RBI’s Systemic Risk Survey (SRS)

January 3, 2023

The Reserve Bank of India’s (RBI) latest Systemic Risk Survey (SRS) has shown that global spillovers, financial market and general risks have increased, while macroeconomic risks have moderated. The survey, which was conducted in November 2022 and solicited the perceptions of experts including market participants and academicians on major risks faced by the Indian financial system, found that respondents’ confidence in the stability of the Indian financial system had further improved, with 93.6% of them remaining fairly or highly confident.

Global Risks Increase

The major contributors to the rise in global, financial market and general risks were identified as monetary tightening in advanced economies, tightening of financial conditions, geopolitical risks, global growth uncertainty and growing risks from private cryptocurrencies and climate change. Confidence in the stability of the global financial system slightly declined over the last six months, according to the survey.

Macroeconomic Risks Moderate

Despite the global headwinds posing risks to domestic macro-financial conditions, the impact of external sector developments remained moderate, with 53.2% of respondents perceiving it as having medium impact. More than three-quarters of respondents also perceived that the aggressive monetary policy tightening by advanced economies would adversely impact the exchange rate, capital flows, foreign exchange reserves and bond yields. However, less than 40% of respondents viewed that banks’ profitability and external debt would be adversely impacted.

Institutional Risks Remain Unchanged

There was no change perceived in institutional risks. The majority of respondents saw further improvement in credit prospects for the Indian economy and remained confident about the stability of the Indian banking sector. Nearly 90% of respondents assessed that the prospects of the Indian banking sector are likely to improve or remain unchanged over a one-year horizon, with more than half of respondents assessing that the prospects have improved.

Confidence in Indian Financial System Improves

Confidence in the stability of the Indian financial system further improved, with 93.6% of respondents remaining fairly or highly confident. However, 52.1% of respondents expected that the Indian economy will be impacted somewhat/to a limited extent from global spillovers.

Overall, the 23rd round of the RBI’s Systemic Risk Survey has shown that while global, financial market and general risks have increased, macroeconomic risks have moderated. Respondents’ confidence in the stability of the Indian financial system has also improved, with the majority seeing further improvement in credit prospects for the Indian economy and remaining confident about the stability of the Indian banking sector.

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