YOUI' answers to these items should be based on the passage only. Passage Financial markets J n India have acquired greater depth and liquidity over the years. Steady reforms since 1991 have led to growing linkages and integration of the Indian economy and its financial system with the global economy. Weak global economic prospects and continuing uncertainties the in international financial markets therefore, have had their impact on the emerging market economies. Sovereign risk concerns, particularly in the Euro area, affected financial markets for the greater part of the year, with the contagion of Greece's sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility. The funding constraints in international financial markets could impact both the availability and cost of foreign funding for banks and corporates. Since the Indian financial system is bank dominated, banks' ability to withstand stress is critical to overall financial stability. Indian banks, however, remain robust, notwithstanding a decline in capital to risk-weighted assets ratio and a rise in non-performing asset levels in the recent past. Capital adequacy levels remain above the regulatory requirements. The financial market infrastructure continues to function without any major disruption. With further globalization, consolidation, deregulation, and diversification of the financial system, the banking business may become more complex and riskier. Issues like risk and liquidity management and enhancing skill therefore assume greater significance. According to the passage, in the Indian financial system, banks' ability to with stand stress is critical to ensure overall financial stability because Indian financial system is

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Last updated 23 May 2026, 3:31 pm IST

1. Acontrolled by the Government of India
2. Bless integrated with banks
3. Ccontrolled by Reserve Bank of India
4. Ddominated by banks.Correct