India’s financial system is stable because of the "improving resilience" of its banking sector, said the country's central bank on Thursday as it flagged a widening current account deficit and the state of the global economy.
"Domestic economy hit a soft patch recently as private consumption, the key driver of GDP, turned weak. This along with subdued new investment pipeline and a widening current account deficit have exerted pressure on the fiscal front," said the Reserve Bank of India (RBI) in its financial stability report.
Sluggish economic growth "warrants greater cooperation" between fiscal and monetary policies, said the report.
The RBI cut its policy interest rate by 25 basis points on June 6, while also changing its policy stance to “accommodative,” after latest data showed the economy growing at its slowest in over four years.