Indian economy and financial system remain strong despite rising global risks: FSR

Indian economy and financial system remain strong despite rising global risks: FSR


The reflection of a security guard can be seen next to the Reserve Bank of India (RBI) logo at the RBI headquarters in Mumbai. RBI released the 29th issue of the Financial Stability Report on June 27, 2024.

The reflection of a security guard can be seen next to the Reserve Bank of India (RBI) logo at the RBI headquarters in Mumbai. RBI released the 29th issue of the Financial Stability Report on June 27, 2024. | Photo credit: Reuters

The Reserve Bank of India (RBI) said in the 29th issue of the Financial Stability Report (FSR) released on June 27 that the Indian economy and financial system remain strong and resilient, based on macroeconomic and financial stability.

It said that with improved balance sheets, banks and financial institutions are supporting economic activity through continued credit expansion.

As per the FSR, the credit to risk-weighted asset ratio (CRAR) and common equity tier 1 (CET 1) ratio of scheduled commercial banks (SCBs) stood at 16.8% and 13.9%, respectively, at the end of March 2024.

The gross non-performing asset (GNPA) ratio of SCBs fell to a multi-year low of 2.8 per cent and the net non-performing asset (NNPA) ratio stood at 0.6 per cent at the end of March 2024.

“Macro stress tests for credit risk indicate that SCBs will be able to comply with the minimum capital requirements, with system-level CRAR in March 2025 projected at 16.1%, 14.4% and 13.0% under baseline, moderate and severe stress scenarios, respectively,” RBI said in the FSR.

“These scenarios are strictly conservative assessments under hypothetical shocks and the results should not be interpreted as forecasts,” it said.

Non-banking financial companies (NBFCs) remain healthy, with a CRAR of 26.6 per cent, GNPA ratio of 4.0% and return on assets (RoA) of 3.3% at end-March 2024, respectively.

According to the FSR, the global economy is facing serious threats due to long-term geopolitical tensions, high public debt and slow progress towards the final stages of deflation.

Despite these challenges, the global financial system remains resilient and financial conditions remain stable.


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