By Admin 
RBI Financial Stability Report: Despite global economic uncertainties and geopolitical tensions, the Indian economy is likely to remain on a strong growth path, supported by strong domestic demand, controlled inflation and balanced macroeconomic policies. Reserve Bank of India (RBI) has issued its latest financial stability report It said the country’s domestic financial system remains strong, with scheduled commercial banks having adequate capital and cash reserves, asset quality improving and profitability strong.
India’s growth will continue
According to the central bank, favorable financial conditions, healthy balance sheets and relatively low volatility in markets have underpinned this strength, although uncertainties related to global trade remain a near-term risk.
RBI’s stress tests show that even in adverse circumstances, banks are able to absorb potential losses and their capital will remain well above the regulatory minimum level.
India’s strong finance system
Along with this, mutual fund companies, clearing corporations, non-banking financial companies (NBFCs) and insurance sectors are also in a strong position due to adequate capital, stable income and better asset quality. This assessment reflects the overall assessment conducted by a sub-committee of the Financial Stability and Development Council (FSDC), which confirms the strength of the Indian financial system and risks to financial stability.
Keep an eye on the increasing pressure in the loan book
The Reserve Bank of India (RBI) has advised financial institutions giving small amounts of loans to be cautious about possible pressure in their loan books. Central Bank released for financial year 2024-25 ‘Trends and Progress in Banking’ The report said that the microfinance segment has faced challenges in recent quarters, the main reason for which is the increasing debt burden on borrowers.
According to RBI, in the current financial year the pace of loan distribution in the southern states, especially Karnataka and Tamil Nadu, has been relatively weak. This report has come at a time when many policy and regulatory steps have been taken affecting the industry in these states. The central bank said that even though several initiatives have been taken by the industry to improve performance, regulated entities need to maintain close monitoring given the possibility of asset quality pressure in this segment going forward. RBI indicated that paying special attention to cautious credit distribution and risk management in the microfinance sector will be important in the times to come.
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