Financial Stability Report


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Why in news?

  • Reserve Bank of India (RBI) released its bi-annual Financial Stability Report (FSR).

About Financial Stability report:

  • The FSR which is published biannually reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC - headed by the Governor of RBI) on risks to financial stability and the resilience of the financial system.
  • The Report also discusses issues relating to development and regulation of the financial sector.

Highlights of FSR 2022:

  • On NPA:
    • The asset quality of the banking system has improved with the gross non-performing assets (GNPA) ratio declining from 7.4 per cent in March 2021 to a six-year low of 5.9 per cent in March 2022.
    • Reason:
      • Banks have reduced the GNPA ratio through recoveries, write-offs and reduction in slippages.
  • Provisioning coverage ratio (PCR):
    • It improved to70. 9 per cent in March 2022 from 67.6 per cent a year ago.
      • PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster.
  • Buffer to withstand shocks:
    • According to the RBI’s report, banks, as well as non-banking financial institutions, have sufficient capital buffers to withstand shocks, and support from it during Covid helped banks arrest their GNPA ratio.


  • Global spillover:
    • US rate increase and the threat of recession; Ukraine crisis; Oil price rise.
  • Risks of Fintech:
    • The report cautioned that the advent of fintech has exposed the banking system to new risks such as safeguarding of data privacy, cyber security, consumer protection, competition and compliance with AML (anti-money laundering) policies.
    • The Indian fintech industry —is amongst the fastest growing Fintech markets in the world.
    • India has the highest fintech adoption rate globally (87 per cent), receiving funding of $8.53 billion during 2021-22.
  • Risk from BigTechs (big technology firms):
    • They can scale up rapidly and pose risk to financial stability, which can arise from increased disintermediation of incumbent institutions.
    • Moreover, complex intertwined operational linkages between BigTech firms and financial institutions could lead to concentration and contagion risks and issues relating to potential anti-competitive behaviour.
  • Cryptos a ‘clear danger’:
    • RBI Governor termed cryptocurrencies as a “clear danger” and anything that derives value based on make-believe, without any underlying, is just “speculation under a sophisticated name”.


Financial Stability Report is published by

(a) NITI Aayog

(b) Reserve Bank of India

(c) Department for Promotion of Industry and Internal Trade

(d) SEBI