The Reserve Bank of India (RBI) said on Friday that banks must boost development while keeping a close eye on the credit behaviour of firms whose loans were adjusted during the pandemic period to avoid defaults.

Banks had put a hold on loan repayments and adjusted advances to firms to assist them in dealing with the impact of the COVID pandemic and subsequent lockdowns to stop the virus from spreading. Despite the COVID-19 pandemic, the RBI noted in its annual report released on Friday that the banking industry has shown improving financial metrics. "However, there is a need to be wary of the credit behaviour of restructured advances, as well as the likelihood of additional slippages emanating from sectors that were more susceptible to the pandemic," it warned.

Some of the restructured accounts may face solvency concerns when support measures are phased off, with the impact on banks' balance sheets becoming clearer in the coming quarters, according to the report. Prudence necessitates the proactive identification of any nonviable accounts in order to initiate prompt resolution, it noted.

RBI called for growth-oriented structural reforms

RBI's balance sheet registers by 8.46 pc growth in FY2022

Centre likely to keep to its budget deficit target: RBI Shaktikanta Das