The Reserve Bank of India (RBI) on Monday said that disproportionate growth in credit to sectors such as real estate, infrastructure, non banking finance companies(NBFCs) and retail segment and higher provisioning requirement due increase in bad loans might be matter of concern for the stability of India's banking sector.
In its Report on Trend and Progress of Banking in India 2010-11, RBI also termed constant asset-liability mismatches, higher provisioning requirement and reliance on short-term borrowings to fund asset growth as a matter of concern.
However, the RBI said that its stress tests suggests that the banking sector remains fairly well capitalised and resilient to asset quality shocks and other plausible adverse changes in macroeconomic scenario.
"During 2010-11, banks were able to improve their profitability and asset quality," it said.