The RBI released its bi-annual Financial Stability Report highlighting the resilience of the banking sector against stress tests while identifying risks in the insurance and cybersecurity domains
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Why in news
The RBI released its bi-annual Financial Stability Report highlighting the resilience of the banking sector against stress tests while identifying risks in the insurance and cybersecurity domains.
Background
The RBI's Financial Stability Report indicates that while banks passed stress tests, gross non-performing assets (GNPA) could rise under adverse scenarios. The report specifically flagged rising policyholder grievances and cost structure divergence in the insurance sector.
Facts for Prelims
- BodyRBI: The central bank of India responsible for maintaining monetary stability and issuing the Financial Stability Report.
- FactGross Non-Performing Assets (GNPA): A key metric used by RBI to assess the quality of bank assets.
- S&TCybersecurity: Identified by RBI as a primary systemic risk to financial stability in the current reporting period.
For Mains
Q. Analyze the systemic risks posed by interconnectedness in the financial sector and the role of the RBI in ensuring financial stability amidst rising cybersecurity threats.
Dimensions to cover in your answer
- Contagion risk: Rapid transmission of shocks across interconnected financial institutions due to high inter-dependency.
- Cyber-resilience bottleneck: Vulnerability of core banking infrastructure to sophisticated cyber-attacks affecting systemic liquidity.
Keywords: Financial Stability · Systemic Risk · Stress Testing · Non-Performing Assets · Contagion Effect
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