CONCEPT – FINANCIAL STABILITY REPORT JUNE 2018

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 CONCEPT – FINANCIAL STABILITY REPORT JUNE 2018

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    • FSR 2018 : The FSR reflects the overall assessment of the stability of India’s financial system and its resilience to risks emanating from global and domestic factors.
    • Overall assessment of systemic risks
      1. Global and domestic macro-financial risks : Global growth outlook for 2018 remains positive despite some recent softness.
      2. Spillover risk from advanced financial markets to emerging markets, however, has increased.
      3. Tightening of liquidity conditions in the developed markets alongside expansionary US fiscal policy and a strong US dollar have started to adversely impact emerging market currencies, bonds and capital flows. Firming commodity prices, geopolitical developments and rising protectionism pose added risks.
      4. On the domestic front, economic growth is firming up. However, conditions that buttressed fiscal consolidation, moderation in inflation and a benign current account deficit are now changing.
      5. In the domestic financial markets, structural shifts are altering the pattern of credit intermediation and impacting market interest rates. These developments, while a healthy sign of diversified financing of the economy, call for greater vigilance of the system as a whole in order to safeguard financial stability.
    • Financial Institutions: Performance and risks
      1. The stress in the banking sector continues as gross non-performing advances (GNPA) ratio rises further.
      2. Profitability of SCBs declined, partly reflecting increased provisioning. While this has added pressure on SCBs’ regulatory capital ratios, the provision coverage ratio has increased.
      3. Credit growth of SCBs picked up during 2017-18 notwithstanding sluggish deposit growth.
      4. Macro-stress tests indicate that under the baseline scenario of current macroeconomic outlook, SCBs’ GNPA ratio may rise from 11.6 per cent in March 2018 to 12.2 per cent by March 2019.
      5. The capital augmentation plan announced by the government will go a long way in addressing the potential capital shortfall, while also playing a catalytic role in credit growth at healthier banks.
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      PT's IAS Academy: CONCEPT – FINANCIAL STABILITY REPORT JUNE 2018
      CONCEPT – FINANCIAL STABILITY REPORT JUNE 2018
      Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!
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