India's Financial System Resilient Despite Global Volatility: RBI

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.

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.

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.

How Robust Are India's Forex Reserves and External Buffers Amid Global Outflows?

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)."

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.

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.

At the same time, the central bank said liquidity conditions have improved in April, with money market rates easing after pressures seen in March.

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.

(With inputs from ANI)