Financial system strong enough
REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2005-06
| RBI said the recent fall in global crude oil prices should help ease inflation pressures and that the macroeconomic environment remained favourable. |
| "Inflation continues to be low in the range of 5.0-5.5 percent, despite revision in domestic oil prices. Although the absence of complete pass-through was a cause of concern from the future inflation point of view, the recent easing of international oil prices should provide the much needed relief," it said in the report. |
| The report said macroeconomic fundamentals were favourable, with the industrial sector likely to maintain its growth momentum in the near future. |
| "Strong growth prospects would continue to have a positive impact on the balance sheets of the corporate sector and households," it stated. |
| Industrial output in the first half of 2006-07 rose 10.9 per cent from a year earlier as manufacturing maintained its high growth momentum, helped by strong consumer demand for cars and home appliances. |
| The RBI said the strong capital position of banks would enable the banking system to handle adverse global developments. |
| "While disruptions in global financial markets might have some impact, it is the domestic conditions which impact banking operations the most," it said. The RBI expects the economy to grow about 8 per cent in 2006-07. |