Mumbai: Despite global uncertainties and banking sector issues, the Indian economy stands out in terms of growth as compared to other emerging markets, a report released by RBI on Tuesday said. “Being a net commodity importer and with efforts to improve the ‘ease of doing business’, India at this juncture stands out amongst the emerging markets cohort in terms of growth,” RBI’s Financial Stability Report (FSR) said.
It added the country’s financial system remains stable, even as the banking sector is facing significant challenges. The report highlighted the need to bolster gross fixed capital formation while maintaining robu-st trends in consumption to sustain higher levels of growth. The sharp decline in global crude oil prices since the third quarter of fiscal 2015 has provided terms of trade benefits leading to relatively low-er imports and reduced external vulnerabilities.
The report, however, said the gross non-performing assets of the banks can rise to as high as 9.3 per cent in 2016-17 after hitting 7.6 per cent in March 2016. “If the macro scenarios deteriorate in the future, the GNPA ratio may further increase to 9.3 per cent by March 2017 under at severe stress scenario,” it said. While the report claimed that rise in home prices “moderated significantly” in 2015-16 and there is no threat of any systemic risk from the housing sector with the gross NPAs amongst retail loans being contained. Gross non-performing asset (GNPA) ratio in the retail housing segment is around 1.3 per cent.
In his foreword to the FSR, RBI governor Raghuram Rajan said banks’ asset quality stress has to be dealt first in order to revive the credit growth. “The stress in the banking sector, which mirrors the stress in the corporate sector, has to be dealt with in order to revive credit growth,” he said. “We need to deal with legacy issues that hold back growth and bring chan-ges to enhance the efficacy of our business processes, he said.
