Ex-Central Banker Warns of Financial Instability Risks in India
- Mohan says sluggish credit growth points to economic pain
- RBI will release bi-annual financial stability report soon
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Former Indian central banker Rakesh Mohan warned of looming financial instability in India’s already struggling banking sector, citing the growing divergence between the pain in the real economy and the exuberance in the capital markets.
Mohan, who served as deputy governor of the Reserve Bank of India twice between 2002 and 2009, said loan growth has mostly been sluggish in the economy despite the RBI’s recent measures to boost flow of bank credit. The only exception was credit to small- and medium-sized enterprises, he wrote in a paper published by the Centre for Social and Economic Progress.