The Reserve Bank of India urged banks in the country to monitor credit behaviour of restructured loans and the possibility of increased repayment slippages from sectors more exposed to the pandemic, in a report on Friday.

"As the economy recovers and credit demand rises, banks will need to focus on supporting credit growth while being vigilant of the evolving risks," it said.

The RBI cautioned in its annual report that the unwinding of support measures, some restructured accounts might face solvency concerns, with the impact on banks' balance sheets becoming clearer in the upcoming quarters.

RBI recommended banks to ensure fresh repayment slippages are arrested and banks' balance sheets are strengthened to avoid future build-ups of stress.

The report added that the Indian economy is relatively better placed to strengthen the recovery that is underway and improve macroeconomic prospects going forward.

The RBI, in its April policy, had revised its inflation projection upwards and sharply cut its growth projections for the economy in the current financial year. The RBI estimates inflation to average at 5.7 percent in this financial year and pegs economic growth at 7.2 percent. Economists expect the RBI to raise the inflation forecast at the next monetary policy meet on June 8.

Central banks across the globe are quickening the reversal of pandemic-era stimulus and are seeking to shrink their bloated balance sheets, while fiscal authorities slash taxes and raise subsidies.
-Reuters/ET