Are we financially stable?-An Analysis of Financial Stability based on the Financial Indicators with reference to the Indian Economy

Financial stability is a prerequisite for sustainable economic growth. When in an economy, the key financial markets and the financial institutional system is resistant to economic shocks and is fit to fulfil its basic function like intermediation of financial funds, risk management and arrangements of payments, then the economy is said to be stable financially. These are certain factors affecting the financial system. The relevance of these factors differ from country to country based on the scope of analysis. Financial stability does not mean that all the elements of the financial environment are sound and healthy and are operating without flaws. Financial stability encompasses the total financial system like institutions, infrastructure and markets, regulators, legal system and surveillance. This paper attempts to realize an analysis of macroeconomic indicators and their degree of correlation on financial stability using Principal component Analysis and examine the interrelation among a set of variables