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The Reserve Bank, in October-November 2011, instituted its first Systemic Risk Survey to gauge perceptions of market participants and other stakeholders about the key sources of risk to the Indian financial system. The Survey will be a biannual exercise, said the RBI.
The endeavour is expected to complement RBI's own assessment of risks to financial stability.
The respondents
The Survey respondents included a group of about 100 select individuals from banks, financial institutions, insurance companies, asset management companies, non-banking financial companies, primary dealers and broking firms.
The respondents also included representatives from industry associations, rating agencies, clearing corporations as well as select academicians and thinkers.
The majority of the respondents identified deterioration in the asset quality of banks as the most significant risk to the financial system followed by risks from heightened market volatility, including exchange rate volatility, global risks, risks from high inflation and high interest rates.
The Survey respondents assessed that the risks from high inflation will be most difficult for the country to manage. The impact of global risks and increased market volatility would also be difficult for the system to manage as would risks from deterioration in asset quality.
Participants from financial institutions felt that funding risks, risks from deterioration in asset quality, interest rates and from increased market volatility would be most difficult for their respective institutions to manage.
Over 50 per cent of the respondents had little or no confidence in the stability of the global financial system, whereas more than 90 per cent of the respondents were ‘very' or ‘fairly' confident of the stability of the Indian financial system, said RBI.
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