**Executive Summary**
The Reserve Bank of India (RBI) released the 26th issue of the Financial Stability Report (FSR) on December 29, 2022. The report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system. It also includes projections for the capital to risk weighted assets ratio (CRAR) in September 2023.
**Key Points / Main Content**
* **Global and Indian Economy:**
* The global economy faces significant recessionary headwinds.
* The Indian economy confronts strong global headwinds but is supported by sound macroeconomic fundamentals.
* **Banking Sector:**
* Bank credit demand is buoyant, and investment cycle revival signs are emerging.
* Asset quality has improved, profitability has returned, and scheduled commercial banks (SCBs) have strong capital and liquidity buffers.
* The gross non-performing asset (GNPA) ratio of SCBs has fallen to a seven-year low of 5.0% while net non-performing assets (NNPA) have dropped to a ten-year low of 1.3% in September 2022.
* **Stress Test Results:**
* Macro stress tests indicate that SCBs can meet minimum capital requirements even under severe stress.
* The system-level capital to risk weighted assets ratio (CRAR) in September 2023 is projected at 14.9%, 14.0%, and 13.1% under baseline, medium, and severe stress scenarios, respectively.
* **Mutual Funds and Insurance:**
* Stress tests for open-ended debt mutual funds showed no breach in limits pertaining to interest rate, credit and liquidity risks.
* The consolidated solvency ratio of both life and non-life insurance companies remains above the prescribed minimum level.
**Impact Analysis**
**Scheduled Commercial Banks (SCBs)**
* **Impact**: SCBs will be affected by the projected capital requirements and need to maintain sufficient capital buffers to withstand potential stress scenarios.
* **Action Required**: Banks need to ensure compliance with minimum capital requirements and proactively manage credit risk.
**Debt Mutual Funds**
* **Impact**: Impacted by the stress tests on open-ended debt mutual funds.
* **Action Required**: Ensure limits pertaining to interest rate, credit and liquidity risks are not breached.
**Life and Non-Life Insurance Companies**
* **Impact**: Impacted by solvency requirements.
* **Action Required**: Maintain a consolidated solvency ratio above the prescribed minimum level.
**Financial Stability and Development Council (FSDC)**
* **Impact**: FSDC's assessment of financial stability risks is reflected in the report.
* **Action Required**: Monitor financial stability and take necessary measures to mitigate risks.
Key Entities Referenced
Financial Stability Report (FSR): A report by the Reserve Bank of India reflecting the collective assessment of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system.
Reserve Bank of India (RBI): The central bank of India, responsible for releasing the Financial Stability Report.
Financial Stability and Development Council (FSDC): A council whose Sub-Committee's assessment informs the Financial Stability Report.
Mumbai: Location of the Department of Communication, Central Office of RBI
�ेस �काशनी PRESS RELEASE
भारतीय �रज़व� ब�क
RESERVE BANK OF INDIA
वेबसाइट : www.rbi.org.in/hindi संचार िवभाग, क��ीय कायार्लय, शहीद भगत �संह मागर्, फोटर्, मुंबई-400001
Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मेल/email : helpdoc@rbi.org.in Mumbai-400001 फोन/Phone: 022- 22660502
December 29, 2022
RBI releases the Financial Stability Report, December 2022
Today, the Reserve Bank released the 26th issue of the Financial Stability Report
(FSR), which reflects the collective assessment of the Sub-Committee of the Financial
Stability and Development Council (FSDC) on risks to financial stability and the resilience
of the financial system.
Highlights:
• The global economy is facing formidable headwinds with recessionary risks
looming large. The interplay of multiple shocks has resulted in tightened financial
conditions and heightened volatility in financial markets.
• The Indian economy is confronting strong global headwinds. Yet, sound
macroeconomic fundamentals and healthy financial and non-financial sector
balance sheets are providing strength and resilience and engendering financial
system stability.
• Buoyant demand for bank credit and early signs of a revival in investment cycle
are benefiting from improved asset quality, return to profitability and strong capital
and liquidity buffers of scheduled commercial banks (SCBs).
• The gross non-performing asset (GNPA) ratio of scheduled commercial banks
(SCBs) fell to a seven-year low of 5.0 per cent and net non-performing assets
(NNPA) have dropped to ten-year low of 1.3 per cent in September 2022.
• Macro stress tests for credit risk reveal that SCBs would be able to comply with
the minimum capital requirements even under severe stress scenarios. The
system-level capital to risk weighted assets ratio (CRAR) in September 2023,
under baseline, medium and severe stress scenarios, is projected at 14.9 per cent,
14.0 per cent and 13.1 per cent, respectively.
• Stress tests for open-ended debt mutual funds showed no breach in limits
pertaining to interest rate, credit and liquidity risks. Consolidated solvency ratio of
both life and non-life insurance companies also remained above the prescribed
minimum level.
(Yogesh Dayal)
Press Release: 2022-2023/1457 Chief General Manager