Financial sector stress

It is not obvious how the system will come out of it

The latest Monetary Policy Report of the Reserve Bank of India (RBI) shows that the flow of funds to the commercial sector has virtually collapsed. Between April and mid-September, the flow declined to Rs 90,995 crore against Rs 7,36,087 crore in the same period last year. The decline is an indication of stress in both the financial and industrial sectors. This indicates that a lot of businesses are in the process of deleveraging or reducing debt, while the financial sector is not looking to expand its balance sheet. Although this process may reduce balance sheet stress over time in the