The Indian economy and its financial system have retained the features of strength and resilience, continued to be underpinned by sustained macroeconomic and financial stability. As a matter of fact, consultations with the June 2022 acquaintance of the Financial Stability Report reveal that banks and financial institutions have strengthened economic activities through continuous credit expansion, which was enabled by their improved balance sheet strength.
Reportedly, the GNPA ratio of scheduled commercial banks has slipped to a multi-year low of 2.8 percent, and the NNPA ratio stood at 0.6 percent as of March 2024.
Meanwhile, non-banking financial firms also appear to be performing soundly, with a capital-to-risk-weighted asset ratio of 26.6 per cent, a gross NPA ratio of 4.0 per cent, and return on assets of 3.3 per cent as of March 2024.
Further insights from the RBI indicate that SCBs have maintained a capital to risk-weighted assets ratio of 16.8 per cent and a common equity tier 1 ratio of 13.9 per cent as of March-end 2024.
According to the report, macro stress tests for credit risk project that SCBs, under baseline, medium, and severe stress scenarios, would have system-level CRARs of 16.1 percent, 14.4 percent, and 13.0 percent by March 2025, respectively, thereby showing that they can still absorb credit risk shocks and meet minimum capital requirements. These stress tests are stringent assessment exercises based on hypothetical shocks and should not be construed as forecasts.
It also highlights from the Financial Stability Report that risks to the global economy are building up through continuous geopolitical tensions, high public debt, and slow progress in meeting inflation objectives. Notwithstanding challenges to the global environment, it has put forward the resilience of the global financial system together with stable financial conditions.
Read also | India's External Debt Ratio Declines to 18.7% by March 2024
Read also | RBI Governor Forecasts India's Consistent Path to 8% GDP Growth
