RBI Financial Stability Report (FSR) 2023

The Reserve Bank of India (RBI) released its Financial Stability Report (FSR) 2023 in December 2023. The report highlights the resilience of India’s domestic financial system.

FSR (biannual report) is based on the assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC).

Financial Stability Report (FSR) 2023 Highlights:

FSR highlighted that resilience of the non-banking financial companies (NBFCs) sector has improved.

• Capital-to-risk weighted assets ratio (CRAR) has improved.
• Gross Non-Performing Asset (GNPA) ratio is on downward trajectory.
• Credit growth in the post-pandemic period has accelerated.

The FSR also states that the Non-Banking Financial Companies (NBFCs) industry has shown indications of improvement. As of September 2023, their CRAR was 27.6%, their GNPA ratio was 4.6%, and their return on assets (RoA) was 2.9%.

About NBFC:

• It is a company registered under the Companies Act, 1956.
  ♦ These are engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities etc.
• It does not include institutions with principal business as agriculture activity, industrial activity, trading and purchase or sale of immovable properties.
• Regulation: Primarily, NBFCs are regulated and governed by RBI.
• However, some NBFCs are regulated by SEBI, IRDAI etc.

NBFC Difference  vs Banks

NBFCs activities are akin to that of banks; however there are a few differences like NBFCs:

• Cannot accept demand deposits.
• Do not form part of payment and settlement system and cannot issue cheques drawn on itself.
• Deposit insurance facility is not available to depositors of NBFCs.

 

Significance of NBFC:

It play key role in bridging the gap between traditional banks and customers, especially in areas where the reach of traditional banks is limited.

About Financial Stability and Development Council (FSDC)

• It aims to strengthen and institutionalizes the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
• Finance Minister is ex-officio chairman of FSDC.
• It was set up in 2010.

Also Read: Global Debt of Developing Countries