'Global spillovers, financial market, general risks increased'

MUMBAI: The Reserve Bank of India's latest Systemic Risk Survey (SRS) showed that global spillovers, financial market and general risks have increased, while macroeconomic risks have moderated.

The survey also showed respondents' confidence in the Indian financial system further improved with 93.6 per cent of them remaining fairly or highly confident of the stability of the Indian financial system.

No change is perceived in institutional risks. Monetary tightening in advanced economies, tightening of financial conditions, geopolitical risks, global growth uncertainty and growing risks from private cryptocurrencies and climate change are cited as the major contributors to the rise in the global, financial market and general risks.

The majority of the respondents saw further improvement in credit prospects for the Indian economy and remained confident about the stability of the Indian banking sector, according to RBI survey which was released on Thursday.

Nearly ninety per cent of the respondents assessed that the prospects of the Indian banking sector are likely to improve or remain unchanged over a one-year horizon. The 23rd round of the RBI's Systemic Risk Survey was conducted in November 2022 to solicit the perceptions of experts, including market participants and academicians, on major risks faced by the Indian financial system.

The survey also captured respondents' perception on risk to financial stability from external sector developments; segments of the Indian financial system -- likely to be impacted by aggressive monetary policy tightening by advanced economies and their views on the likelihood of a global recession in 2023.

More than half of the respondents assessed that the prospects of the Indian banking sector over a one-year horizon have improved.

According to the survey, confidence in the stability of the global financial system marginally declined during the last six months. In contrast, confidence in the Indian financial system further improved with 93.6 per cent of the respondents remaining fairly or highly confident of the stability of the Indian financial system.

Whereas, as much as 52.1 per cent of the respondents expected that the Indian economy will be impacted somewhat/to a limited extent from global spillovers. Despite global headwinds posing risks to domestic macro-financial conditions, the impact of external sector developments remained moderate as 53.2 per cent of the respondents perceived it of medium impact, RBI said in the survey.

More than three-fourths of the respondents perceived that the aggressive monetary policy tightening by advanced economies would adversely impact the exchange rate, capital flows, foreign exchange reserves and bond yields. It also added that less than 40 per cent of respondents viewed that banks' profitability and external debt would be adversely impacted.