New Delhi: RBI Governor Sanjay Malhotra said on Tuesday that India’s financial system remains a key source of strength and support for the real economy and the country’s growth momentum, as banks and NBFCs remain sound, supported by strong capital and liquidity positions, healthy profitability, low levels of non-performing assets, and robust credit growth.
In his foreword to the RBI’s Financial Stability Report, Malhotra said: “The Indian economy and the financial system have demonstrated remarkable resilience despite facing external shocks of significant magnitude. Strong growth, low inflation, healthy balance sheets of financial and nonfinancial firms, and ample buffers have helped preserve macro-financial stability.”
The Financial Stability report states that India’s sound macroeconomic fundamentals place it in a stronger position than many of its peers and provide greater resilience to external shocks than in past crisis episodes. The balance of risks has turned favourable, supported by the interim peace deal and recent policy measures by the government and the Reserve Bank aimed at strengthening capital inflows.
The report highlights that the domestic financial system remains resilient, underpinned by strong bank and non-bank balance sheets. Scheduled Commercial Banks (SCBs) remain safe and sound, supported by strong capital and liquidity buffers, continued improvement in asset quality, and stable profitability.
Macro stress test results indicate that the banking system remains well-positioned to absorb potential shocks, with aggregate capital ratios projected to remain comfortably above regulatory thresholds even under hypothetical adverse scenarios.
Non-banking financial companies (NBFCs) remain financially sound, supported by strong capitalisation, healthy profitability, and improving asset quality.
The insurance sector continues to display balance sheet resilience with the solvency ratio of life insurers remaining above the minimum threshold.
“Nevertheless, we remain alert to evolving external and domestic risks and are committed to further strengthening the guardrails that protect our economy and financial system from potential shocks,” Malhotra said.
Persistent supply chain uncertainties could tighten financial conditions and revive inflationary pressures. Meanwhile, elevated public debt, bond market fragilities, stretched asset valuations, and leveraged NBFIs remain key vulnerabilities that could amplify future shocks, the report added.
(IANS)
