Financial Stability Report December 2024
Source: The Hindu
GS III: Economy
Overview
- News in Brief
- Key Highlights of the report
- Financial Stability and Development Council (FSDC)
Why in the News?
Reserve Bank has released the December 2024 issue of the Financial Stability Report (FSR).
News in Brief
- This reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability.
- Financial Stability Report (FSR) is published by RBI bi-annually.
- The report highlights several aspects of the Indian and global financial.
Key Highlights of the report
- Debt-to-GDP ratio of the central government is expected to decrease from 62.7% in 2020-21 to 56.8% by 2024-25.
- Outstanding liabilities of the state are projected to decline from 31% to 28.8%.
- Gross domestic product (GDP) is projected to grow at 6.6 % in 2024-25, aided by a revival in rural consumption, Government spending, & services exports.
- Gross Non-performing Asset (GNPA) ratio could increase from 2.6% in September 2024 to 3% by March 2026.
- Financial health of Scheduled Commercial Banks (SCBs) is ensured by robust profitability and sufficient capital and liquidity reserves.
- The Insurance Sector demonstrates its stability through a strong solvency ratio.
- The Financial Stability Report (FSR) underscores issues in specific areas, including microfinance and consumer credit, which demand vigilant oversight.
Financial Stability and Development Council (FSDC)
Financial Stability and Development Council (FSDC) is a non-statutory apex body established by the Government of India in December 2010 under the Ministry of Finance. It was first proposed by the Raghuram Rajan Committee on financial sector reforms in 2008.
Key Features:
- Chairperson: The Union Finance Minister chairs the council.
- Members: The council includes the heads of all financial sector regulators (RBI, SEBI, IRDA, PFRDA, and FMC), the Finance Secretary, the Secretary of the Department of Economic Affairs, the Secretary of the Department of Financial Services, and the Chief Economic Adviser.
- Sub-committee: A sub-committee headed by the Governor of the Reserve Bank of India (RBI) focuses on financial sector development and stability.
Functions:
- Financial Stability: The council aims to strengthen and institutionalize the mechanism for maintaining financial stability.
- Inter-regulatory Coordination: It enhances coordination among various financial sector regulators.
- Financial Sector Development: It promotes the development of the financial sector.
- Macro-prudential Supervision: It monitors the macro-prudential supervision of the economy, including the functioning of large financial conglomerates.
The FSDC plays a crucial role in addressing issues related to financial stability and development, making it an important topic for UPSC aspirants, especially in the context of the Indian economy and governance.
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