The central bank said the economy was supported by an improvement in rural consumption, a pick-up in government consumption and investment and strong services exports.
The Reserve Bank has released the December 2024 issue of the Financial Stability Report (FSR). The report was prepared by the Sub-Committee of the Financial Stability and Development Council (FSDC) on Resilience of the Indian Financial System and Risks to Financial Stability.
Reflects collective assessment.
“Scheduled Commercial Banks (SCBs) are in a good position due to growth in profits, decline in non-performing assets, adequate capital and cash reserves,” it said. Return on assets (ROA) and return on equity (ROE) are at decade highs, while the gross non-performing assets (GNPA) ratio has fallen to a multi-year low.”
The report also said that extensive stress testing shows that most SCBs have substantial excess capital in the event of an adverse situation.
On the economy, the FSR said gross domestic product (GDP) growth slowed to six per cent during the first half of 2024-25 from 8.2 per cent and 8.1 per cent in the first and second half of 2023-24, respectively.
“Despite this recent slowdown, structural growth drivers remain intact,” the RBI said. “GDP growth is expected to improve in the third and fourth quarters of 2024-25 due to domestic drivers, mainly public consumption and investment and strong services exports.”
Regarding inflation, the report said that due to bumper Kharif crop and Rabi crop, food prices are expected to soften in future. However, risks remain due to increasing trends of extreme weather events.
Geopolitical conflicts could put pressure on global supply chains and commodity prices.