RBI’s 25th Financial Stability Report (FSR)
Recently the Reserve Bank of India (RBI) has released the 25th Financial Stability Report (FSR).
The Financial Stability Report is a half yearly report. This report reflects the threats to the financial stability of the Indian financial system and its ability to counter them.
The International Monetary Fund releases the Global Financial Stability Report (FSR).
The banking system can face macroeconomic crises even without capitalization.
It is underlined by the following indicators:
- The Capital to Risk Weighted Assets Ratio (CRAR) of Scheduled Commercial Banks (SCBs) has reached a new high of 16.7 per cent.
- The gross non-performing assets (GNPA) ratio of scheduled commercial banks reached a six-year low of 5.9% in March 2022.
- The net non-performing asset (NNPA) ratio declined to 1.7%.
- The provisioning coverage ratio (PCR) increased from 67.6% to 70.9%.
Financial Technology (Fintech) Industry:
It has democratized access to organized finance. However, this poses instability threats to the broader financial system. This means that it has posed threats to the banking system related to data privacy, cyber security, customer protection etc.
Crypto Assets: Cryptocurrencies can lead to volatility and dollarization of the financial system (foreign money instead of domestic money) over time. This is because it creates a parallel currency system. In this way it can undermine sovereign control over the money supply, interest rates and macroeconomic stability.
Central Bank Backed Digital Currencies (CBDCs): Switching from bank deposits to such instruments could potentially reduce credit availability or increase credit costs.
Source – The Hindu