Business Mantra: Faridabad
RBI releases Financial Stability Report (FSR) every 6 months & has released, its 13th “Financial Stability Report of June, 2016 on 28 June 2016.
According to press release of 28 June 2016, in June, 2016 FSR, the financial system of the country is stable despite all the illness or problems in Banking Sector. Amid Global Economic Slowdown and uncertain environment, strong and effective domestic policies and various Reforms Procedures are the pillars of Economic Stability in India.
Global & Domestic Major Financial Risks:
The report says around the globe, there is uncertain, week and uneven growth pattern in the world trade and slowdown is quite evident in many advance economies, presently easy monetary policies are being implemented.
While, India’s economy, despite all global odds, stands firm as both growth pattern and investment potential are there.
The report says, the government seems committed on fiscal discipline reducing the revenue deficit by rationalizing the subsidies.
The report further says, external sector is relatively stronger but, report shows concerns over increasing our imports in terms of volume.
According to report, RBI presumes a normal Monsoon, which will be good for agriculture sector in 2016-2017. Improvement in corporate sector has also been indicated.
Financial Institutions’ Performance & Risks:
Schedules Commercial Banks and FASB’s are facing challenging times, Gross non performances advances (NPAs) are increasing alarmingly and have reached to 7.6% in March, 2016, from 5.1% in September 2015. The profitability of Public Sector Banks has declined shapely and most of the PSBs have reported losses on March, 2016, due to high provisioning of NPA’s.
According to the report, the assets quality of NBFCs in India and the performance of the NBFCs is relatively better than Public Sector Banks.
Regulations of the Financial Sector:
Presently, the Indian Banks are going through, a process of correcting their Balance Sheets by following provisions of “Assets quality review” (AQR).
Government has taken various steps to improve the position of Stressed, Industrial and Service sectors. This will help in improving the credit growth and if some industries are able to come out of stress, then Asset quality would improve.
Private placement debt securities will be regulated according to SEBI (Securities & Exchange Board of India) guidelines, which provide Electronic Book Mechanism.
In nutshell, the report expresses, there are challenges, according to global economic conditions but India’s economy and the basis of our strong work force and Govt. reforms are showing signs of improvement.