In a scenario where the growth cycle is continuously weakening, rising provisioning costs of banks help no one, certainly not the drying credit cycle. Any banker will vouch for the fact that almost all economic activities go through different growth cycles. With the right intentions and robust internal S&Ps, many are able to weather such fluctuations successfully and start growing again. As far as AQR for NBFCs is concerned, the RBI has categorically stated that as of now it doesn’t have any such proposal. But, yes, the NBFC monitoring mechanism needs to be strengthened, which the RBI is working on. Such a mechanism must include all aspects of the functioning of NBFCs including their capital adequacy, stability, their cash inflow and outflow.
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