India: Financial System Stability Assessment-Press Release and Statement by the Executive Director for India

IMF Staff Country Reports, December 21, 2017

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Discusses findings of the Financial System Stability Assessment for India.
Since the 2011 Financial Sector Assessment Program, India has recorded strong growth in both economic activity and financial assets, supported by important structural reforms and terms of trade gains.
Increased diversification, commercial orientation, and technology-driven inclusion have supported growth in the financial industry, backed by improved legal, regulatory, and supervisory frameworks.
Economic growth has recently slowed down, while the financial sector faces considerable challenges.

High nonperforming assets (NPAs) and slow deleveraging and repair of corporate balance sheets are testing the resilience of the banking system.
Elevated NPAs and balance-sheet repair problems are holding back investment and growth.
Authorities have been pursuing policies to accelerate the process of NPA resolution.

Structural strengths:
- Diversification of financial products and institutions.
- Greater commercial orientation of financial entities.
- Technology-driven inclusion expanding access to financial services.
- Improved legal, regulatory, and supervisory frameworks since 2011 FSAP.
Ongoing challenges:
- High NPAs in the banking system.
- Slow deleveraging of corporate balance sheets.
- Slower recent economic growth complicating financial-stability dynamics.

Authorities are pursuing policies to accelerate NPA resolution.
Emphasis on measures that support repair of corporate balance sheets and speed up deleveraging to restore bank resilience and support investment and growth.