WASHINGTON–India needs to improve its financial system supervision and crisis preparedness while at the same time liberalising some sectors to reduce distortions and risks created by heavy state involvement in banking. The IMF's Financial System Stability Assessment Update said India had improved its supervision and regulations in the 20 years since it started liberalising its economy and that its financial system fared well in the global financial crisis.
These challenges were mostly medium- to longer-term, while stress tests of banks and other indicators showed that the financial system vulnerabilities were manageable in the near term, it said.