financial system remains resilient and supportive of the ongoing economic revival. banks are well - positioned to withstand even severe stress scenarios without falling below the minimum capital requirement. the reserve bank continues to remain watchful of the headwinds and shall be proactive in taking measures as necessary to ensure financial stability. 5. recent developments in the forex market have generated intense debate, including predictions of the rupee dropping to record lows as foreign portfolio funds exit india. i would like to address the issue in a balanced and factual manner. 6. first, it is important to recognize that spillovers from the global monetary policy tightening, the geopolitical situation, the still elevated commodity prices – especially crude – and the lingering effects of the pandemic, all coming together, have become overwhelming for all countries the world over. even reserve currencies such as the japanese yen, the euro and the british pound sterling have not been spared. portfolio funds are selling off assets and fleeing to safe haven. emerging market economies ( emes ) are particularly affected by capital outflows, currency depreciations and reserve drawdowns, complicating macroeconomic management in these countries. 7. second, the impact of these overwhelming spillovers on india has been relatively modest. in fact, the indian rupee is holding up well relative to both advanced and eme peers. this is because our underlying fundamentals are strong, resilient and intact. the recovery is gradually strengthening. the current account deficit is modest. inflation is stabilizing. the financial sector is well - capitalized and sound. the external debt to gdp ratio is declining. the foreign exchange reserves are adequate. 8. third, in recognition of the fact that there is a genuine shortfall of supply of forex in the market relative to demand because of import and debt servicing requirements and portfolio outflows, the rbi has been supplying us dollars to the market to ensure that there is adequate forex liquidity. after all, this is the very purpose for which we had accumulated reserves when the capital inflows were strong. and, may i add, you buy an umbrella to use it when it rains! 9. fourth, a predominant part of the outstanding ecbs is effectively hedged. let me elaborate. according to the june 2022 financial stability report ( fsr ) of the rbi, of the outstanding ecbs of us $ 180 billion, 44 per cent or us $ 79 billion is unhedged

banking beyond tomorrow speech by shri shaktikanta das, governor, reserve bank of india delivered at the bank of baroda ’ s annual banking conference in mumbai on july 22, 2022 i am delighted to be here among such a distinguished gathering at the bank of baroda banking conference. i wish to compliment the bank of baroda for organising this event and for having chosen ‘ banking beyond tomorrow ’ as the theme of the conference. given that the banking landscape is witnessing far - reaching changes in the backdrop of rapid innovation, disruption and evolution of new business models, i believe this theme merits active discussion. 2. in my address today, i propose to touch upon the current macroeconomic situation, followed by highlighting the special role played by the banks and the new trends in the banking sector. i shall also attempt to highlight what banking beyond tomorrow may look like and the opportunities and challenges it may bring along. macroeconomic situation - where we stand today 3. we are living in turbulent times. the continuing war in europe and the pandemic have rendered the global macroeconomic outlook highly uncertain. countries are facing unexpectedly high inflation including food inflation, supply chain disruptions and demand - supply imbalances in product and labour markets. central banks are tightening monetary policy at a rapid pace, raising fears of imminent recession. commodity prices have eased somewhat from their june high, but remain elevated. higher interest rates in the us along with increased risk aversion among global investors have fuelled safe haven demand and strengthening of the us dollar. currencies of emerging market economies ( emes ) and even of some advanced economies ( aes ) are depreciating vis - a - vis the us dollar. consequently, inflationary pressures are building up and external funding conditions are becoming tighter, posing financial stability challenges in emerging market economies. overall, the global situation remains grim amidst fluid geopolitical situation while the war and the pandemic add to the forces of disintegration and fragmentation of the global economy. 4. in such an environment, the indian economy remains relatively better placed, drawing strength from its macroeconomic fundamentals. the financial system is well - capitalised, asset quality indicators have improved, balance sheets are stronger, and banks have returned to profitability. we are also seeing healthy pickup in credit demand. the external sector is well - buffered to withstand the ongoing terms of trade shocks and the portfolio outflows. the recently released financial stability report of the rbi highlights that the indian