Among all the bad news of slow growth, high inflation, high fiscal deficit, depreciating rupee and weak corporate performance, there's one good news on the Banking front.

RBI, in its Financial Stability Report, concludes that stress tests of the credit risk exposure of banks reveal a reasonably comfortable position and resilience of banks to withstand unexpected deterioration in credit quality.

See the RBI Financial Stability Report

You may also like to read the basics of the Indian Financial System and Financial Markets

Niranjan Rajadhyaksha reviews the RBI report and says that the new Financial Stability Report provides a comforting conclusion, though it warns that economic and financial risks are rising. See Article. Excerpts:

However, a macroeconomic stability map provided by the central bank shows that six out of seven types of risk have increased: global risk, external, growth, inflation, fiscal and corporate. Only the household sector shows a reduction in risk levels.

The central bank has flagged several micro concerns as well: the decline in bank capital adequacy, rising bad loans, the need to carefully monitor bank exposures to power and telecom companies, the risk from underwater convertible bonds, the difficulty in getting dollar funding and unhedged corporate exposures, for example. Yet, the Indian financial system is expected to be robust even in case a new global shock hits us next year.

You may also like to read the basics of the Indian Financial System and Financial Markets

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