RBI Says Indian Economy and Banks Are Strong Despite Global Challenges
The Reserve Bank of India (RBI) has released its 29th Financial Stability Report, highlighting significant risks to the global economy due to ongoing geopolitical tensions, high public debt, and slow progress in reducing inflation. Despite these challenges, the global financial system remains resilient.
Indian Economy and Financial System
The report emphasizes that the Indian economy and its financial system are strong and resilient, supported by robust macroeconomic fundamentals and a sound financial system. Banks and financial institutions in India are actively supporting economic activities through consistent credit expansion.
RBI stated, “The Indian economy and the financial system remain robust and resilient, anchored by macroeconomic and financial stability.”
Key Financial Indicators
As of the end of March 2024, the capital to risk-weighted assets ratio (CRAR) for scheduled commercial banks (SCBs) was 16.8%, and the common equity tier 1 (CET1) ratio was 13.9%. These ratios indicate a bank’s financial health relative to its risks.
The gross non-performing assets (GNPA) ratio fell to a multi-year low of 2.8%, and the net non-performing assets (NNPA) ratio dropped to 0.6% by the end of March 2024, showing effective management of bad loans by banks.
Stress Tests and Projections
Macro stress tests for credit risk project that banks will meet minimum capital requirements even under adverse conditions. The system-level CRAR is projected to be 16.1% under a baseline scenario, 14.4% under a medium stress scenario, and 13.0% under a severe stress scenario by March 2025.
Non-Banking Financial Companies (NBFCs)
As of the end of March 2024, NBFCs had a CRAR of 26.6%, a GNPA ratio of 4.0%, and a return on assets (RoA) of 3.3%, indicating they are well-capitalized, managing non-performing assets effectively, and achieving good returns on investments.
