AFP, NEW DELHI: The Inter-national Monetary Fund on Thursday recommended India strengthen the independence of its central bank and bolster resources for its financial system regulators amid a bad debt pile-up at public banks.

Indian banks have some of the highest levels of debt of any emerging market, with the bulk of bad loans saddled in public-sector lending institutions.

This debt burden means that banks have been stretched too thin to lend for fresh investments, holding back growth in Asia’s third-largest economy.

The IMF—in its annual assessment of the stability of India’s financial system—said these conditions are testing the resilience of banks.

Larger lenders appear sturdy but “the system is subject to considerable vulnerabilities”, the IMF said in its report.

In particular, a “group of public sector banks are highly vulnerable to further declines in asset quality”, it added.