Is India Hedged Against Systemic Risk?
Dr. Rupa Rege Nitsure
Chief Economist & General Manager, Bank of Baroda “Systemic risk” is the risk that arises because of the interconnectedness between different financial institutions. It means when some institution is unable to meet its obligations when due, will cause several other institutions also to default on their obligations when due. Such a failure may cause significant liquidity or credit problems and, as a result, could threaten the stability of or confidence in markets. As per India’s central monetary authority’s (RBI’s) latest available assessment (June, 2012), “the country’s financial system remains robust despite increase in risks to stability primarily due to global risks and worsening domestic macroeconomic conditions. Risks to domestic growth are accentuated by fiscal and external sector imbalances and persistence of inflation. Foreign exchange and equity markets continue to experience heightened volatility. While banks remain resilient to credit, market and liquidity risks thanks to their comfortable capital adequacy ratios, asset quality pressures have persisted and liquidity pressures have intensified. Both credit and deposit growth in the banking industry ]?HX?[\?]Y[? H?[????&H\[?[??H?8?'?????Y?[? ??'H\?[??X\?Y ??]\? ???\??YH\? ] H\? ?\??\[?[??Y\??] ?Y[??[???]?H ?\?[?[? H ?\?[ZX?[\?[??H? H8?'[?????X?Y8?'H?[???\?[??X\?Y ?\??[?[??H???\?[?]?[??? H?[????'K?[??? [?][ H?] ?Y[??[?K ? L?
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