According to IMF report, However India has done a remarkable progress toward developing a stable financial system; its financial sector still confronts longstanding impediments to its ability to support growth as new challenges to achieve its stability.
In a report produced by International Monetary Fund in a Financial System Stability Assessment Update for India, it has been said that since liberalisation in the early 1990s, the system's growth and increasing commercial orientation have been accompanied by steady improvements in the legal, regulatory, and supervisory framework.
The report says that the Indian economy and its financial system weathered the global financial crisis well-due to strong balance sheets and profitability entering the crisis, a robust regulatory framework, and timely actions to counter pressures on liquidity, the supply of credit, and aggregate demand.
Noting that the system is becoming more complex, with interlinkages across institutions and borders, the update on assessment undertaken in June and October 2011 suggests the main near-term risks to the financial system are a worsening of bank asset quality and renewed pressures on systemic liquidity.
Report mentioned that however, stress tests did not reveal near-term stability concerns, suggesting the banking system would be resilient to a range of adverse shocks.
Further steps are also needed to promote deeper fixed income markets, including a prudent reduction in banks' minimum statutory holdings of government bonds in line with evolving international liquidity requirements, it said.
These would support liquidity in secondary markets and the development of a yield curve; and upgrading the corporate insolvency framework
(With inputs from IANS)
|
|
Comments:
