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Business and Economics > Finance: General

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Cover IMF Staff Country Reports
India: Financial Sector Assessment Program-Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
India’s financial system has withstood the pandemic well and has become more resilient since the 2017 FSAP. Nonbank financial institutions (NBFIs)—especially nonbank financial companies (NBFCs) providing credit with wholesale financing—and market financing have grown, making the financial system more diverse and interconnected. The role of the state has diminished, yet it remains significant, including in using the financial system to pursue social and public finance goals.
Keywords:
market financing; coverage ratio; NBFC liquidity stress test result; policy option; liquidity support; FSAP finding; Financial sector stability; Nonbank financial institutions; Credit; Mutual funds; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover Technical Assistance Reports
Bhutan: Technical Assistance Report-Development of an Interest Rate Corridor Framework
International Monetary Fund. Asia and Pacific Dept
and
International Monetary Fund. Monetary and Capital Markets Department
In August 2024, at the request of the Royal Monetary Authority of Bhutan (RMA), the IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) conducted a Technical Assistance (TA) mission in Thimphu. The mission aimed to assist the RMA in establishing an interest rate corridor (IRC) and operationalizing related instruments, liquidity forecasting, and collateral frameworks. The mission identified that the RMA lacks necessary monetary policy instruments to effectively address changing systemic liquidity conditions and financial stability challenges. It emphasized the need to move away from reliance on administrative controls, as the absence of appropriate price incentives reinforces the preference for foreign exchange among Bhutanese residents, increasing pressures on the peg. To tackle these issues, the mission proposed a phased approach to introduce the IRC. Initially, relevant external and internal documents should be finalized, followed by mock operations. The first phase involves introducing a one-week main Open Market Operation (OMO), conducted weekly at the policy rate with full allotment. Automatic access to the IRC's standing facilities should be ensured. Later, fixed-quantity, variable-rate OMOs should be utilized, relying on liquidity forecasting to calibrate operations. Additionally, the mission recommended reinstating sweeping arrangements for government accounts and enhancing coordination with the Treasury to improve liquidity forecasting. These measures aim to strengthen the RMA's operational framework and enhance the effectiveness of monetary policy.
Keywords:
Monetary policy; International organization; Bhutan.; RMA money market contact group; IMF South Asia Regional Training and Technical Assistance Center; IMF's Monetary; expert of the IMF Monetary; interest rate corridor framework; Liquidity management; Interest rate corridor; Liquidity; Commercial banks; Central bank policy rate
Cover High-Level Summary Technical Assistance Reports
India: Review and Evaluation of the Reserve Bank of India’s Stress Test Model Framework
Marco Gross
and
Wei Sun
This report provides a brief summary of the purpose and findings of a technical assistance (TA) mission that was intended to review and evaluate the Reserve Bank of India (RBI)’s stress test model suite, which took place in April 2023. The RBI’s model suite was found to be strong and well developed in numerous respects. The most noteworthy recommendations pertain to credit risk, market risk, and macro-financial scenario design. A detailed list of 28 recommendations spanning all areas was left with the RBI. A detailed TA report accompanies this brief summary report.
Keywords:
Bank solvency risk analysis; liquidity risk analysis; contagion analysis; stress test model framework; IMF team; RBI's model suite; TA mission; summary report; Stress testing; Market risk
Cover IMF Working Papers
Foreign Exchange Intervention Under the Integrated Policy Framework: The Case of India
Jesper Lindé
,
Patrick Schneider
,
Nujin Suphaphiphat
, and
Hou Wang
This paper analyzes the effectiveness of foreign exchange intervention (FXI) in mitigating economic and financial shocks in India by applying the Integrated Policy Framework (IPF). It highlights how FXI can be a complementary tool in mitigating the tradeoff between output and inflation, specifically under large economic shocks amid temporarily shallow FX markets. The paper indicates that while FXI can soften adverse impacts on domestic demand and output during severe risk-off shocks, its benefits under normal conditions with liquid FX markets are limited.
Keywords:
Integrated policy framework; foreign exchange intervention; risk-off shocks; EM FX intervention proxy; RBI FX intervention; FX Market development; OTC FX turnover; rate Policy; Currency markets; Inflation; Central bank policy rate; Global
Cover Policy Papers
Central Bank Digital Currency: Progress And Further Considerations
International Monetary Fund. Monetary and Capital Markets Department
The paper briefs the Executive Board on the further considerations on CBDC. These cover the positioning of CBDC in the payments landscape, cyber resilience of the CBDC ecosystem, CBDC adoption, CBDC data use and privacy protection, implications for monetary policy operations, and cross-border payments with retail CBDC.
Keywords:
Capacity development; CBDC; Central bank digital currencies; Adoption; Collaboration; Cross-border payments; Cyber resilience; Data use and privacy protection; Monetary operations; Payment systems; Positioning CBDC; CBDC data; CBDC system; CBDC adoption; CBDC design; data use; position CBDC vis-à-vis; Digital financial services; Monetary base; Global
Cover Technical Assistance Reports
India: Technical Assistance Report-Review and Evaluation of the Reserve Bank of India’s Stress Test Model Framework
International Monetary Fund. Monetary and Capital Markets Department
This report summarizes the content and findings of a technical assistance (TA) mission that was reviewing and evaluating the Reserve Bank of India (RBI)’s stress test model suite. The RBI’s model suite was found to be strong and well developed in numerous respects. The most noteworthy recommendations pertain to credit risk, market risk, and macro-financial scenario design. A detailed list of recommendations spanning all areas was left with the RBI.
