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The Indian financial system has become more resilient and diverse, driven by rapid economic growth and withstood the pandemic well, according to an IMF report. The Financial Sector Assessment Program (FSAP), a joint programme of the International Monetary Fund (IMF) and the World Bank (WB), undertakes a comprehensive and in-depth analysis of a country's financial sector. IMF has released the latest India-FSSA report, based on the assessment carried out during 2024, while WB's Financial Sector Assessment (FSA) report is due for publication. "India welcomes assessment of the Indian financial system undertaken by the joint IMF-World Bank team conforming to the highest international standards," the Reserve Bank said in a release on Monday. The IMF report said that since the last FSAP in 2017, India's financial system has become more resilient and diverse, driven by rapid economic growth. "The system recovered from the distress episodes of the 2010s and withstood the pandemic well. NBFIs and market financing have grown, making the financial system more diverse and interconnected. State-owned financial institutions' share remains significant," it said. It further said that stress tests show that the main lending sectors are broadly resilient to macrofinancial shocks, despite some weak tails. Banks and NBFCs have sufficient aggregate capital to support moderate lending even in severe macro-financial scenarios. "But several banks, particularly PSBs, may need to strengthen their capital base to support lending in such situations. Weak tails comprise a few non-systemic NBFCs and urban cooperative banks (UCBs) that report below minimum or negative capital even in the baseline. Vulnerability to short-term liquidity stress is generally contained," the report said. On regulation and supervision of NBFCs, the IMF acknowledged India's systematic approach to prudential requirements of NBFCs with the scale-based regulatory framework. IMF appreciated India's approach to the introduction of a bank-like Liquidity Coverage Ratio (LCR) for large NBFCs. IMF also acknowledged that the regulatory framework in securities markets has been enhanced in line with international practice to manage and prevent emerging risks. Notable improvements include establishing the Corporate Debt Market Development Fund (CDMDF). The report observed that India's insurance sector is strong and growing, with a significant presence in both life and general insurance. The sector has remained stable, supported by better regulations and digital innovations. IMF also analysed cyber security frameworks in the banking sector, financial market infrastructure (FMI), critical information systems, and other relevant players in the securities market. It found that Indian authorities have advanced cybersecurity risk oversight, especially for banks. However, it stated that extensive cybersecurity crisis simulations and stress tests for banks could be expanded for cross-sectoral and market-wide events to further strengthen cybersecurity resilience. The recommendations in the case of India FSAP are mainly focussed on bringing about further improvements in the structure and functioning of the financial system and many of the detailed recommendations are in conformity with the concerned authorities'/ regulators' own developmental plans.

The Indian rupee erased its losses for the year Monday, riding the crest of a wave that’s lifting equities across industry and market-cap segments, to end at 85.63 to a dollar – the strongest level for the unit in 2025.The currency, which ended 34 paise stronger, had climbed to 85.50/$1 during the day, stretching the winning run for the ninth straight day as foreign banks sold dollars, while overseas investors bought Indian stocks and bonds, traders said.The rupee had previously closed at 85.97/$1, LSEG data showed.119447938The sharp appreciation of the rupee from its record low levels of 87.95/$1 seen in February caused exporters to sell dollars, prompting further appreciation, traders said.“Exporters kept their positions unhedged because many thought the rupee would touch 88 levels and on the other hand, importers had hedged. Additionally, the Reserve Bank of India does not seem to be absorbing dollars,” said Anil Bhansali, head of treasury, Finrex Treasury Advisors.The rupee has strengthened 2.1% during the month so far, and has outpaced all Asian currencies, LSEG data showed.Dollar inflows from foreign portfolio investors into Indian stocks and bonds also contributed to the rupee’s strength. FPIs bought $1.3 billion worth of Indian stocks and bonds in March, depository data showed.“There were dollar sales by foreign banks and exporters. Local banks, along with the RBI also seemed to be missing in the market today,” said Dilip Parmar, currency research analyst at HDFC Securities.