The revival of consumption and investment while remaining vigilant about spillovers from global financial markets remains a critical challenge for the government going forward, RBI said in the latest Financial Stability Report released on Friday. However, unless the global uncertainties are properly addressed, they are likely to remain a major drag on growth, it added. Even as the inflows of capital remain positive, India’s exports could face challenges in the event of the sustained global slowdown, the report also said, adding that the current account deficit is expected to be under control reflecting weak energy price outlook. “India’s financial system remains stable notwithstanding weakening domestic growth; the resilience of the banking sector has improved following recapitalisation of Public Sector Banks (PSBs) by the Government. Risks arising out of global/domestic economic uncertainties and geopolitical developments, however, persist,” RBI also said.
The economy is undergoing a slowdown, with the GDP in Q2FY20 growing at a mere 4.5 per cent. The government has announced a slew of measures in the last few months to revive growth ranging from bank recapitalisation to removal of tax on the super-rich.
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The RBI report released on Tuesday said that the gross non-performing loans of banks have improved to 9.1 per cent in comparison with 11.2 per cent in FY18 as of September end. “The gross NPA ratio of all banks declined in FY19 after rising for seven consecutive years, as recognition of bad loans neared completion,” the RBI said. For PSU banks, a fall has been seen both in the gross NPAs and net NPA ratio. Even the asset quality has seen an improvement, the report added.
Source: Financial Express