also attuned to international best practices so as to appropriately capture market risks. third, the rbi has moved away from micro - regulation to macro - management. rbi has replaced detailed individual guidelines with general guidelines and now leaves it to individual banks ’ boards to set their guidelines on credit decisions. a regulation review authority was established in rbi, whereby any bank could challenge the need for any regulation or guideline and the department had to justify the need and usefulness for such guideline relative to costs of regulation and compliance. fourth, to strengthen the banking system to cope up with the changing environment, prudential standards have been imposed in a progressive manner. thus, while banks have greater freedom to take credit decisions, prudential norms setting out capital adequacy norms, asset classification, income recognition and provisioning rules, exposure norms, and asset liability management systems have helped to identify and contain risks, thereby contributing to greater financial stability. fifth, an appropriate legal, institutional, technological and regulatory framework has been put in place for the development of financial markets. there is now increased volumes and transparency in the primary and secondary market operations. development of the government securities, money and forex markets has improved the transmission mechanism of monetary policy, facilitated the development of an yield curve and enabled greater integration of markets. the interest rate channel of monetary policy transmission is acquiring greater importance as compared with the credit channel. regulatory environment prudential regulation and supervision have formed a critical component of the financial sector reform programme since its inception, and india has endeavoured to international prudential norms and practices. these norms have been progressively tightened over the years, particularly against the backdrop of the asian crisis. bank exposures to sensitive sectors such as equity and real estate have been curtailed. the banking regulation act 1949 prevents connected lending ( i. e. lending by banks to directors or companies in which directors are interested ). periodical inspection of banks has been the main instrument of supervision, though recently there has been a move toward supplementary'on - site inspections'with'off - site surveillance '. the system of'annual financial inspection'was introduced in 1992, in place of the earlier system of annual financial review / financial inspections. the inspection objectives and procedures, have been redefined to evaluate the bank ’ s safety and soundness ; to appraise the quality of the board and management ; to ensure compliance with banking laws & regulation ; to provide an appraisal of soundness of the bank's assets ;

core inflation that excludes food and fuel and is most amenable to monetary policy has fallen to its lowest level ever. the rbi has anchored expectations by remaining committed to aligning inflation with the target and regards the recent easing of price pressures as work in progress. it projects inflation to average 4. 5 per cent in 2024 - 25 and 4. 1 per cent in 2025 - 26. the taming of inflation lays the foundations of sustained high growth in the future by improving consumption conditions, the investment outlook and external competitiveness. alongside macroeconomic stability, financial stability is getting reinforced by prudent financial policies and active on - site supervision complemented with off - site surveillance, which harnesses suptech, big data analytics and cyber security drills. india's financial sector is predominantly bank - based. gross non - performing assets ( gnpas ) in the banking system have steadily fallen from their peak in march 2018 to 2. 8 per cent of total assets by march 2024. adjusted for provisions, net npas are just 0. 6 per cent. capital and liquidity buffers are well above the regulatory norms. profitability is high and this virtuous circle has supported a credit upswing. stress tests for credit risk and interest rate risk reveal that banks would remain above minimum capital requirements even under severe stress scenarios. similar improvements are evident among nonbanking financial companies. the rising strength and resilience of the financial sector augurs well for medium - term growth prospects as it is the financial sector which intermediates the resource requirements of the growth process. another aspect of macroeconomic stability is the ongoing fiscal consolidation. as a result, the general government debt which is estimated at 81. 6 per cent of gdp at the 4 / 8 bis - central bankers'speeches end of march 2024 is expected to decline to 78. 2 per cent by end of this decade by the imf. our projections show that if expenditures are increased on reskilling / upskilling the labour force in the most productive sectors of manufacturing, investing in digitalisation and promoting energy efficiency, the general government debt will fall even further to 73. 4 per cent of gdp by 2030 - 312. this is significant in the context of the imf's projections that show the debt ratio as projected to rise to 116. 3 per cent in 2028 for advanced economies and to 78. 1 per cent for emerging and middle - income countries. a potent growth accelerator emerges from india '