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Why in News:
- The first flagship publication of the Centre for Advanced Financial Research and Learning (CAFRAL) with the title “India Finance Report 2023” (IFR 2023) was released by the RBI Governor.
CAFRAL (not-for-profit organization)
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Key points:
- Enhanced Capital Position: The Capital to Risk-weighted Assets Ratio (CRAR) for NBFCs rose to 27.6% in 2022-23, exceeding the required 15%.
- Reduced NPA Ratios: There’s a downward trend in both gross and net Non-Performing Asset (NPA) ratios.
- Increased Bank Financing: The report notes a rise in bank financing for NBFCs, raising concerns about potential systemic risks.
- Systemic Risk Underestimation: Current risk asset ratios may not accurately reflect systemic risks, which easily can escalate.
Way Forward/Recommendations:
- Post-2008 global financial crisis, NBFCs played a key role in credit provision when banks were burdened with NPAs. It’s crucial for regulators to learn from past mistakes and ensure that the NBFC sector remains robust and resilient.
