RBI Financial Stability Report, December 2024

Question 1

the Reserve Bank of India (RBI) released the ______ publication of the ‘Financial Stability Report (FSR), December 2024’ which shows the joint assessment of the sub-committee of the
_______ of the potential risks to financial stability and the resilience of the Indian financial system.

Answer 1

half-yearly ; Financial Stability and Development Council (FSDC)

Question 2

The report covered both international and domestic economic conditions, the performance of
Scheduled Commercial Banks (SCBs) and Non-Banking Financial Companies (NBFCs), and the _____ of the insurance sector.
* The report observed that SCBs has been strengthened by strong profitability, decreasing Non-Performing Assets (NPAs) and sufficient capital and liquidity buffers.

Answer 2

solvency

Question 3

The FSR is a biannual report released by the RBI in ____ and ____.
* The report is prepared by the _____ and is a joint evaluation by the Sub-Committee of the Financial Stability and Development Council
(FSDC).
* The RBI published its first FSR in 2010.

Answer 3

June and
December ; Financial Stability Unit (FSU)

The report taking inputs from financial sector regulators i.e.
RBI, Securities and Exchange Board of India (SEBI), Insurance
Regulatory and Development Authority of India (IRDAI), Pension
Fund Regulatory and Development Authority (PFRDA) and Ministry of Finance(MoF).

The report assesses the financial system’s resilience and the
risks to financial stability

Question 4

As per the RBI’s FSR, the Indian economy is demonstrating strength and resilience thus it has projected that India’s Gross Domestic Product (GDP) growth rate will be at ____ in the Financial Year 2024-25(FY25).

Answer 4

6.6%

-The report has outlined this growth will be mainly driven by a resurgence in rural consumption,
an increase in government spending and investment, robust services exports, declining Non-Performing Assets (NPAs) and adequate capital and liquidity buffers.

Question 5

The report highlighted that India’s GDP moderated to ____ during the 1st half (H1:April to September) of FY25 from the 8.2% and 8.1% growth registered during H1 and H2 of FY24, respectively. The report noted that despite this latest deceleration, India’s structural growth drivers’ remains intact.

• Central government’s debt-to-GDP ratio is expected to decrease to _____by 2024-25 from 62.7% (2020-21).

-States’ outstanding liabilities are projected to decline from 31% to _____ during the
same period

Answer 5

6% ; 56.8% ; 28.8%

Question 6

The report highlighted that unhedged External Commercial Borrowings (ECBs) reached at USD 65.49 billion, nearly____ of the total debt increased under this avenue.
* It further mentioned that increase in foreign currency borrowings by NBFCs could potentially
pose currency risks to the extent they are unhedged.

Answer 6

34.4%

Question 7

The report highlighted that new accretion of NPAs in the retail loan portfolios was led by slippages in the
unsecured loan book, at _____ as of September 30, 2024.

Answer 7

51.9%

Question 8

As per the report, Liquidity Coverage Ratio(LCR) of the banking system declined from 135.7% (in September 2023) to _____ (in September 2024). This decrease is mainly attributed by an increase in net cash outflows, which is further influenced by an increase in less stable sources of funding

Answer 8

128.5%

Question 9

The report underscored that the overall performance of listed Private Non-Financial Companies (NFCs)
has remained stable in 2024 as sales growth Year-on-Year (Y-o-Y) remained at ____ in H1 of FY25 as in H2
of FY24.

Answer 9

6.2%

Question 10

Monetary penalties imposed by the RBI on regulated entities from June to November 2024 have decreased by _____to Rs 30 crore as against Rs 57 crore in the same period a year ago.

