RBI Financial Stability Report: Gross NPAs Of Banks May Rise To 9.5% By September 2022 In Worst-Case Scenario

According to the RBI, the global economic recovery has been losing momentum in the second half of 2021 in the face of resurfacing Covid-19 infections, new variant Omicron, and supply disruptions

The capital to risk-weighted assets ratio of scheduled commercial banks rose to a new peak of 16.6 per cent and their provisioning coverage ratio stood at 68.1 per cent in September 2021, the RBI said. Image: Getty

New Delhi: The Reserve Bank of India (RBI) on Wednesday released the 24th issue of the Financial Stability Report, which reflects the collective assessment of the sub-committee of the Financial Stability and Development Council on risks to financial stability and the resilience of the financial system.

According to the RBI statement, the global economic recovery has been losing momentum in the second half of 2021 in the face of resurfacing Covid-19 infections, the new variant Omicron, supply disruptions and bottlenecks, elevated inflationary levels and shifts in monetary policy stances, and actions across advanced economies and emerging market economies.

The capital to risk-weighted assets ratio of scheduled commercial banks (SCBs) rose to a new peak of 16.6 per cent and their provisioning coverage ratio (PCR) stood at 68.1 per cent in September 2021.

The central bank said that macro stress tests for credit risk indicate that the gross non-performing asset (GNPA) ratio of SCBs may increase from 6.9 per cent in September 2021 to 8.1 per cent by September 2022 under the baseline scenario and to 9.5 per cent in the worst-case scenario.

SCBs would, however, have sufficient capital, both at the aggregate and individual levels, even under stress conditions, the RBI said.

On the domestic front, progress in vaccination has enabled the recovery to regain traction after the debilitating second wave of the pandemic, notwithstanding signs of slowing pace more recently; the corporate sector is gaining strength and bank credit growth is improving, according to the RBI release.

Emerging signs of stress in micro, small and medium enterprises (MSME) as also in the micro finance segment call for close monitoring of these portfolios going forward.