Lending risks

Interconnectedness must be watched carefully

Risks in the financial system often grow when the going is good. It is thus important for financial regulators to carefully monitor such possibilities. The Reserve Bank of India (RBI), having dealt with the twin balance sheet problem over the last decade, now seems unwilling to take chances, which must be welcomed. As RBI Governor Shaktikanta Das noted last week, there is no immediate cause for worry, but banks and non-banking financial companies (NBFCs) would be well advised to take certain precautionary measures. While the asset quality and capital adequacy of these institutions have improved in recent years, the increase