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The FSR, released on Monday (December 30), reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC). It evaluates the strength of India’s financial system and its ability to withstand risks.
The report highlights that scheduled commercial banks (SCBs) are in strong shape. They have improved profitability, declining non-performing assets (NPAs), and sufficient capital and liquidity buffers. Return on Assets (RoA) and Return on Equity (RoE) have reached decadal highs. The Gross Non-Performing Asset (GNPA) ratio has also dropped to a multi-year low.
The report also points out that macro stress tests show SCBs have adequate capital buffers. This remains true even under adverse conditions. The stress tests also confirm the resilience of mutual funds and clearing corporations.
On the economic front, real GDP growth moderated to 6% in the first half of 2024-25. This is a decrease from the 8.2% and 8.1% growth recorded in the first and second halves of 2023-24, respectively. However, the RBI remains optimistic.
Structural growth drivers such as public consumption, investment, and service exports are expected to support recovery in the latter half of FY25. This will be aided by favorable financial conditions.
On inflation, the FSR notes that a bumper kharif harvest and favorable rabi crop prospects will help ease foodgrain prices.
However, the rising frequency of extreme weather events remains a risk to food inflation. Additionally, ongoing geopolitical conflicts and economic fragmentation could push up global supply chain and commodity prices.
–With PTI inputs
First Published: Dec 30, 2024 5:14 PM IST