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FINANCIAL STABILITY REPORT
ANALYSISy It tells us about the health of Indias financial sector
y The first report was published in March 2010
y RBI issues this report bi-annually i.e. June & Decembery FSR holistically assess the financial sector from risk
perspective
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HIGHLIGHTS OF JUNE
GLOBA LMACR OECONOMIC DEVELOPMENT
y Global risk scenario
y Increasing uncertainty
DOMESTIC MACR OECONOMIC DEVELOPMENT
y
Downside risk to GDP growthy Inflation
y Management of government expenditure
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FIN A NCIA LMARKET
y Stress free financial market
y Liquidity in system
y Government bond yield
FIN A NCIA L INSTITUTIONy W ell capitalized financial sector
y Reliance on market borrowing
y Robust growth in credit warrant
y Growth of insurance sector
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R EGUL ATORY ENV IR OMENT
y Amendment to banking legislationy Challenges under Basel-2 & Basel-3y Importance of NBFC
FIN A NCIA L MARKET INFRASTRUCTUR E
y Robust operational performancey Integration & interrelationship amoung various
segmenty
Management of liquidity risk
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HIGHLIGHTS OF DECEMBERy Domestic financial system remained robust
y Macro financial stress test
y Financial stability map & indicator
MACR OECONOMIC ENV IR OMENT
y Deceleration of domestic demand component
y Inflation remain elevated
y Increase in risk of external sector
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FIN A NCIA LMARKET
y Market remain volatile
y Depreciation creating external deficit
y Monitoring of equity market microstructure
FIN A NCIA L INSTITUTIONS SOUNDNESS &R ESILIENCE
y Deterioration in financial indicator
y Resilience of urban bank & NBFCs
y Stability of financial market
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P AYMENT & SETTLEMENT SYSTEM
y RTGS system
CR OSS-SECTION A L EXPOSUR E
y Banking system distinctly tiered
DISTR ESS DEPENDENCIES BET WEEN BA NKS
y Assessment of distress dependencies
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MACROECONOMIC OUTLOOKy Inflation risk have stayed & high risk likely to
persist during Q2 of 2011-12
y Moderation in inflation is expectedy Risk factor adversely impact aggregate demand
y Continuation of anti-inflationary stance
y
Marginal moderation in economic activity
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INFL ATION STAYS WHILE GR OW TH MODERATES
y Inf lation stayed high since December 2010 due to
cost-push & demand side factory Growth in tune with trend
y Risk in growth sustainability
y
Slowdown in overall economic activity y Rising input & borrowing cost
y Lower optimism & increasing raw material costaffect profit margin
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y The three important factors that affect growth &inflation are-
Significant departure of monsoon Collapse of global commodity price bubble Euro zone debt crisis
yDecline in Industrial activity
y Uncertainty of exportsy Growth of corporate salesy Increase in wages
y Breaking internal dynamicsy Controlling inflation
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