Reserve Bank Governor Shaktikanta Das emphasized that the Indian economy has exhibited robust recovery and is positioned among the fastest-growing major economies despite significant challenges and uncertainties.
Das stressed the non-negotiable nature of monetary stability and called upon all stakeholders in the financial system to consistently safeguard it.
In the preface to the Financial Stability Report (FSR), he stated, “The Reserve Bank and other financial regulators remain steadfast in their commitment to ensuring financial stability in the face of emerging challenges.”
In the current global landscape, preserving macroeconomic and financial stability, supporting sustainable growth, and maintaining confidence are top priorities for policymakers worldwide, according to Das.
In recent years, the global economy has experienced successive shocks of high intensity, including the waves of the COVID-19 pandemic, escalating international tensions, rapid shifts in monetary policies, and the recent turmoil in the banking sector.
Das asserted that the macroeconomic prospects are at risk due to economic fragmentation, specifically in emerging markets and developing economies (EMDEs). Since the last publication of the FSR in December 2022, both the global and Indian financial systems have followed distinctive paths.
The global financial system has experienced significant strain due to the banking turmoil in the United States and Europe since early March 2023. Notably, US-based Silicon Valley Bank and Signature Bank faced bankruptcy earlier this year, with Credit Suisse providing a bailout to UBS, the largest bank in Switzerland, in March.
On the other hand, India’s financial sector has demonstrated resilience and stability, as indicated by its low levels of non-performing assets, sufficient capital and liquidity buffers, and consistent growth in bank credit.
Das highlighted that the strengthening of the balance sheets of the banking and corporate sectors has created a “twin balance sheet advantage” for growth. He also acknowledged that advancements in technology and digitalization are expanding the scope and depth of financial intermediation, creating new opportunities for growth and financial inclusion.
Given the recent financial instability in certain advanced economies (AEs), Das emphasized that new risks necessitate a reevaluation of global regulations on the financial sector. While global collaboration among regulators is paramount, he emphasized the need for a collective commitment from regulators and regulated entities to ensure a stable financial system.
Das noted that periods of prosperity often sow the seeds of vulnerability as risks tend to be overlooked. He also highlighted the importance of international cooperation and regulatory focus in addressing issues such as climate change and cyber risks.
India, through its G20 leadership, is actively working towards enhancing the effectiveness of multilateralism in various areas. The theme chosen by India for the G20, “One Earth, One Family, One Future,” reflects these dedicated efforts.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
