geopolitical spillovers and the indian economy 1 shri pradeep multani, president, shri saket dalmia, senior vice - president, shri sanjeev agarwal, vice president, shri saurabh sanyal, secretary general, dr. s p sharma, chief economist, esteemed members of the phd chamber of commerce and industry, eminent dignitaries and friends. i am honoured to be invited to address and interact with you today. i am inspired by the chamber ’ s glorious history of 117 years as an apex chamber of national eminence catalysing indian businesses towards rapid economic development and nation building, including by building partnerships with government. a special mention is warranted of the phd research bureau that was established in 2010. by providing regular updates on the economic situation, the bureau has been sensitising the nation to socio - economic and business developments of contemporaneous relevance. dr. satya prakash sharma, with whom i go back a little way, and his team in the research bureau are also part of the rbi ’ s survey of professional forecasters and their work figures in our fan charts describing the balance of risks around our forecasts. keynote address delivered by michael debabrata patra, deputy governor, reserve bank of india, standalone session on ‘ geopolitical spillovers and the indian economy ’ organised by the phd chamber of commerce and industry, new delhi, on june 24, 2022. valuable comments from sitikantha pattanaik, g v nadhanael and editorial help from vineet kumar srivastava are gratefully acknowledged. the context the world has been overwhelmed by the fallout of geopolitical conflict, which threatens to snuff out a recovery that was hesitantly and haltingly making its way through multiple waves of the pandemic and multiple mutations of the virus. india ’ s economic prospects are also challenged by these ongoing developments, and the outlook is darkened and highly uncertain. i thought i would take this opportunity to share with you how the rbi is navigating this tsunami in its endeavour to shield the indian economy and secure its tryst with a brighter future. on february 10, 2022 as governor shri shaktikanta das made his statement on the occasion of the sixth and final meeting of the monetary policy committee ( mpc ) for the year 2021 - 22, the mood was one of cautious optimism. in spite of the omicron - driven third wave, india was decoupling from

the central plank of financial sector reforms. stability of the financial system has a critical influence on price stability and sustained growth, which constitute the principal objectives of policy. a stable financial system facilitates efficient transmission of monetary policy initiatives and the smooth operation of payment systems. from the perspective of regulation and supervision, safeguarding depositors ’ interest, and ensuring strong risk management within payment, clearing and settlement systems, is the mandate of the reserve bank of india ( rbi ). the rbi has put in place prudential supervisory reporting system, covering all vital aspects and a wide range of indicators, which serves as an early warning signal as well. macroprudential indicators ( mpis ) are being compiled since march 2000, collating data from 1 / 7 various reports that are received in the regulatory and supervisory wings of the bank. the review of mpis covers the areas of capital adequacy, asset quality, risk management, management soundness, earnings and profitability liquidity, interest rate, maturity structure of assets and liabilities, and various indicators pertaining to major segments of financial markets such as debt, forex, capital market segments, besides macroeconomic indicators such as growth, inflation, interest rate and exchange rate. the mpi review is accompanied by a review of developments in the global environment. as part of the efforts to disseminate these financial soundness indicators ( fsis ), the reserve bank has started publishing the core set of indicators in its various publications. financial sector reforms adopted in the 1990s have enhanced the strength of banks and financial institutions in india. a striking feature of these institutions has been their improved resilience to the domestic and the external environment. the reform process has changed the relationship between the rbi and commercial banks from one of micro regulation to that of macro management. aided by the robust macroeconomic environment, banks ’ bottom lines have improved significantly over the last two years. the aggregate capital ratios of scheduled commercial banks at 12. 83 per cent as at end march 2005 have been well above the stipulated level of 9 per cent. the reserve bank, along with the government, has initiated several institutional measures to contain the levels of npas. notable among these include establishment of debt recovery tribunals, lok adalats ( people ’ s courts ), asset reconstruction companies ( arcs ) and corporate debt restructuring ( cdr ) mechanism. settlement advisory committees have been formed at regional and head office level of commercial banks. enactment of the securitisation and reconstruction of financial assets and