While contemplating the measures, we did not have any disaggregated statistical data or evidence to support our concerns on the potential risks of rising bank exposures to real estate, among other sensitive sectors based on the incurred loss method. However, what we did have was a clear trend in significant year-to-year increase in aggregate bank credit.
The Indian financial system is still largely a bank-intermediated system and for this reason, the bank credit channel becomes a key monetary policy transmission instrument. Thus the aggregate bank credit growth has always formed an important variable in the conduct of monetary policy. The credit-deposit ratio, particularly on an incremental basis, has been an important indicator. 13.