(Bloomberg) -- India’s central bank Governor Shaktikanta Das warned banks to undertake stress tests and said all forms of “exuberance” should be avoided, days after imposing curbs on some lending. 

“At the current juncture, there may not be any cause for worry,” Das said Wednesday at an annual conference in Mumbai hosted by industry and banking lobby groups. But banks and non-bank financial companies “would be well advised to take certain precautionary measures,” he said. 

The Reserve Bank of India last week clamped down on unsecured lending by lenders and shadow banks to curb financial stability risks. The moves prompted a selloff in financial stocks as analysts predicted a rise in borrowing costs for lenders and a hit to their profits.

The recent macroprudential measures were aimed at ensuring sustainable credit growth, Das said Wednesday. The RBI excluded home and car loans from the restrictions, since those sectors are contributing to economic growth, he said.

With lending accelerating, banks and non-banks should take care that credit growth at all levels “remain sustainable and all forms of exuberance must be avoided,” Das said.

The governor warned that the concentrated linkages between banks and shadow banks creates contagion risks in the economy. He said the institutions need to pay attention to their liabilities. 

Other highlights of his speech:

  • The RBI is “completely focused” on achieving its 4% inflation target. Monetary policy needs to remain “watchful” and “actively disinflationary”
  • The moderation in core inflation was noteworthy and showed monetary policy was working
  • The rupee has shown low volatility and orderly moves, consistent with strength in the underlying economy

The central bank has kept interest rates unchanged for four straight meetings now and has maintained a relatively hawkish policy stance, suggesting it will keep rates higher for longer. The next monetary policy decision is on Dec. 8.

While inflation eased to 4.87% in October, nearing the RBI’s target, rising food prices, especially for vegetables, remain a risk. Goldman Sachs Group Inc. said this week it doesn’t see the RBI cutting interest rates until the final quarter of 2024.  

(Updates with comments from governor.)

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