RBI's financial stability report flags risks with public debt profile

Financial risks associated with the profile of government debt can hamper the functioning of fixed-income markets, the Reserve Bank of India (RBI) said on Thursday.

A credible strategy to ensure debt sustainability calls for reducing primary deficits, the central bank said in its Financial Stability Report.

In the report, the RBI warned that while the differential between interest rates and the growth rate has largely been favourable over the past three decades, tightening monetary policies worldwide stand to erode this advantage.

“At the end of March 2021, the outstanding debt of general government (Centre and states) peaked at 89.4 per cent of GDP