The Reserve Bank of India (RBI) recognizes that global challenges could affect the local economy and is monitoring the situation along with other financial regulators, governor Shaktikanta Das said.
"The international economic order stands challenged; financial markets are in turmoil due to monetary tightening in most parts of the world; food and energy supplies and prices are under strain; debt distress is staring at many emerging markets and developing economies; and every economy is grappling with multiple challenges," Das said in the foreword to RBI's half-yearly Financial Stability Report published on Thursday.
Das said the Indian economy is a picture of resilience amid such challenges.
In its stress analysis, RBI found that banking sector bad loans could slightly decline to 4.9% of total advances by September 2023 under the baseline stress scenario, down 10 basis points (bps) from September this year. This, RBI said, is based on the assumption of no further regulatory reliefs as well as not accounting for the potential impact of stressed asset purchases by India's bad bank National Asset Reconstruction Co. Ltd.
If the macroeconomic environment worsens to a medium or severe stress scenario, the gross NPA ratio may rise to 5.8% and 7.8%, respectively, it said.
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