India's economy has demonstrated remarkable resilience in the face of global challenges such as geopolitical tensions, supply-chain disruptions, and volatile commodity prices, according to Reserve Bank of India (RBI) Deputy Governor Swaminathan J. Speaking at the School of International and Public Affairs (SIPA), Columbia University, he attributed this strength to robust industrial and services activity, broad-based demand, and improving corporate performance.
Macroeconomic Stability
Swaminathan noted that inflation remains within the RBI's tolerance band, and external-sector vulnerabilities are under control. He stated, 'Even amid geopolitical uncertainty, supply-chain disruptions and volatile commodity conditions, domestic economic activity has shown resilience, supported by strength in industrial and services activity, broad-based demand and improving corporate performance.' India currently stands on a relatively strong macroeconomic footing.
Banking Sector Strength
The Deputy Governor highlighted that the Indian financial system is entering the current phase of global uncertainty from a position of strength. The banking sector boasts healthier balance sheets, comfortable capital buffers, improved profitability, and non-performing assets at multi-decade lows. He emphasized the critical role of banking resilience, noting that a weak banking system can quickly transmit stress to firms, households, public finances, and the broader economy.
Swaminathan stressed that resilience does not emerge automatically from economic growth or favorable conditions. 'It has to be designed at multiple levels: in the rules that govern banks, in the supervisory systems that detect vulnerabilities, in the resolution architecture that addresses stress, and in the behaviour of banks themselves,' he said.
Continuous Institutional Effort
The Deputy Governor underscored that banking resilience should be viewed as an ongoing institutional effort rather than a one-time achievement. Drawing from India's recent experience, he explained that resilience is built through discipline across the balance sheet, transparent recognition of stress, balance sheet strengthening, calibrated and adaptive regulation, and responsible conduct within banks.
Swaminathan added that strong banks require more than just capital and technology. 'Strong banks require capital and technology, but they also require judgment, governance, accountability and institutions that learn,' he said. He noted that India's experience demonstrates that resilience is strongest when regulation, supervision, resolution mechanisms, and prudent banking practices reinforce one another.
The speech, titled 'Resilience by Design: Lessons from India's Banking Sector,' was posted on the RBI's website on Wednesday.
