India’s financial sector facing considerable challenges: IMF

Tribune News Service

New Delhi, December 21

India’s 2017 Financial System Stability Assessment (FSSA) by the IMF and World Bank has said the financial sector is facing considerable challenges and high NPAs and slow deleveraging and repair of corporate balance sheets are testing the resilience of the banking system.

The IMF and WB today released the FSSA and Financial Sector Assessment (FSA), respectively. The programme undertakes a comprehensive and indepth analysis of a country’s financial sector. 

The IMF said since the 2011 FSAP, India has recorded strong growth in both economic activity and financial assets, yet, the financial sector is facing considerable challenges, and economic growth has recently slowed down. 

The report said that India’s key banks appear resilient, but the system is subject to considerable vulnerabilities. Stress tests show that the while largest banks are sufficiently capitalised and profitable to withstand a deterioration in economic conditions, a group of public sector banks (PSBs) are highly vulnerable to further declines in asset quality and higher provisioning needs.