The Reserve Bank of India (RBI) in its financial stability report said, capital to risk weighted assets ratio (CRAR) of the scheduled commercial banks at 12.8% as of September 2014 is satisfactory, going forward, the banking sector, particularly the public sector banks would require substantial capital to meet regulatory requirements with respect to additional capital buffers.

With the increased regulatory focus on segregating the cases of wilful defaults and ensuring the equity participation of promoters in the losses leading to defaults, there is a need for greater transparency in the process of carrying out a net economic value impact assessment of large Corporate Debt Restructuring (CDR) cases. Another aspect that impinges upon the banks' asset quality is corporate leverage and its impact on banks' balance sheets, particularly double leveraging through holding company structures and the pledging of shares by promoters. Indian stock markets have seen a rapid growth in recent months, the report said.

"While the retail investor base still remains comparatively low, India's stock markets have been attracting substantial amounts of foreign investments, increasing the risk of reversal. The Securities and Exchange Board of India has introduced an additional safety net in the form of core settlement guarantee fund to mitigate risks from possible default in settlement of trades and to strengthen risk management framework in the domestic capital markets."

"With a view to improving participation of actual users / hedgers and the quality of price discovery in the market, the Forward Markets Commission has revised position limits which are linked to estimated production and imports of the underlying commodities," RBI added.

If further said, to deal with issues relating to unauthorized deposit acceptance and financial frauds, the State Level Coordination Committee (SLCC) mechanism has been strengthened under the initiative of the Financial Stability and Development Council (FSDC).