India's Economy Resilient Amid Geopolitical Uncertainties: RBI Deputy Governor

• RBI Deputy Governor Swaminathan J said India’s economic activity has shown resilience despite geopolitical uncertainty.

• He said inflation is within the RBI’s tolerance band and external vulnerabilities remain manageable.

• He added that banking resilience depends on strong rules, supervision, resolution systems and bank behaviour.

India's economic activity has demonstrated resilience, fuelled by the growth of the industrial and services sectors, broad-based demand, and improving corporate performance, despite geopolitical uncertainties, according to Reserve Bank Deputy Governor Swaminathan J.

In a speech at the School of International and Public Affairs (SIPA), Columbia University, on Monday, the deputy governor also said inflation is within the RBI's tolerance band, and external vulnerabilities remain manageable.

"We meet at a time when the global policy conversation is again crowded with large themes: geopolitics, climate change, artificial intelligence, technological disruption and the reordering of supply chains," he said.

Against that backdrop, Swaminathan said, banking resilience may seem like a quieter subject.

"But it has one distinct feature: when it is absent, its importance is immediately recognised. A weak banking system can quickly transmit stress from financial balance sheets to firms, households, public finances and the broader economy," he said.

The Reserve Bank of India (RBI) posted his speech on 'Resilience by Design: Lessons from India’s Banking Sector' on its website on Wednesday.

He said India today stands on a relatively strong macroeconomic footing.

"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," Swaminathan said.

He emphasised that the Indian financial system enters this uncertain phase with strength -- healthier balance sheets, comfortable capital buffers, improved profitability and non-performing assets at multi-decade lows.

He further said banking resilience does not arise automatically from growth or favourable 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," Swaminathan said.

India’s recent experience suggests that resilience is strongest when these elements reinforce one another, he added.

The deputy governor also emphasised that banking resilience is not a fixed achievement and it is a continuing institutional project.

"As India's recent experience has shown, it is built through discipline across the balance sheet and beyond, transparent recognition of stress, balance sheet strengthening, calibrated and adaptive regulation, and responsible conduct within banks," he said.

Strong banks require capital and technology, but they also require judgment, governance, accountability and institutions that learn, the Deputy Governor said.