FINANCIAL STABILITY REPORT - REPORTS AND INDICES
News: Indian
economy resilient despite global uncertainty, says RBI
What's in the news?
● Despite
the global economy facing heightened uncertainty due to banking system
fragility in certain countries, persisting geopolitical tensions and moderating
but elevated inflation, the Indian economy and the domestic financial system
remain resilient supported by strong macroeconomic fundamentals, the Reserve
Bank of India (RBI) said in the 27th issue of the Financial Stability Report
(FSR).
Key takeaways from the report:
1. Sustained growth:
● As
per the FSR continuing growth momentum, moderating inflation, narrowing current
account deficit, rising foreign exchange reserves, ongoing fiscal consolidation
and a robust financial system are setting the economy on a path of sustained
growth.
2. Positives from banks and corporates:
● Healthy
balance sheets of banks and corporates are engendering a new credit and
investment cycle and brightening the prospects of the Indian economy.
3. Rising CRAR:
● The
capital to risk-weighted assets ratio (CRAR) and the common equity tier 1
(CET1) ratio of scheduled commercial banks (SCBs) rose to historical highs of 17.1% and 13.9%, respectively, in March
2023.
4. Reducing NPA levels:
● Scheduled
Commercial Banks’ gross non-performing assets (GNPA) ratio continued its
downtrend and fell to a 10-year low of 3.9%
in March 2023 and the net non-performing assets (NNPA) ratio declined to 1%.
Go back to basics:
Financial stability report:
● It
is a bi-annual report published by RBI.
● The
RBI looks at the state of both the global as well as domestic economy.
● It
reflects on risks to financial stability
and the resilience of the financial system in the context of contemporary
issues relating to development and regulation of the financial sector.
● It
focuses on public and private banks with the following aspects:
○ Capital
availability for working
○ Cost
of NPAs and whether they are manageable
○ Credit
flow in different sectors of the economy
○ Credit
flow at personal levels (households)
○ Macro-financial
risks in the economy
○ Macro-financial
risks refer to the risks that originate from the financial system but affect
the wider economy as well as risks to the financial system that originate in
the wider economy.