Financial Stability Report (FSR) of RBI

RBI recently released the 9th edition of its Financial Stability Report (FSR), which is a bi-monthly publication, reflecting the collective assessment of an expert sub-committee on risks to financial stability. The publication of the report is a good practice, being followed all over the world.

The recent FSR aims to promote awareness about the vulnerabilities in the financial system. The report also seek to examine the resilience of the financial institutions, and to encourage a debate on the development and regulation of the financial sector.

The Government as well as RBI has also been discussing these issues at higher levels. For instance, the issue of Bank Governance has been dealt with extensively by the P. J. Nayak Committee.

Another major issue is the deteriorating asset quality of public sector banks. The FSR points out that there is a case to review the governance structure of Public Sector Banks, with more emphasis on market discipline.

However, the FSR has also noted that the level of capital, with commercial banks, remain well above the regulatory minimum requirements, even under adverse conditions. It also notes that the post-election political stability has given strength to the economy.

The report recognise that the government is in a better position to handle the issue price rise and supply-side issues.

At the global level, the financial market is showing signs of improvement and recovery, though economic growth has not picked up uniformly.

The report has called for a vigil over Shadow Banking Entities, which are inaccurately perceived as being regulated by the RBI. There is a need to do away the ambiguities related to such entities. FSR also calls for a better monitoring of the lending operations of insurance companies and the circulation of money in the large corporations.

Courtesy: The Hindu

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