For modern economies, financial stability is not just a goal, it's a necessity - for when it falters, the ripple effects can bring down even the mightiest to their knees. The 2008 financial crisis was a stark reminder that financial stability isn't just an ideal, it's a prerequisite for a well-functioning economy.
Banks are the backbone of the financial system, and they play a significant role in ensuring financial stability. For this reason, the banks are required to comply with the prudential regulations issued by the Reserve Bank and are required to maintain sufficient capital buffers to absorb losses. The other crucial element of financial stability is robust governance.