The latest FSR released by the Reserve Bank of India (RBI) brings out today’s true situation – a difficult global macro environment and visible green shoots on the domestic banking front. In such a scenario, the job of the central bank and the bankers, which is to balance the aggressive policies required for growth while exerting control to manage and mitigate heightening risks, is challenging.
The two sides of the coin are elaborated here
Macroeconomic risks are indeed high, with geopolitical tensions, supply chain disruptions and high inflation causing problems for the public and the government. The reaction to these challenges by authorities have had far-reaching and often adverse impact. Lockdowns, sanctions and interest rate hikes, for example, have been doing a lot of harm besides their intended consequences. Rupee depreciation and commodity inflation are bloating our import bill, FIIs are pulling money out of Indian debt and equity markets, and our hitherto strong reserves are seeing a beating.