The banking sector has been progressing, thanks to a growing economy and many stable macroeconomic fundamentals. Financial stability is a precondition for continuous growth in the banking sector.

The RBI has been, for sometime now, concentrating on the question of creating financial stability. Here, while the RBI can be entrusted with the task of providing suitable monetary policy and regulatory framework for banks, it is the fiscal policy of the government that significantly contributes to financial stability.

The Indian economy has been prospering significantly during the recent years and, in fact, is poised to become the fifth largest economy in the world, very soon. Its macroeconomic fundamentals are gradually strengthening. The economic reforms ushered in from 1991 have been by and large producing the desired results. The banking sector, in particular, has become strong, stable and vibrant, with a dominating share in gross financial assets. It continues to be the principal purveyor of finance and its all pervasive intermediation role has not been challenged by other disintermediation agents.

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