Financial Stability Report

Context: Recently, the Reserve Bank of India has released its Financial Stability Report.

Key Highlights of Financial Stability Report

  • The GNPA Ratio of all scheduled commercial banks (SCBs) may increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021.
  • It warned that the gross non-performing assets (GNPA) ratio of all scheduled commercial banks could rise to 14.7 per cent under very severe stress.
  • Under the baseline scenarios, state-run banks’ GNPA ratio may increase to 15.2 per cent by March 2021 from 11.3 per cent in March 2020.
  • The GNPA ratio of private banks and foreign banks may increase from 4.2 per cent and 2.3 per cent to 7.3 per cent and 3.9 per cent, respectively, over the same period.
  • The system level CRAR is projected to drop from 14.6 per cent in March 2020 to 13.3 per cent in March 2021 under the baseline scenario and to 11.8 per cent under the very severe stress scenario.
  • The stress test results indicated that five banks may fail to meet the minimum capital level by March 2021 in a very severe stress scenario.
  • The common equity tier I (CET 1) capital ratio of banks may decline from 11.7 per cent in March 2020 to 10.7 per cent under the baseline scenario and to 9.4 per cent under the very severe stress scenario in March 2021.

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