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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.

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