Mint Quick Edit | Financial stability must deliver service efficiency
Systemic risk is not a concern, going by the Reserve Bank of India’s (RBI) latest Financial Stability Report. As its systemic risk survey conducted in May reveals, “medium risk” is seen in all major risk groups, with 92% of respondents expressing a level of confidence in India’s financial system that’s either higher than or similar to the last round’s.
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As the report notes, corporate balance sheets are healthy, as are those of banks, which have taken their non-performing loan ratios to a multi-decadal low and reported strong earnings, even as stress tests have affirmed the adequacy of their capital buffers.
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Mutual funds and clearing corporations are resilient too. While high equity valuations and global trade uncertainty pose some risks, India’s financial system seems in good shape overall. As a macroprudential exercise, such sector-wide scans are important.
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Yet, as RBI Governor Sanjay Malhotra says in the report’s foreword, “Financial stability, like price stability, is a necessary condition, and not a sufficient one to boost India’s potential growth.” His note ends with a mention of the need for service efficiency. A stable base, after all, is just a foundation for economic success.
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