MUMBAI: Banks have enough capital and liquidity buffers to face future shocks as the pandemic’s impact on their balance sheets is not as severe as was estimated earlier, a report said. Reserve Bank of India (RBI) said.
financial stability report It is published bi-annually by RBI on behalf of Financial Stability and Development Council, an umbrella group of regulators that gives an overview of the health of India’s financial system.
The report said that the gross non-performing assets of banks may grow to 9.8% of the total assets by March 2022, from around 7.48% by the end of March this year and 11.22% under a severe stress scenario.
The projections are far less pessimistic than the report released in January, in which the RBI said bad loans could double in a severely stressed scenario.
“The capital and liquidity buffers are reasonably resilient to future shocks, as the stress tests presented in this report demonstrate,” RBI Governor Shaktikanta Das, written in the preface to the report.
He also noted that there are new risks that have emerged on the horizon, including possible future waves of the coronavirus pandemic, pressures on international commodity prices and inflation, and rising instances of data breaches and cyber attacks.
The report showed that Indian banks, which have been bearing a significant bad debt burden for several years, managed to bring down bad loans to 7.5% in March 2021, as against 8.5% in March 2020 despite the challenges of the pandemic. .
“Unprecedented policy support has contained the loss of balance sheets of banks in India despite the dent in economic activity brought on by the waves of the pandemic,” the report said.
It said that even in times of stress, lenders have sufficient capital.
RBI also said downside risk remains, especially from loans extended to small and medium enterprises. It added that the slowdown in credit growth could also adversely affect the level of net interest income of banks.
financial stability report It is published bi-annually by RBI on behalf of Financial Stability and Development Council, an umbrella group of regulators that gives an overview of the health of India’s financial system.
The report said that the gross non-performing assets of banks may grow to 9.8% of the total assets by March 2022, from around 7.48% by the end of March this year and 11.22% under a severe stress scenario.
The projections are far less pessimistic than the report released in January, in which the RBI said bad loans could double in a severely stressed scenario.
“The capital and liquidity buffers are reasonably resilient to future shocks, as the stress tests presented in this report demonstrate,” RBI Governor Shaktikanta Das, written in the preface to the report.
He also noted that there are new risks that have emerged on the horizon, including possible future waves of the coronavirus pandemic, pressures on international commodity prices and inflation, and rising instances of data breaches and cyber attacks.
The report showed that Indian banks, which have been bearing a significant bad debt burden for several years, managed to bring down bad loans to 7.5% in March 2021, as against 8.5% in March 2020 despite the challenges of the pandemic. .
“Unprecedented policy support has contained the loss of balance sheets of banks in India despite the dent in economic activity brought on by the waves of the pandemic,” the report said.
It said that even in times of stress, lenders have sufficient capital.
RBI also said downside risk remains, especially from loans extended to small and medium enterprises. It added that the slowdown in credit growth could also adversely affect the level of net interest income of banks.
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