India’s financial and external sectors are resilient despite global shocks, says the RBI’s April 2026 Bulletin. Forex reserves are comfortable and the banking system is healthy, though foreign portfolio investment flows have turned volatile.
India’s financial system and external sector indicators remain “favourable” and resilient despite global volatility and capital outflows triggered by the ongoing West Asia conflict, according to the Reserve Bank of India’s April 2026 Bulletin.
External Sector Resilience
The RBI noted that key external sector vulnerability indicators “remained contained” and foreign exchange reserves continued to remain “comfortable” even amid heightened global uncertainty. Highlighting India’s resilience, the central bank said that “India’s key external sector vulnerability indicators remained contained… and foreign exchange reserves continued to remain comfortable,” underlining stability in the face of global shocks.
Capital Flows and Investor Confidence
The Bulletin also pointed to strong capital inflows and investor confidence. “Gross foreign direct investment (FDI) witnessed strong growth, while net FDI showed improvement,” it said, adding that “India remains an attractive destination for greenfield FDI projects.” However, the RBI flagged that foreign portfolio flows have turned volatile, noting that “foreign portfolio investment (FPI)… recorded net outflows,” reflecting global risk aversion.
Robust Foreign Exchange Buffers
Despite these outflows, India’s external buffers remain robust. The RBI said foreign exchange reserves stood at “US$ 697.1 billion,” which are “adequate in terms of… import cover (about 11 months).”
Domestic Financial Stability
On the domestic front, the banking system continues to remain strong. The Bulletin highlighted that “system-level financial parameters related to capital adequacy, liquidity, asset quality and profitability… continue to remain healthy,” indicating stability in the financial sector.
Strong Credit Growth
Credit growth has also remained strong, supporting economic activity. The RBI noted that “growth in bank credit has been high,” with improved transmission of interest rates in the current easing cycle.
Improved Liquidity Conditions
At the same time, the central bank said liquidity conditions have improved in April, with money market rates easing after pressures seen in March.
Outlook and Cushioning Factors
The RBI cautioned that global uncertainties–including geopolitical tensions, energy price volatility, and capital flow fluctuations–continue to pose risks. However, it emphasised that India’s macroeconomic fundamentals and policy measures are helping cushion the impact. “Strong fundamentals… provide India the wherewithal to withstand the adverse impact of heightened global uncertainties,” the Bulletin said. (ANI)
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