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‘Indian economy robust’

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India’s financial system is robust despite the rise in global risks and domestic macro-economic conditions, the Reserve Bank of India (RBI) said Thursday.

"The financial system of the country remains robust despite increase in risks to stability primarily due to global risks and domestic macroeconomic conditions," the RBI said in its Financial Stability Report (FSR).

It said that risks to domestic growth were accentuated by fiscal and external sector imbalances and added that though inflationary pressures had moderated risks remained.

The report also said banks remained resilient to credit, market and liquidity risks and would be able to withstand macroeconomic shocks, given their comfortable capital adequacy positions.

Asset quality concerns, however, persist and liquidity pressures have intensified, it added.

"Credit deposit growth in the banking sector have decelerated while banks’ reliance on borrowed funds has increased. Banks in India will migrate to Basel III from a position of relative strength but there could be challenges in the form of higher cost of capital," said RBI, suggesting a closer monitoring of the banks.

 

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