Financial Stability report
The Reserve Bank of India's biannual Financial Stability Report has again flagged the fact that risks to the banking sector remain worryingly "high".
Why it says so?
- Continuous deterioration in asset quality
- 2.Low profitability
- Low liquidity
Any systemic risk to the banking industry has the potential to ripple across the entire economy. There has been no perceptible improvement in the health of domestic banks, even six months after the RBI's previous report had highlighted the sector's high vulnerability.
Some measures have been initiated and others are in the pipeline, including a draft Financial Resolution and Deposit Insurance Bill to address bankruptcy situations in banks and other financial entities.
Any systemic risk to the banking industry has the potential to ripple across the entire economy. There has been no perceptible improvement in the health of domestic banks, even six months after the RBI's previous report had highlighted the sector's high vulnerability.
Some measures have been initiated and others are in the pipeline, including a draft Financial Resolution and Deposit Insurance Bill to address bankruptcy situations in banks and other financial entities.
Risks
Restoration of the sector's health is of great significance as some of the risks inherent in banks may already be getting transferred to other segments of the financial markets. Among institutional risks, credit growth and cyber risk were seen as two key "high risk factors".