Regulatory environment Prudential regulation and supervision have formed a critical component of the financial sector reform programme since its inception, and India has endeavoured to international prudential norms and practices. These norms have been progressively tightened over the years, particularly against the backdrop of the Asian crisis. Bank exposures to sensitive sectors such as equity and real estate have been curtailed.
Measures of longer-term inflation expectations have moved up from their pandemic lows and are in a range that is broadly consistent with the FOMC’s longer-run inflation goal. Two boxes in the July Monetary Policy Report discuss recent developments in inflation and inflation expectations. Sustainably achieving maximum employment and price stability depends on a stable financial system, and we continue to monitor vulnerabilities here.