Financial Stability Report By RBI UPSC
Source : Indian Express
Indian Economy

What is discuss under Financial Stability Report By RBI UPSC ?

1. About the Report
2. Financial Stability Report By RBI

Why in News ?

The Reserve Bank of India (RBI) released the 23rd issue of its Financial Stability Report (FSR).

Key Facts

• Gross non-performing asset (GNPA) ratio
  • India’s Scheduled Commercial Banks (SCBs) may climb by the end of the current fiscal year to as much as 11.2%

    

    under a severe stress scenario, from 7.48% in March 2021.

  • Under the medium stress scenario, where GDP growth is at 6.5%, the gross NPA ratio could rise to 10.36%.
  • Under the severe stress scenario, where GDP growth is at 0.9%, the gross NPA ratio for the banking sector may rise to 11.22%.
  • Policy support has helped in shoring up financial positions of banks, containing non-performing loans and maintaining solvency and liquidity globally.
  • For private banks and foreign banks, the transition of the NPA ratio from baseline to severe stress is from 5.82 per cent to 6.04 per cent to 6.46 per cent, and from 4.90 per cent to 5.35 per cent to 5.97 per cent.
  • This shows there are incipient signs of stress in the micro, small and medium enterprises (MSMEs) and retail segments.
• Capital to risk-weighted assets ratio (CRAR)
  • Increased to 16.03% and the provisioning coverage ratio (PCR) stood at 68.86% in March 2021.
  • Banks respond to credit demand in a recovering economy, they will need to reinforce their capital and liquidity positions to fortify themselves against potential balance sheet stress
• Impact of second wave of COVID-19
  • Dented economic activity but monetary, regulatory and fiscal policy measures have helped curtail the solvency risk of financial entities, stabilise markets, and maintain financial stability,
  • Write-offs as a percentage of GNPA at the beginning of the year, fell sharply as compared to 2019-20, except for private banks.
• Macro stress tests indicates
  • The gross non-performing asset (GNPA) ratio of SCBs may increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the baseline scenario.
  • To 11.22 per cent under a severe stress scenario, although SCBs have sufficient capital, both at the aggregate and individual level, even under stress.
• Restructuring Of Loans
  • By March 2021, 0.9% of total bank advances were under restructuring.
  • Micro, small and medium enterprises had the highest restructure ratio at 1.7%.
  • Corporate borrowers had a restructured ratio of 0.9% of total advances.
  • 0.7% of total retail advances were restructured.

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