2023, Vol. 5, Issue 2, Part A

The turmoil in the international financial markets of advanced economies, that started around mid-2007, has exacerbated substantially since August 2008. The financial market crisis has led to the collapse of major financial institutions and is now beginning to impact the real economy in the advanced economies. As this crisis is unfolding, credit markets appear to be drying up in the developed world.

The cautious approach of Reserve Bank of India advising banks to go slow on their exposure to sensitive sectors like real estate and capital market has saved the day for the banking industry. The regulatory authorities had shown vision to forsee the dangerous signals ahead. While the impact of global recession on India cannot be wished away, Indian banks, encouraged by the government and RBI, rose to the occasion to implement various stimulus packages and restructured facilities to tide over the crisis. In the middle of the previous financial year, the volatility in the global financial markets and closure of many big banks in the western world have given a shock to the banking system in India. However, the strong fundamentals of banks as well as support and guidance by regulators helped mitigate the severity of these trans-national developments. Having withstood the testing times, things are looking bright, as signs of recovery of Indian economy are visible. It gives us some hope that we can expect robust growth of the Indian banking industry in the medium term.