Keywords:
Bank solvency risk analysis; liquidity risk analysis; contagion analysis; India.; IMF TA mission member; CD recipient; revaluation calculation; stress test model framework; executive director Dr. O. P. Mall; Stress testing; Market risk; Credit risk; Nonperforming loans; Credit; Global
Cover FinTech Notes
Positioning Central Bank Digital Currency in the Payments Landscape
Manisha Patel
,
Safari Kasiyanto
, and
Andre Reslow
The IMF is frequently approached by central banks seeking guidance on the balance between central bank digital currency (CBDC), fast payment systems (FPS), and electronic money (e-money) solutions. Common questions arising include: Do central banks need a CBDC when already equipped with other well-established digital payments systems? For central banks with less-developed solutions: Should central banks establish one system over the other? This discussion is then compounded by the reality of constrained resources. This note focuses on the comparison of retail CBDC—that is, the presence of digital central bank money available to the general public—with FPS and e-money systems from a payments perspective, and how CBDC may support a jurisdiction’s vision on payments in the digital age. The note does not seek to advocate for CBDC over an FPS or e-money. The balance of arguments for any one system may change over time, and the choice may not be mutually exclusive in many jurisdictions. In the future, it is possible to envisage the coexistence of an FPS, e-money, and CBDC in many payment landscapes across the world. Through good design, all three systems could meet central bank objectives such as payments efficiency and supporting financial inclusion; some benefits are unique to CBDC, such as maintaining access to central bank money in an increasingly digitalized age. While central banks will make choices unique to their circumstances, it remains important for central banks to establish a strategy that allows them (at minimum) to monitor trends and core benefits of multiple solutions as developments occur, to allow them to plan, adapt, and drive developments in their payments landscape.
Keywords:
CBDC; Central bank digital currency; central bank; fast payments; FPS; e-money; digital currencies; digital payments; payment systems; Annex I. payment system case; positioning central bank digital currency; IMF Fintech Note 2024/006; infrastructure provider; payment infrastructure; Central Bank digital currencies; Monetary base; Digital financial services; Global
Cover FinTech Notes
Central Bank Digital Currency Adoption: Inclusive Strategies for Intermediaries and Users
Tayo Tunyathon Koonprasert
,
Shiho Kanada
,
Natsuki Tsuda
, and
Edona Reshidi
Among the countries that have launched central bank digital currency (CBDC) or are conducting large-scale pilots, adoption remains slow and limited due to various challenges such as lack of public awareness and trust, preference for existing payment methods, and inadequate incentives for intermediaries. Central banks cannot take it for granted that CBDC, once launched, will be adopted and scaled up easily. Forming part of the CBDC Virtual Handbook, this paper aims to encourage policymakers to consider CBDC adoption early on, by arguing that successful CBDC adoption hinges not only on technical readiness and operational robustness, but also on strategic policy and design choices that target end-user and intermediary involvement from the outset. The paper introduces The REDI Framework which outlines various regulatory strategies, education/communication initiatives, design/deployment choices, and incentive mechanisms to prepare for CBDC adoption.
Keywords:
Central bank digital currency; CBDC; Adoption; Intermediaries; Incentives; central bank digital currency adoption; CBDC adoption; IMF Fintech Note 2024/005; eAUD payment; central bank of Peru; Central Bank digital currencies; Currencies; Payment systems; Digital financial services; Financial inclusion; Global; Africa
Cover Finance & Development
Finance & Development, September 2024: Productivity and How to Revive It
International Monetary Fund. Communications Department
Productivity must play a more important role in driving sustained growth as our societies age. But there’s no consensus on how to reverse the broad slowdown in productivity growth seen across almost all countries over the past 20 years. F&D magazine’s September issue invites leading thinkers to examine productivity from multiple angles, including dynamism, innovation, demographics, and sustainability.
Keywords:
Productivity; total factor productivity; demographics; sustainable growth; economic growth; dynamism; innovation; international cooperation.; productivity gain; understanding productivity growth; productivity growth rebound; IMF photo; low-productivity firm; TFP advancement; Emerging and frontier financial markets; Tax avoidance; Global; West Africa; Europe; Central Asia; Asia and Pacific
Cover IMF Working Papers
Programmability in Payment and Settlement
Xavier Lavayssière
and
Nicolas Zhang
Programmability in payment and settlement has yet to realize its potential to support policy goals such as efficiency, safety, and innovation. This paper proposes a comprehensive framework for understanding and evaluating programmability. It explores two key dimensions: external programmatic access, which is the ability for external participants to access the system data and functions with code, and internal programmatic capabilities, the extent to which internal execution of programs is supported and guaranteed. By developing strategies based on these dimensions, financial institutions, regulators, and related actors can better improve resilience, reduce costs and interoperability, all while managing associated risks. The resulting hybrid systems are coordinated efforts balancing the advantages of permissionless blockchains, such as composability, with regulatory requirements and a wider range of technologies. The paper describes these programmatic models to inform and guide the development of digital finance, bridging policy discussions with technical considerations.
Keywords:
Programmability; Tokenization; Automation; Payment; Settlement; closed-loop payment system; blockchain infrastructure; payment category; settlement mechanism; financial asset; settlement system; Smart contracts; Payment systems; Blockchain and DLT; Global