homeeconomy NewsRBI report: Banks' gross NPAs may jump to 9.5% by Sept 2022

RBI report: Banks' gross NPAs may jump to 9.5% by Sept 2022

The RBI Financial Stability Report, which assesses the resilience of the financial system, assured that banks would be able to comply with minimum capital requirements even under severe stress scenarios.

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By CNBCTV18.com Dec 29, 2021 7:24:16 PM IST (Published)

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RBI report: Banks' gross NPAs may jump to 9.5% by Sept 2022
Macro stress tests of credit risk at commercial banks have revealed that gross non-performing assets (NPAs) can jump to 9.5 percent by September 2022 under severe stress scenario or 8.1 percent under the baseline scenario from 6.9 percent in September 2021, the Reserve Bank of India (RBI) said in its Financial Stability Report released on December 29.

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However, the scheduled commercial banks would be able to comply with the minimum capital requirements at the aggregate and individual levels even under severe stress scenarios, the report said.
The central bank’s report assesses the risks to financial stability and the resilience of the financial system.
Some of the key highlights of the Financial Stability Report are as follows:
Resilience of financial institutions:
  • Capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks climbed to 16.6 percent in September 2021 as these banks continued to bolster their capital.
  • Return on assets remained in the positive territory.
  • These banks saw improvement in asset quality, with gross non-performing assets and net NPA ratios declining to 6.9 percent and 2.3 percent, respectively.
  • Capital to risk-weighted assets ratio of urban cooperative banks stood at 12.9 percent in September 2021, while that of NBFCs was 26.3 percent.
  • Asset management companies and insurance firms were the dominant fund providers, while NBFCs and housing finance companies were the biggest receivers of funds.
  • Macro-financial risks
    • The second half of 2021 saw global recovery losing its momentum on the back of resurgence of COVID-19 infections in several parts of the world.
    • The Omicron variant of COVID-19 has cast a shadow on global economic prospects.
    • This caused supply bottlenecks and disruptions, persistent inflationary pressures and change in the monetary policy stances of central banks across the globe.
    • The US dollar appreciated as compared to currencies of emerging market economies.
    • Capital flows in bond markets of emerging market economies are now slowly tapering off, while equity flows have turned volatile
    • Domestic economy
      • Between April and October this year, the government’s deficit indicators had started improving to their pre-pandemic levels, with the borrowing programme gathering momentum.
      • Non-financial private companies in India had indicated improvement.
      • Bank credit growth displayed signs of recovery, led by the retail sector.
      • Micro, small and medium enterprises (MSMEs) and micro finance companies showed signs of stress.
      • These signs of stress in MSMEs call for close monitoring of these portfolios, going forward.
      • Finance sector regulators in the country have bolstered efforts to enhance the resilience of the financial system and achieve a sustainable recovery, the financial stability report said.

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