Economy on recovery path; inflationary pressures, geopolitical risks warrant careful handling of situation: RBI

The Reserve Bank of India (RBI) said on Thursday that the Indian economy is well on the way to recovery, although inflationary pressures and geopolitical risks warrant careful handling and monitoring of the situation. The RBI’s 25th Financial Stability Report (FSR) also states that both banks and non-bank financial institutions have sufficient capital buffers to absorb shocks.

“Despite the challenges of global spillovers, the Indian economy remains on track for recovery, although inflationary pressures, external spillovers and geopolitical risks require careful handling and monitoring,” the report said.

The report noted that the outlook for the global economy is shrouded in significant uncertainty due to the war in Europe, the head-on normalization of monetary policy by central banks in response to continued high inflation and multiple waves of the coronavirus pandemic.

Turning to the banking sector, it said Scheduled Commercial Banks (SCBs)’s Capital to Risk weighted Assets Ratio (CRAR) rose to a new high of 16.7 percent, while their gross non-performing assets (GNPA) ratio fell to a low in six years. from 5.9 percent in March 2022.

Credit risk macro stress tests show that SCBs could meet minimum capital requirements even under severe stress scenarios, it added.

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