Pushed by fast progress, India’s monetary system extra resilient and various: IMF

The Indian monetary system has grow to be extra resilient and various, pushed by fast financial progress and withstood the pandemic nicely, in response to an IMF report.

The Monetary Sector Evaluation Program (FSAP), a joint programme of the Worldwide Financial Fund (IMF) and the World Financial institution (WB), undertakes a complete and in-depth evaluation of a rustic’s monetary sector.

IMF has launched the most recent India-FSSA report, based mostly on the evaluation carried out throughout 2024, whereas WB’s Monetary Sector Evaluation (FSA) report is due for publication.

“India welcomes evaluation of the Indian monetary system undertaken by the joint IMF-World Financial institution group conforming to the very best worldwide requirements,” the Reserve Financial institution mentioned in a launch on Monday.

The IMF report mentioned that for the reason that final FSAP in 2017, India’s monetary system has grow to be extra resilient and various, pushed by fast financial progress.

“The system recovered from the misery episodes of the 2010s and withstood the pandemic nicely. NBFIs and market financing have grown, making the monetary system extra various and interconnected. State-owned monetary establishments’ share stays vital,” it mentioned.

It additional mentioned that stress checks present that the principle lending sectors are broadly resilient to macrofinancial shocks, regardless of some weak tails. Banks and NBFCs have enough combination capital to help average lending even in extreme macro-financial eventualities.

“However a number of banks, notably PSBs, might must strengthen their capital base to help lending in such conditions. Weak tails comprise a number of non-systemic NBFCs and concrete cooperative banks (UCBs) that report beneath minimal or destructive capital even within the baseline. Vulnerability to short-term liquidity stress is usually contained,” the report mentioned.

On regulation and supervision of NBFCs, the IMF acknowledged India’s systematic method to prudential necessities of NBFCs with the scale-based regulatory framework. IMF appreciated India’s method to the introduction of a bank-like Liquidity Protection Ratio (LCR) for giant NBFCs.

IMF additionally acknowledged that the regulatory framework in securities markets has been enhanced consistent with worldwide observe to handle and forestall rising dangers. Notable enhancements embody establishing the Company Debt Market Improvement Fund (CDMDF).

The report noticed that India’s insurance coverage sector is robust and rising, with a big presence in each life and basic insurance coverage. The sector has remained secure, supported by higher laws and digital improvements.

IMF additionally analysed cyber safety frameworks within the banking sector, monetary market infrastructure (FMI), crucial info methods, and different related gamers within the securities market.

It discovered that Indian authorities have superior cybersecurity threat oversight, particularly for banks.

Nevertheless, it said that in depth cybersecurity disaster simulations and stress checks for banks may very well be expanded for cross-sectoral and market-wide occasions to additional strengthen cybersecurity resilience.

The suggestions within the case of India FSAP are primarily focussed on bringing about additional enhancements within the construction and functioning of the monetary system and most of the detailed suggestions are in conformity with the involved authorities’/ regulators’ personal developmental plans.