Answer 10

47%
- Of the total 153 monetary penalties, the central bank has imposed fines on 5 Public Sector Banks(PSBs) and five private sector banks. It has penalised 3 foreign banks, 2 Regional Rural Banks(RRBs), 116 Cooperative Banks(CBs), 14 Non-Banking Financial Companies (NBFCs), and
eight housing financiers.
* NBFCs have healthier balance sheets

Question 11

As of December 23, 2024, the liquidity deficit stood at _____, driven by tax outflows and the central bank’s foreign exchange interventions

Answer 11

2.43 trillion rupees

Question 13

As per the RBI’s FSR, the asset quality of SCBs improved further with their Gross Non-Performing Assets(GNPA) ratio declined to 12-year low of _____ in September 2024.

Answer 13

2.6%

• The stress test scenario has further projected that GNPA ratio could possibly increase to 3% by
  the end of March 2026, for 46 banks under the baseline scenario, and 5% and 5.35%, respectively, under two different high risk scenarios.
• While, the Net NPA (NNPA) ratio of the SCBs continue to be at around 0.6%.

Question 13

Similarly, the report has projected that the Capital Adequacy Ratio (CAR) could decrease to 16.5% in March 2026 in the baseline scenario and decrease to 15.7% and 14.3% in two different high risk scenarios. CAR stood at _____ in September 2024.

Answer 13

16.6%

Question 14

The Provisioning Coverage Ratio (PCR) of SCBs increased further to _____ in September 2024, mainly due
to the proactive provisioning by PSBs.

Answer 14

77%

Question 15

The report showed that at the starting of the 2014, ______ out of 33 public and private sector banks examined under the ‘Key Risk Indicators (KRIs)’ framework were found deficient in 3 or more KRIs.

Answer 15

three-fourths (75%)

Question 16

The report noted that only 3 banks accounting ____of total banking system assets have been found to be
deficient in 3 KRIs in September 2024, despite sector-wide improvements.

Answer 16

15%

Question 17

As per the report, loan sector registered the growth of ____ 3-Month Moving Average(3-MMA), in September 2024, investments reported lower growth of 7.6% 3-MMA, this resulted into the combined assets
(loan +investments) growth of 11.2% (3-MMA), same as deposit growth of 11.2% (3-MMA).

Answer 17

13.4%

Question 18

The report noted that increase in bank profits as well as increase in equity capital has been a significant additional source of funds, which contributed to an increase in _____.

Answer 18

loan-deposit ratio.
* Also, it observed that bank reliance on borrowings for bridging the financing gap increased as loan growth outpaced deposit growth leading to an increase in loan-deposit ratio

Question 19

About KRI Framework:

Answer 19

i.This framework was formulated by the International Monetary Fund (IMF), which measures vulnerability
of banks by merging the Capital adequacy, Asset quality, Management, Earnings, Liquidity, and
Systems(CAMELS) supervisory framework with market-based metrics and flags institutions based on
specified thresholds that differ by jurisdictions.
ii.The framework evaluates the bank’s overall risk based on 5 key indicators: capital adequacy, asset quality,
profits, liquidity and market metrics.

Question 20

GNPA NNPA CAR PCR

Answer 20

i.GNPA is the amount of the debts an establishment or people owe to the organization that has failed to
collect their contractual obligations.
ii.NNPA is the remaining amount after the bank has deducted the provision for doubtful and unpaid debts
from the total GNPA.
iii.CAR, also known as Capital to Risk Assets Ratio (CRAR), is the ratio of a bank’s capital in relation to its
risk weighted assets and current liabilities.
iv.PCR is the percentage of funds that a bank sets aside for covering losses due to bad debts

Question 21

Financial Stability Development Council

Answer 21

i.The FSDC is a non-statutory apex council under the Ministry of Finance(MoF).The Council is chaired by the
Union Finance Minister.
ii.The Raghuram Rajan Committee (2008) on financial sector reforms had first proposed setting up of FSDC.

Question 22

about reserve bank of india

Answer 22

Governor- Sanjay Malhotra (26th Governor of RBI)
Headquarter- Mumbai, Maharashtra
Established-1 April, 1935