The Reserve Bank of India in its latest Financial Stability Report (FSR) has expressed concern over the asset quality of banks. The report has said the banking stability indicator (BSI) worsened between September 2016 and March 2017 due to a deterioration in asset quality and profitability. The BSI represents the five dimensions of soundness, asset quality, profitability, liquidity, and efficiency. While the central bank has activated prompt corrective action (PCA) to stem the slide in the banking system, Deputy Governor NS Vishwanathan underscored in the foreword to the FSR that nothing can replace credit discipline and appreciation of the sanctity of commercial contracts in order to ensure a robust financial system. "Thus, additional focus has to be on strengthening the internal governance framework of financial entities and observance of market discipline. This will have a salubrious impact on financial intermediation, whereby assumption and sharing of risks are based on risk capacity and not on herd instinct or accounting and regulatory dispensations," said Vishwanathan.