. alongside, the current account deficit remains within sustainable levels, other indicators of external viability such as the ratios of indebtedness to gdp and / or reserves are also reflecting a healthy improvement. the government has pursued the path of fiscal consolidation and the ratio of public debt to gdp is gradually declining. international investors have warmed to where the indian economy is currently positioned and this is reflected in sizeable foreign investment inflows. meanwhile, domestic financial markets have shown resilience and stability in spite of escalation of global geo - political uncertainty and heightened volatility in financial markets. these developments have enabled the build - up of “ buffers ” against unforeseen shocks. 5. taming the non - performing assets problem : a landmark development relating to resolution of stressed assets is the insolvency and bankruptcy code ( ibc ) 2016. from the reserve bank ’ s point of view, a great enabler in this context has been the banking regulation ( amendment ) ordinance promulgated in may and subsequently enacted in august this year. by the authority it conferred on the reserve bank to issue directions to banks to initiate resolution processes, it scales up the ability of the reserve bank to deal decisively with stress in banks ’ balance sheets and unclog the flow of credit to grease the wheels of growth. in the year ahead, we must seize this opportunity to overcome the debilitating problem of corporate loan delinquency and get our banks back into the mainstream of financial intermediation. the recently chalked out recapitalisation plan of the government for public sector banks will ensure that flows to productive sectors ( and credit - worthy borrowers ) are not impeded and growth impulses are 1 / 4 bis central bankers'speeches nurtured. the government has also proposed to take steps to improve the corporate governance of psbs by strengthening boards, bringing objectivity into management appointments, and decentralising decisions to the professional board. 6. the risk - based supervisory process of the reserve bank keeps flagging the risks in the balance sheet of banks which are taken up with the institutions concerned for remedy. previously, effective enforcement action on the specific violations / breaches has been a gap in implementation. the new enforcement department was established in april this year for this function ; viz., concentrate on its mandate to develop a rule based, consistent framework to deal with breaches of law, rules and directions. effective deterrence enforced through such actions is expected to contribute

urjit r patel : financial system and the macroeconomy opening remarks by dr urjit r patel, governor of the reserve bank of india, at the centre for advanced financial research and learning ( cafral ) conference on " financial system and the macroeconomy ", mumbai, 7 december 2017. * * * 1. it gives me great pleasure to be here this morning to share some observations and thoughts. the theme of this international conference : “ financial system and the macroeconomy ”, and the papers that are slated for presentation touch upon a number of issues that the reserve bank has been grappling with. ( needless to say, some of the conference participants who follow the indian economy closely would already be aware of what i am about to briefly enunciate, but others may not, and these remarks would, i hope, be helpful to them. ) 2. for us in india, an eventful 2017 is drawing to a close with important transformations in place, viz., a new monetary policy framework with decision making by a monetary policy committee ( mpc ) ; demonetisation of high value currency notes ; introduction of a goods and services tax ( gst ) regime ; the insolvency and bankruptcy code ( ibc ) ; promulgation of the banking regulation ( amendment ) act and a recapitalisation plan for government - owned banks. as these key changes mould india ’ s financial sector landscape, let me take this opportunity to briefly explain how they will shape the outlook. 3. entrenching macroeconomic stability : two significant developments have taken place in the recent period. first, the primary objective of monetary policy in india has been defined explicitly “ to maintain price stability while keeping in mind the objective of growth ". second, an mpc has been constituted with the task of setting the benchmark policy rate in pursuit of this goal defined in the amended rbi act ( 2016 ). the new monetary policy framework has been playing an important role in shaping inflation expectations and outcomes. with some disinflation underway, inflation expectations are, perhaps, getting re - anchored, indicative, in part, of the credibility earned by the new framework ; but these are early days, and hence considerable caution and vigilance is warranted on the inflation front. recent success in containing inflationary pressures needs to be viewed in the broader context of entrenching macroeconomic stability in which the government has played a crucial part. 1 4