India’s banks face risks from low growth, fiscal deficit

MUMBAI, Dec 23 (Asia Pulse) – India’s banking system has weak
spots such as decelerating growth and a growing fiscal deficit
which need to be addressed, a Reserve Bank report says. Rupee has weakened nearly 18 per cent since January and is
currently trading at Rs 52.65 against dollar.

The other major challenge before the government would be to
contain fiscal year deficit during 2011-12. “The fiscal year
situation remains challenging as the revenue collection was
lower than expected in the first half of the current year,” it
said.

The government proposes to bring down the fiscal year
deficit to 4.6 per cent in the current fiscal year, from 4.7
per cent in 2010-11. However, poor disinvestment and tardy
revenue collection is putting pressure on fiscal year
deficit.

As far as growth is concerned, it is likely to moderate to
7.5 per cent in 2011-12 from 8.5 per cent a year ago.

The report, further, said that the global risks to the
stability of the domestic financial system have intensified
over the past 6 months.

“Emerging developments in the macro economy and in the
financial soundness indicators of the banking system pose some
concerns as do th