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The International Monetary Fund (IMF) has released the latest Financial System Stability Assessment (FSSA) report for India, based on the 2024 Financial Sector Assessment Program (FSAP) conducted jointly with the World Bank. The report evaluates India’s financial system across banks, non-banking financial companies (NBFCs), insurance, and securities markets, highlighting resilience, regulatory improvements, and areas for further strengthening.
According to the report, India’s financial system has become more resilient and diverse since the last FSAP in 2017. Banks and NBFCs maintain sufficient capital to withstand moderate stress scenarios, while the insurance sector remains stable, aided by stronger regulations and digital innovations. The report notes that public digital infrastructures have significantly boosted retail financial inclusion, and recommended enhanced legal, tax, and informational frameworks to further improve credit access to underserved sectors.
IMF acknowledged India’s progress in cybersecurity oversight, particularly in the banking sector, financial market infrastructures (FMI), and critical information systems. While the country has advanced risk monitoring frameworks, the report emphasizes the need for expanded cybersecurity stress testing and crisis simulations across sectors to strengthen system-wide resilience.
The report also highlighted emerging risks, including cybersecurity threats, climate change, and potential system-wide contagion, recommending better data coverage for mapping climate-related financial risks and ongoing vigilance against cyber threats in financial institutions.
Other key findings include:
Systematic prudential regulations for NBFCs, including bank-like Liquidity Coverage Ratios (LCR) for large NBFCs.
Strengthened regulatory frameworks in securities markets, including swing pricing and liquidity requirements for bond mutual funds.
Recommendations to further enhance credit risk management, group supervision, and risk-based solvency frameworks in banks and insurance.
The IMF emphasized that financial stability should remain the primary objective of macroprudential authorities, and that India’s phased adoption of international best practices is aligned with domestic economic conditions.
The FSSA report underscores India’s commitment to a resilient, digitally empowered, and cyber-secure financial system, while recommending additional measures to mitigate operational, cyber, and climate-related risks.
[RBI]