RBI releases Financial Stability Report

RBI releases Financial Stability Report

Question: Which of the following statement is/are correct regarding the Financial Stability Report of RBI?
1) This is the eighteenth issue of Financial Stability Report (FSR)
2) It has information over the risks to financial stability, as also the resilience of financial system
3) It shows concern over growing NPAs and non improvement of banking sector
4) It also mentions the risk of fiscal deficit target which remains unachieved
Correct option:
(a) 1, 3 and 4
(b) 2, 3 and 4
(c) 1, 2 and 4
(d) All of the above
Answer: (c)
Related facts:

  • On 31December 2018, apex bank of India, RBI (Reserve Bank of India) released the eighteenth issue of Financial Stability Report (FSR). The FSR shows the collective assessment of the Sub Committee of the Financial Stability and Development Council (FSDC) on the risks to financial stability, as also the resilience of the financial system.
  • The report discusses the issues which are related to development and regulation of the financial sector. The overall assessment of the financial system remains stable even when the global economic scenario poses challenges. It drained wide publicity for the decline of the NPAs (Non Performing Assets) of the banks.

Concerns regarding Global and Domestic macro financial risks:

  • The global growth outlook for 2018 and 2019 remains steady. The growth of gross domestic product (GDP) on the domestic front showed slight moderation in Q2: 2018-19 while inflation remained contained.
  • The structural shift in credit intermediation and the evolving interconnectivity between banks and the non-banks call for greater vigilance in the domestic financial markets.

Financial Institutions: Performance and risks

  • Between March 2018 and September 2018, credit growth of Scheduled Commercial Banks (SCBs) has improved and is driven largely by Private Sector Banks (PSBs).
  • The asset quality of the banks showed an improvement as the Gross Non-Performing Assets (GNPA) ratio to Scheduled Commercial Banks declined to 10.8% in September 2018 from 11.5% in March 2018.
  • GNPA is expected to decline further to 10.3% in March 2019. The analysis of financial network structure between September 2017 and September 2018 also reveals shrinking linkages with asset management companies-mutual funds (AMC-MFs) for raising funds and with NBFCs/ Housing Finance Companies for lending.

Links:
https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=45862
https://indianexpress.com/article/business/banking-and-finance/non-performing-assets-stress-to-decline-for-first-time-in-3-years-rbi-5517757/

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