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Informist, Monday, Jun. 30, 2025

 

MUMBAI – Geopolitical conflicts, capital outflows and slowdown in trade due to reciprocal tariffs are major near-term potential risks to financial stability, according to the risk assessment survey done by the Reserve Bank of India. The results of the stress test were published in the June edition of the Financial Stability Report, released by the Reserve Bank of India on Monday.

 

According to the latest round of the survey, all major risk groups remain in the medium risk category. The risk groups included in the survey are geopolitical conflicts, capital outflows, rupee depreciation, reciprocal tariff, trade slowdown, global growth and inflation, climate risks, cybersecurity issues, and domestic growth or consumption demand. 

 

Some sub-categories were perceived as high risk in the survey, which included equity price volatility, climate risk, and cyber risk. The risk perception of global growth and geopolitical conflict and geoeconomic fragmentation recorded the most significant increase, the survey showed. The survey showed that global and institutional risks were perceived to have increased compared with the previous survey round, whereas macroeconomic and financial market risks registered a marginal decline. Around two-thirds of the respondents of the survey expressed decreasing confidence in the stability of the global financial system.

 

However, over 90% of the participants expressed higher or similar confidence in the Indian financial system, with three-fourths expecting trade tension and protectionist policies to have moderate impact on India's financial stability. "About 80% of the respondents perceived that the prospects of Indian banking sector have either improved or remain unchanged, underlining the resilience and strength of the sector," the report said.

 

Around 60% of participants expected the asset quality of the banking sector to improve or remain unchanged in the following six months. The survey also showed that export-dependent manufacturing sectors, micro small and medium enterprises in export clusters and shipping and logistics industry would be the most affected by the global trade disruption.

 

Majority of the respondents perceived the trade slowdown to have a moderate to low impact on banking sector asset quality. Around 53% of the respondents assessed the demand for credit to improve in the near-term owing to an uptick in rural demand, better business sentiment and improved health of banks, the survey showed. Another quarter of the respondents reported credit demand to remain unchanged.  End

 

Reported by Kabir Sharma

Edited by Deepshikha Bhardwaj

 

 

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