FINANCIAL STABILITY REPORT OF RBI

FINANCIAL STABILITY REPORT OF RBI

Context:

On December 29, 2021, the Reserve Bank of India (RBI) released its report on financial stability.

Key Highlights:

• According to the report, stress tests have revealed that gross non-performing assets (GNPAs) of banks are likely to jump from 6.9% in September 2021 to 8.1% in September 2022 below the baseline level.
• While under a severe stress scenario, it is likely to increase to 9.5% over the same period.
• The report highlights the fact that scheduled Commercial Banks have sufficient funds, at the aggregate as well as individual levels.
• The report also highlights the collective assessment of the Sub-Committee of the Financial Stability & Development Council (FSDC) on the risks of financial stability.
• It notes that advances in early vaccination have made recovery possible after the collapse of the second wave of the Covid-19 epidemic. However, signs of slowing down have been seen recently.
• The corporate sector is becoming stronger and the growth in bank credit growth is also improving.

Capital to risk-weighted asset ratio (CRAR):

• The capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) has risen to a new high of 16.6%. 
• On the other hand, the average provisioning coverage ratio (PCR) was 68.1% in September 2021.

Financial Stability Report (FSR):

• The FSR is published twice a year by the Reserve Bank of India. 
• It reflects the joint evaluation of the Financial Stability and Development Council (FSDC), on the risks of financial stability. 
• It also addresses issues related to the development and regulation of the financial sector.