regulatory action before vulnerabilities arise can prevent risks to banks’ balance sheets and maintain stability.
Banks in India are again ramping up lending to the commercial real estate sector, indicating renewed confidence in the market.
The commercial real estate portfolio of scheduled commercial banks grew by 22.94 per cent to Rs 3.96 lakh crore at the end of March 2024. This is a significant increase compared to previous years. Meanwhile, Das expressed confidence that India has the potential to achieve an economic growth rate of more than 7.50 per cent.
The Reserve Bank expects the growth rate of the current financial year to be 7.20 percent. Growth risks have been balanced. This balance is maintained with the support of strong macroeconomic fundamentals. Private consumption and investment are the key factors.
