FINANCIAL STABILITY REPORT PUBLISHED BY RBI ON JUNE 2015

1. Presentation On
Financial Stability Report
2015
Presented by -
14312 - Swapnil Fuse
14245 - Sarang Meshram
14221 - Nitesh Bhavsar
14255 - Aniket Kudake
14154 - Susheel Bhad

2. Report Overview
Macroeconomic
Risk
1. Global
2. Domestic
Financial Institutions :
Soundness and
Resilience
1. SCB
2. SUCB
3. NBFC
Financial Sector
Regulation and
Development

3. Introduction
• Financial Stability Report is published yearly by
Reserve Bank of India (Financial Stability Unit) –
First published in 2010
• The Process aspect – rigorous, comprehensive
and continuous assessment of risk buildup across
the financial system
• The outcome aspect – having the necessary
institutional and instrumental arrangements to
take effective regulatory, supervisory and other
policy measures to address the identified risks.

4. Macro- Financial Risks
Global Economy
• Even after eight years since the economic
crisis, top economies still struggling to keep
economy activity going
• Role of Central Banks – difficult to predict
• There is imbalance between countries around
the world. Few countries are facing persistent
CAD for last few years while few are surplus.
• The two main concerns for Volatility and
Stability – the Greek debt crisis and Fed rate
Hike

5. 2.Domestic Macro Environment
• Significant improvement in the micro economic
environment and going forward, economic performance
is going to be better.
• Economic growth in India is estimated to have improved
to 7.3% during 2014-2015.
• However notwithstanding this improvement, higher
growth seems difficult with low credit growth, relative
low flow of resources to the commercial sector, low
capacity utilization.

7. Continued…
• External threats has been reduced and progress has been
made with regard to fiscal consolidation.
• There is a re-orientation in government expenditure in
2015-2016 where capital expenditure is budgeted to be
higher alongside a reduction in expenditure on major
subsidies, which should improve the quality of
government expenditure.
• Foreign portfolio flows to India have been strong during
the Past year but any unexpected change in A/E
monetary policy may lead to slow down of such flow.
• India is better prepare to deal with this volatility, as
compare to previous episodes.

8. Securities Market:
Action Against Illegal Raising Of Funds:
•Unlisted Companies used to issue Non-Convertible Debentures and
Preference shares in name of private placements.
•SEBI cracked down – Collective Investment Schemes
And Deemed Public Issue and issued orders against these to the
companies.
•SEBI issued caution notes to the Investors to avoid investments in these
schemes.
•Financial Stability and Development Council took significant steps for
information and awareness of “Protection Of Depositors Act”

9. Trends In Algorithm Trading And Regulatory Steps:
• Algorithm Trading And High Frequency Trading developed rapidly
• Introduced in April 2008 as means for Direct Market Access
• SEBI regulated in March 2012 and 2013.
• Needs to monitor to avoid increased error trade and market
manipulation
• Abnormal Movements in Indian Stock Markets was observed So
Increased volume needs to be monitored
• Senior Supervisors Group keeps close watch on risk associated and
Control parameters
• SEBI implements regulation as recommended by SSG.

10. Relations to Counter Insider Trading:
• To Counter Insider trading initial law was “Prohibition Of Insider Trading
Regulation 1992”
• To review and strengthening of legal framework SEBI constituted
committee having Chairman Justice N.K.Sodhi
• As per recommendation new regulatory law is introduced
• “Prohibition Of Insider Trading Regulation 2015” with effective from 15th
May 2015. and these regulations matches with international practices.
• Highlights :
• Definition of insider has been made wider. Any relationship that allows
person to access “Unpublished Price sensitive Information”

11. • No separate definition for “Unpublished”
• Information available on website and other media is called as
“Generally available information.”
• In line with Companies Act 2013 the regulations prohibit Director and
key managerial person in trading in derivatives on securities of
company.
• Every listed company must have code of conduct to monitor regulate
and report trading done by its employees.
• Stock Exchanges must have mechanism to handle complaints to
inadequate and inaccurate disclosures by companies.
• Stock exchanges must report SEBI if companies response on clarification
of disclosures is not satisfactory.

12. Insurance sector:
• Agricultural sector need urgent focus in wake of its development.
• Crop insurances are riskier and costlier also they have high premium and
limited coverage.
• Crop failures are not random and independently distributed as weather
conditions can affect the whole geographical area.
• Insurance plans needs to be designed properly in order to attract small
and marginal farmers
• IRDAI has approved co insurance arrangement between Agricultural
Insurance Company (AIC) and General Insurance Public Sector
Association(GIPSA) which will cover only non loanee farmers under
Modified National Agricultural Insurance Scheme(MNAIS) and Weather
Based Crop Insurance Scheme(WBCIS).

13. • Pension Sector:
• The expected shifts in demography in coming decades call for attention
on old age income security and pension schemes.
• Presently only 12% of current population in country is covered with any
form of old age income security.
• There are nearly 100 million people aged 60 years or more and number
will be triple by 2050.
• The government has launched pension scheme foe unorganised sector
called Atal Pension Yojana
• APY will focus on all citizens in the unorganised sector who join National
Pension Scheme(NPS) administrated by Pension Fund Regulatory and
Development Authority(PFRDA)
• APY aims to provide an assured income level and sustainable retirement
solution to unorganised sector with flexibility and ease of operation.

14. Banking Sector: Soundness And Resilience
Performance March'15 Sep'14
Credit Growth 9.70% 10.00%
Deposit Growth 10.70% 12.90%
Asset Quality
NPA 4.60% 4.50%
Stressed Advances 11.10% 10.70%
Leverage
Tier 1 6.60% 6.30%
Soundness
CAR 12.90% 12.80%

15. Banking Stability Map

16. Financial Inclusion:
• Pradhan Mantri Jan Dhan Yojana (PMJDY)
• RuPay Card – A Payment Solution
• Payment Banks

17. Conclusion
 India’s relatively stronger macroeconomic fundamentals in terms of
growth, inflation, current account and fiscal deficits
 The continued uncertainty over global growth and in the absence of
international monetary policy coordination, there can be no room
for complacency.
 The report gives a ray of hope for the PSU Banking sector
 As per the report the larger issues that can impact India may be
external in nature when most of the central banks decide to
reduce/take back their monetary stimulus which can have negative
impact on risk assets.
 The economic growth expected to pick up the Corporate earnings
picture of India would also start to look strong over the next 2-4
quarters.
 The current market volatility should be used by the investors to add
into equities in line with the Asset Allocation and Risk profile.