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The Reserve Bank of India (RBI) in its second Financial Stability Report (FSR) has stated that the Omicron variant of coronavirus remains the major challenge along with rising inflation pressures, though the economy has steadily gained momentum and remained resilient since the second quarter of the current fiscal. RBI Governor Shaktikanta Das noted that after the destructive second wave in April-May 2021, the growth outlook has progressively improved, though there are headwinds from global developments and more recently from the Omicron virus.

He added that a stronger and sustainable recovery hinges on the revival of private investment and shoring up private consumption, which unfortunately still remain below their pre-pandemic levels. Admitting that inflation remains a concern as it is by the build-up of cost-push pressures, Das has called for stronger supply-side measures to contain food and energy prices. Noting that the financial institutions have remained resilient amidst the pandemic and stability prevails in the financial markets cushioned by policy and regulatory support, the governor is confident that the strong balance sheets of banks with higher capital and liquidity buffers will help mitigate future shocks.

Citing the stress tests on banks, the governor has also warned that gross NPAs may jump to 8.1-9.5 per cent by September 2022 from 6.9 per cent in September 2021. The bank noted that the scheduled commercial banks would, however, have sufficient capital, both at the aggregate and individual levels, even under stress conditions. The governor concluded by reiterating the Reserve Bank's resolute commitment to ensure a robust and efficient financial system that supports strong, sustainable and inclusive growth with macroeconomic and financial stability.