Banking system shows signs of instability on rising NPAs: RBI
act of the financial crisis was enacted in the courtyard of the banking sector
where the trigger of financial crisis initially took place."However, concerted efforts
are being made by various organisations such as the IMF, BIS and World Bank as well as individual central banks to evolve various leading indicators
of the financial stability, including banking sector, in order to make an informed judgement about the evolving risks to the financial system and initiate corrective policy measures.
The paper also observed that banking instability has immediate adverse effect on the financial markets stability as well as real sector output.
"...stability in the banking sector is a necessary condition for maintaining financial stability," it added.
It further said deterioration in the banking stability indicator has adverse impact on the real sector and similarly deceleration in the real sector performance will adversely
affect banking sector.
