Reserve Bank of India (RBI) Governor Sanjay Malhotra (file photo)
| Photo Credit:
REUTERS/FRANCIS MASCARENHAS
While India faces uncertainties arising from the West Asia crisis, trade policy, and cyber risks, the Indian economy and the banking sector is very well positioned to meet these challenges, said RBI Governor Sanjay Malhotra.In reply to a question on the risks the Indian economy and the financial system could face over the next few years, Malhotra said: ”I think there are quite a few challenges. Public debt levels in advanced economies are high. There is growing interconnectedness of NBFCs and unregulated space outside, not so much in India.”“Equity valuations are elevated and if there are corrections, all of these could have spill-over effects.”Answering questions from FICCI members at the FICCI-IBA Annual Banking Conference, the Governor noted that the country is facing uncertainties, not only geopolitical arising from the West Asia crisis, but also those related to global trade policy and tariffs. He also flagged cyber risks.“But I must mention that the Indian economy and the Indian banking sector are very well positioned to meet these risks, meet these challenges...The banking sector is very robust, with CRAR (capital to risk-weighted assets ratio) of, I think, 17-18 per cent. GNPAs (gross non-performing assets) is less than 2 per cent and Net NPA is less than 0.5 per cent,” he said.Further, banks have strong liquidity coverage ratio (the ratio of stock of high-quality liquid assets to the total net cash outflow over the next 30 calendar days), good profitability, and price to book also is increasing.Malhotra emphasised that the macroeconomic fundamentals of the Indian economy are very strong, with growth being resilient, inflation more or less under check, and healthy balance sheets of financial and non-financial firms. The external sector too is quite robust.The Governor noted that the government and all stakeholders not only met every shock, be it the Ukraine crisis or COVID, but have come out of it much strongerSo, while this (West Asia) shock may temper India’s growth for the short run, but it’s very good for the long term because of the various measures that the government and other stakeholders are taking.“You look at the measures taken for diversification of our supply chains for energy, fertilizers and other critical elements. Look at how we are trying to reduce our energy intensity through use of ethanol blending, EVs. etc....the number of FTAs the government has signed...the measures for capital flows that the government has taken. So, all these things, I think, bode very well for our economy going forward to meet these risks and challenges,” he said.Published on August 11, 2026
