Building a Strong Credit Culture in India

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Building a Strong Credit Culture in India

For financial institutions around the world it is more important than ever to ensure they are balancing asset growth while maintaining strong attention to the management of risk. This is being accomplished in successful banks around the world by focusing on the development of a strong credit culture that prioritizes risk management throughout the organisation.

When it comes to supporting the development of a strong credit culture in India’s financial institutions, the Reserve Bank of India (RBI) enforces a preemptive approach as well as a regulated approach towards building a strong credit culture in India’s financial institutions. Further, the RBI has adopted measures to facilitate robust risk management and enhance corporate governance standards in the country—standards that saved the domestic economy from major adverse shocks of the last global financial crisis.

“Some risk reduction is taking place. The RBI’s human resources department is working on setting up a new certification system for supervisors. Also, a more structured and quantitative approach is being employed, based on a more intensive use of models. The U.S. Federal Reserve’s approach to the accreditation of bank-internal credit models is being used. New training programs are being devised in cooperation with the World Bank’s Financial Sector Development Program, as well as collaborative programs with other external agencies.” International Monetary Fund Country Report, March 11, 2015. “India: 2015 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for India”

While the RBI has set a strong foundation for risk management, India’s credit growth rate remains very low. As stated by the International Monetary Fund in a report published in March 2015, India’s credit growth is not only weak but highlights the feeble state of public sector bank balance sheets and an overall low appetite for bank credit, leading to unfavorable conditions for credit growth. Indian banks that take on best practices in enterprise-wide credit risk management are better prepared to identify and structure higher quality loans.

Omega Performance, a premier provider of credit training solutions for financial institutions worldwide, announces a release of this white paper titled “Building a Strong Credit Culture in India,” which offers crucial insights into the development and maintenance of an effective credit risk culture and explains its impact on long-term business growth and profitability. As competition in the financial industry continues to heat up, a robust credit culture serves as a powerful differentiator, allowing lending institutions of all sizes to make smart credit risk management decisions. Further, a strong credit culture plays a big role in reducing nonperforming loans, developing high-quality loan portfolios, and providing superior customer service.

“We are confident that financial professionals in India are going to benefit significantly from the strategies and suggestions outlined in this white paper,” says John Opiola, Curriculum Director at Omega Performance. “by presenting examples of how banks can implement strong credit culture principles, this white paper can serve as a foundational resource for financial institutions in India that are ready to embrace a strong credit culture under the new, pro-business government of Prime Minister Mr. Narendra Modi. This projected, dynamic economic growth and a vision to raise the standard of banking in India should help the country forge ahead as a major global economy.”

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