Exposure to perceived risks arise from the (i) structural problems facing the real sector whose resolution is critical to maintain the momentum in credit operations, and (ii) high domestic asset prices given high interest rates, equity prices and property prices. Underlying the credit growth is altering risk exposures which need to be well tracked to ensure their effective risk management.
There is a broader concern that the growing domestic demand have impact on bank asset quality and the growing exposure of household sector to consumer financing could have their attendant risks. Consumer finance has risen from 2.4% in 2002 to 14.3% by September 2006 and number of borrowers of consumer finance from 0.25 million to 2.6 million, respectively.