New Delhi: The Reserve Bank of India (RBI) on Thursday released the 23rd issue of the Financial Stability Report (FSR), which reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system in the context of contemporaneous issues relating to development and regulation of the financial sector.
Here are the key highlights:
• Sustained policy support, benign financial conditions, and vaccination gathering momentum are nurturing an uneven global recovery.
• Policy support has helped in shoring banks' financial positions, containing non-performing loans, and maintaining solvency and liquidity globally.
• On the domestic front, the ferocity of the second wave of COVID-19 has dented economic activity, but monetary, regulatory, and fiscal policy measures have helped curtail the solvency risk of financial entities, stabilize markets, and maintain financial stability.
• The capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) increased to 16.03%, and the provisioning coverage ratio (PCR) stood at 68.86% in March 2021.
• Macro stress tests indicate that the gross non-performing asset (GNPA) ratio of SCBs may increase from 7.48% in March 2021 to 9.80% by March 2022 under the baseline scenario; and to 11.22% under a severe stress scenario, although SCBs have sufficient capital, both at the aggregate and individual level, even under stress.
• Going forward, as 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.