ICRA Warns on SME Lending Risk, Says Deposit Rates Bottomed
Why in the news
The credit rating agency ICRA drew attention to the banking system’s lending to small and medium enterprises, calling it an area that could pose risk.
Key facts
- ICRA is a credit rating agency; it flagged lenders’ SME exposure as a potential risk for banks.
- It observed that bank deposit rates have bottomed out.
- Deposit rates are unlikely to fall further if the RBI leaves its policy rates as they are.
Significance
- Banks and lenders may need to watch the quality of their small business loan books.
- Depositors may see rates steady rather than lower, provided policy rates hold.
- The link between policy rates and deposit rates is a recurring banking topic.
Exam angle
- Agency in the news: ICRA, a credit rating agency.
- Sector flagged as a risk area: small and medium enterprises.
- Condition for stable deposit rates: RBI maintaining current policy rates.