Volatility not to impact growth of Indian economy: RBI Governor
Indian economy is projected to register high growth, driven by strong domestic consumption and investment despite a volatile and unfavourable external environment, RBI Governor Sanjay Malhotra said on Wednesday.
“Maintaining financial stability and strengthening the financial system remains our north star,” Malhotra said in his foreword in the latest edition of the RBI Financial Stability Report.
According to him, financial sector regulators recognise that financial stability is not an end in itself and promoting innovation and growth, protecting consumers, a pragmatic approach to regulation and supervision that improves financial system efficiency are equally important.
“The most important contribution the policymakers can make is to foster a financial system that is robust and resilient to shocks, efficient in providing financial services and promotes responsible innovation,” he said.
Malhotra noted that the Indian economy and the financial system remain robust and resilient supported by strong growth, benign inflation, healthy balance sheets of financial and non-financial firms, sizeable buffers and prudent policy reforms.
“Despite a volatile and unfavourable external environment, the Indian economy is projected to register high growth, driven by strong domestic consumption and investment. Nonetheless, we recognise the near-term challenges from external spillovers and continue to build strong guardrails to safeguard the economy and the financial system from potential shocks,” he said.
The Reserve Bank, in a report on Wednesday, said the Indian economy is likely to maintain strong growth, underpinned by robust domestic demand, benign inflation, and prudent macroeconomic policies despite an uncertain and challenging global economic backdrop, the Reserve Bank said in a report on Wednesday.
The health of commercial banks (SCBs) remains sound with strong capital and liquidity buffers, improved asset quality and robust profitability, the Reserve Bank said in its Financial Stability Report (FSR).
The report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability.
“The domestic financial system remains robust and resilient, bolstered by strong balance sheets, easy financial conditions, and low financial market volatility. Nonetheless, there are near-term risks from external uncertainties - geopolitical and trade-related,” it said.
Macro stress test results affirm the resilience of scheduled commercial banks to withstand losses under hypothetical adverse scenarios and maintain capital buffers well above the regulatory minimum. It also confirmed the resilience of mutual funds and clearing corporations, the apex bank added. Also, non-banking financial companies (NBFCs) remain robust, supported by strong capital buffers, solid earnings, and improving asset quality, the report said.
On insurance, the RBI report said the sector continues to display balance sheet resilience, while the consolidated solvency ratio remained above the minimum threshold limit.
