India's financial system resilient, diverse: IMF report

Financial Sector Assessment Program (FSAP), a joint programme of the International Monetary Fund (IMF) and the World Bank (WB), undertakes a comprehensive and in-depth analysis of a country's financial sector.
IMF has released the latest India-FSSA report, based on the assessment carried out during 2024, while WB's Financial Sector Assessment (FSA) report is due for publication.
«India welcomes assessment of the Indian financial system undertaken by the joint IMF-World Bank team conforming to the highest international standards,» the Reserve Bank said in a release on Monday.
The IMF report said that since the last FSAP in 2017, India's financial system has become more resilient and diverse, driven by rapid economic growth.
«The system recovered from the distress episodes of the 2010s and withstood the pandemic well. NBFIs and market financing have grown, making the financial system more diverse and interconnected. State-owned financial institutions' share remains significant,» it said.

Live Events

It further said that stress tests show that the main lending sectors are broadly resilient to macrofinancial shocks, despite some weak tails. Banks and NBFCs have sufficient aggregate capital to support moderate lending even in severe macro-financial scenarios.
«But several banks, particularly PSBs, may need to strengthen their capital base to support lending in such situations. Weak tails comprise a few non-systemic NBFCs and urban cooperative banks (UCBs) that report below minimum or negative capital even in the baseline. Vulnerability to short-term liquidity stress is generally contained,» the report said.
On regulation and supervision of NBFCs, the IMF acknowledged India's systematic approach to prudential