RBI's financial stability report: NPA fell to decade low

neerajsingh18

Jun 30

RBI's financial stability report: NPA fell to decade low

The Reserve Bank of India has released the latest edition of its Financial Stability Report and noted in that the net non-performing assets (NPA) ratio of Scheduled commercial banks came down to a 10-year low of 3.9% in March 2023.

Macro stress tests for credit risk discover that schedule commercial banks are well-capitalized and all banks would be able to comply with the minimum capital requirements even under adverse stress scenarios.

Gross and net NPA ratios have descended from a high of 11.5% and 6.1% in March 2018 to 3.9% and 1.0% in March 2023 respectively.

RBI stated that some Non-Banking Financial Intermediaries (NBFIs) owned high leverage and it positing systemic concerns.

Trajectories of global and Indian financial systems' growth have changed after the last issue of FSR was published.

Reason for impact:

The global financial system has been affected by significant stresses from the banking turmoil in the U.S. and Europe since early March 2023.

In contrast, the financial sector in India has been stable and resilient, as reflected in sustained growth in bank credit, low levels of non-performing assets and adequate capital and liquidity buffers.

Risks & Challenges:

The latest Systemic Risk Survey carried out in May 2023 indicated that risk across most categories that contribute to domestic systemic risk retreated.

But the risk from global spillovers stayed in the 'high' risk category as more than half of the respondents expressing falling confidence in the stability of the global financial system.

The global financial conditions have tightened the economies of the world, the global growth slowdown and volatility in capital flows were quoted as major risks.