Indian economy confronting strong headwinds amid global recessionary risks: RBI

The central bank added that the interplay of multiple shocks has resulted in tightened financial conditions and heightened volatility in financial markets.

The RBI’s FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system.

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Through the FSR report, the RBI said, “The Indian economy is confronting strong global headwinds. Yet, sound macroeconomic fundamentals and healthy financial and non-financial sector balance sheets are providing strength and resilience and engendering financial system stability.”

Apart from this, the RBI said that buoyant demand for bank credit and early signs of a revival in investment cycle are benefiting from improved asset quality, return to profitability and strong capital and liquidity buffers of scheduled commercial banks (SCBs).

Also, the gross non-performing asset (GNPA) ratio of scheduled commercial banks (SCBs) fell to a seven-year low of 5.0 per cent and net non-performing assets (NNPA) have dropped to ten-year low of 1.3 per cent in September 2022, the report added.

Even under severe stress scenarios, the SCBs would be able to comply with the minimum capital requirements, showed the macro stress tests for credit risk.

The system-level capital to risk weighted assets ratio (CRAR) in September 2023, under baseline, medium and severe stress scenarios, is projected at 14.9 per cent, 14.0 per cent and 13.1 per cent, respectively.

Among other things, the stress tests for open-ended debt mutual funds showed no breach in limits pertaining to interest rate, credit and liquidity risks. Also, the consolidated solvency ratio of both life and non-life insurance companies also remained above the prescribed minimum level, said the RBI’s 26th issue of FSR.