IMF report suggested enhanced data coverage with better granularity for mapping climate-related financial risks in India
It acknowledges India’s insurance sector is strong and growing with a significant presence in both life and general insurance. The sector has remained stable, supported by better regulations and digital innovations
New Delhi: The Financial System Stability Assessment (FSSA) report prepared by the International Monetary Fund(IMF) has said the various Indian authorities need to keep a watch on emerging risks like cybersecurity, climate change and system-wide contagion
Financial stability risks from climate change appear manageable but warrant careful monitoring in the country, said the latest IMF report.
The assessment suggested enhanced data coverage with better granularity for mapping climate-related financial risks in India.
The IMF found that Indian authorities have advanced cybersecurity risk oversight, especially for banks.
However, the IMF stated that extensive cybersecurity crisis simulations and stress tests for banks could be expanded for cross-sectoral and market-wide events to further strengthen cybersecurity resilience.
The IMF report also analysed cyber security framework in banking sector, Financial Market Infrastructure (FMI), Critical Information Systems, and other relevant players in securities market.
However, the report acknowledged that India’s insurance sector is strong and growing with a significant presence in both life and general insurance.
The sector has remained stable, supported by better regulations and digital innovations, said the IMF.
The report has noted that India’s progress in improving oversight, risk management and governance and suggested further steps toward risk based solvency / supervision frameworks and stronger group supervision.
It also acknowledged transition plans towards risk-based approach in the insurance sector.
This reflects India’s commitment to global best practices and a resilient insurance sector, emphasised the report.
IMF released the latest India-FSSA report on their websites on February 28, 2025, based on the assessment carried out during 2024, while WB’s Financial Sector Assessment (FSA) report is due for publication.
The Financial Sector Assessment Program (FSAP), a joint program of the International Monetary Fund (IMF) and the World Bank (WB), undertakes a comprehensive and in-depth analysis of a country’s financial sector.
The IMF’s FSSA report highlighted that India’s financial system has become more resilient and diverse since the last FSAP in 2017, driven by rapid economic growth.
Financial sector in India has shown recovery from various distress episodes of 2010s and withstood the pandemic well. In terms of evolution of financial sector landscape, Non-Banking Financial Intermediaries (NBFI) sector has become diverse but more interconnected. Banks and Non-Banking Financial Companies (NBFCs) have sufficient aggregate capital to support moderate lending even in severe macrofinancial scenarios.
Since September 2010, the exercise has become mandatory for jurisdictions with systemically important financial sectors.
Currently, it is mandatory for 32 jurisdictions including India, every five years, and for another 15 jurisdictions every ten years. Last FSAP for India was conducted in 2017 and the FSSA report was published by IMF on 21st December, 2017.
The recommendations in case of India FSAP are mainly focussed on bringing about further improvements in the structure and functioning of the financial system and many of the detailed recommendations are in conformity with the concerned authorities’/regulators’ own developmental plans.
India remains committed to adoption of internationally accepted standards and best practices in a phased manner, attuned to domestic needs and economic conditions, wherever necessary.