Economy has made solid recovery: Reserve Bank of India governor Das
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In the foreword to the Financial Stability Report (FSR), the governor said that new risks have necessitated a reassessment of global standards for financial sector regulations. According to the FSR, the ratio of non-performing assets (NPAs) to total loans is projected to improve to 3.6% by March 2024 under a baseline scenario, compared to a 10-year low of 3.9% in March 2023. A baseline scenario represents a situation where the macroeconomic conditions align with expectations and do not worsen.
However, the RBI cautioned that if economic conditions worsen, the gross NPA ratio of banks, which measures a bank’s bad loans, may rise to 4.1% and 5.1% under medium or severe stress scenarios, respectively. Nevertheless, the report assured that all banks would be able to meet the minimum capital requirements even under adverse stress scenarios.
Das emphasised financial stability is non-negotiable, and all stakeholders in the financial system must work to preserve it. He highlighted the stability and resilience of India’s financial sector, reflected in sustained growth in bank credit, low levels of NPAs, and adequate capital and liquidity buffers. The balance sheets of both the banking and corporate sectors have been strengthened, providing a “twin balance sheet advantage” for growth, Das said.
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