India Financial Sector Assessment
Against the backdrop of important structural reforms and terms of trade gains, India recorded strong growth in recent years in both economic activity and financial assets. Increased diversification, commercial orientation, and technology-driven inc...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/704231513810603813/India-Financial-Sector-Assessment http://hdl.handle.net/10986/29113 |
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okr-10986-291132021-09-10T09:42:49Z India Financial Sector Assessment World Bank International Monetary Fund FINANCIAL INSTITUTIONS MACROFINANCIAL RISKS BANK RESILIENCE FINANCIAL OVERSIGHT REGULATION FINANCIAL MARKET INFRASTRUCTURE CRISIS MANAGEMENT STATE-OWNED ENTERPRISES STATE BANKS FINANCIAL INCLUSION DIGITALIZATION CORPORATE BONDS BANKING SYSTEM Against the backdrop of important structural reforms and terms of trade gains, India recorded strong growth in recent years in both economic activity and financial assets. Increased diversification, commercial orientation, and technology-driven inclusion have supported growth in the financial industry, backed by improved legal, regulatory, and supervisory frameworks. Yet, the financial sector is grappling with significant challenges, and growth has recently slowed. Highnonperforming assets (NPAs) and slow deleveraging and repair of corporate balance sheets are testing the resilience of the banking system and holding back investment and growth. The largest banks appear sufficiently capitalized and profitable to withstand a deterioration in economic conditions, reflecting relatively solid capital buffers and, particularly for the private banks, core profitability that is strong enough to cover credit costs. There is a group of public sector banks (PSBs) where vulnerabilities seem highest; these banks would require additional capital under the baseline scenario and some would almost deplete capital buffers due to growing NPAs and provisioning needs if stress intensifies. Capital needs are manageable in the aggregate, ranging between 0.75 percent of GDP in the baseline to 1.5 percent of GDP in the severe adverse scenario. Much needed efforts are now underway to accelerate the process of NPA resolution. The various debt restructuring schemes introduced over the past years have had limited uptake, and agreement among lenders has been hampered by their uneven capacity to withstand losses. The RBI was recently empowered to direct restructuring cases to the insolvency process, with the potential for insolvency used to exert pressure on creditors to finalize debt restructuring agreements outside the court process. This new approach shows promise of further progress, but more needs to be done to ensure that the debt restructuring process gains traction: banks need additional provisions and capital buffers; corporates need to undergo sustainable financial and operational restructuring; and infrastructure for debt restructuring needs to be improved. 2017-12-29T16:31:19Z 2017-12-29T16:31:19Z 2017-10 Report http://documents.worldbank.org/curated/en/704231513810603813/India-Financial-Sector-Assessment http://hdl.handle.net/10986/29113 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Financial Sector Assessment Program South Asia India |
| repository_type |
Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
FINANCIAL INSTITUTIONS MACROFINANCIAL RISKS BANK RESILIENCE FINANCIAL OVERSIGHT REGULATION FINANCIAL MARKET INFRASTRUCTURE CRISIS MANAGEMENT STATE-OWNED ENTERPRISES STATE BANKS FINANCIAL INCLUSION DIGITALIZATION CORPORATE BONDS BANKING SYSTEM |
| spellingShingle |
FINANCIAL INSTITUTIONS MACROFINANCIAL RISKS BANK RESILIENCE FINANCIAL OVERSIGHT REGULATION FINANCIAL MARKET INFRASTRUCTURE CRISIS MANAGEMENT STATE-OWNED ENTERPRISES STATE BANKS FINANCIAL INCLUSION DIGITALIZATION CORPORATE BONDS BANKING SYSTEM World Bank International Monetary Fund India Financial Sector Assessment |
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South Asia India |
| description |
Against the backdrop of important
structural reforms and terms of trade gains, India recorded
strong growth in recent years in both economic activity and
financial assets. Increased diversification, commercial
orientation, and technology-driven inclusion have supported
growth in the financial industry, backed by improved legal,
regulatory, and supervisory frameworks. Yet, the financial
sector is grappling with significant challenges, and growth
has recently slowed. Highnonperforming assets (NPAs) and
slow deleveraging and repair of corporate balance sheets are
testing the resilience of the banking system and holding
back investment and growth. The largest banks appear
sufficiently capitalized and profitable to withstand a
deterioration in economic conditions, reflecting relatively
solid capital buffers and, particularly for the private
banks, core profitability that is strong enough to cover
credit costs. There is a group of public sector banks (PSBs)
where vulnerabilities seem highest; these banks would
require additional capital under the baseline scenario and
some would almost deplete capital buffers due to growing
NPAs and provisioning needs if stress intensifies. Capital
needs are manageable in the aggregate, ranging between 0.75
percent of GDP in the baseline to 1.5 percent of GDP in the
severe adverse scenario. Much needed efforts are now
underway to accelerate the process of NPA resolution. The
various debt restructuring schemes introduced over the past
years have had limited uptake, and agreement among lenders
has been hampered by their uneven capacity to withstand
losses. The RBI was recently empowered to direct
restructuring cases to the insolvency process, with the
potential for insolvency used to exert pressure on creditors
to finalize debt restructuring agreements outside the court
process. This new approach shows promise of further
progress, but more needs to be done to ensure that the debt
restructuring process gains traction: banks need additional
provisions and capital buffers; corporates need to undergo
sustainable financial and operational restructuring; and
infrastructure for debt restructuring needs to be improved. |
| format |
Report |
| author |
World Bank International Monetary Fund |
| author_facet |
World Bank International Monetary Fund |
| author_sort |
World Bank |
| title |
India Financial Sector Assessment |
| title_short |
India Financial Sector Assessment |
| title_full |
India Financial Sector Assessment |
| title_fullStr |
India Financial Sector Assessment |
| title_full_unstemmed |
India Financial Sector Assessment |
| title_sort |
india financial sector assessment |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/704231513810603813/India-Financial-Sector-Assessment http://hdl.handle.net/10986/29113 |
| _version_ |
1764468528313794560 |