RBI reassures on stability of India's financial system in annual FSR, concedes headwinds

Stating that India’s financial system remains stable, the Reserve Bank of India, on Friday released its  Financial Stability Report (FSR) - a collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability. The report states that the economy was stable inspite of weakening domestic growth due to the resilience if the banking sector. Attributing the improvement in the banking sector to 'recapitalization of the Public sector banks', RBI states that the Indian economy was stable inspite of economic uncertainties.

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RBI: 'India’s financial system remains stable'

Listing the uncertainties in the global economy, RBI stated that delay in Brexit, impending recession, geopolitical risks, oil market fluctuations has led to a dip in consumer confidence dampening investment. Stating that as demand reduced in the second quarter of FY20, RBI assured that the current account deficit was capable of countering the dip in India's exports. It also stated that while Scheduled commercial banks’ credit growth remained at 8.7%, PSBs' registered 16.5% credit growth while the gross non-performing assets remained unchanged at 9.3% in Q1-Q2.

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RBI's Financial Stability Report (FSR)

The Central Bank also stated that PSBs witnessed the highest year-on-year (y-o-y) growth in payables, while investment companies have recorded the highest y-o-y growth in their receivables. The report also listed the various measures introduced by the RBI to counter these financial riskes like - liquidity management regime for NBFCs, resolution of stressed assets, allowing domestic banks to freely offer foreign exchange prices to non-residents etc. Apart from these, the report also spoke on the various measures introduced by Securities and Exchange Board of India (SEBI), Insolvency and Bankruptcy Board of India (IBBI), Insurance Regulatory and Development Authority of India (IRDAI) and 
Pension Fund Regulatory and Development Authority (PFRDA).

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Here's the FSR report

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Indian economy at 4.5%

Earlier on November 29, India's second-quarter GDP (July-September) numbers stood at 4.5% - the slowest growth in almost seven years, as released by Central Statistics Office. The previous quarter (April-June) GDP numbers were at 5% and the Q2 (2018-2019) stood at 7%. This development comes inspite of the government's various economic moves like the merger of 9 PSU banks into 4, major corporate tax cuts, policy changes in the automobile sector, reduction in tax regulations to boost foreign income, attract investors and increase the consumer demand. The government currently follows the base year of 2011-12.