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The gross non performing assets (NPAs) of banks may increase from 6.9% in September 2021 to 8.1% by September 2022 under the baseline scenario and to 9.5% under a severe stress scenario, a Reserve Bank of India (RBI) report said.
The RBI today released the 24th Financial Stability Report (FSR), which is published bi-annually on behalf of the Financial Stability and Development Council, an umbrella group of regulators which gives an overview of the health of India's financial system.
RBI said the global economic recovery has been losing momentum in the second half of 2021 in the face of resurfacing Covid-19 infections, the new variant Omicron, supply disruptions and bottlenecks, elevated inflationary levels and shifts in monetary policy stances and actions across advanced economies and emerging market economies.
On the domestic front, progress in vaccination has enabled the recovery to regain traction after the debilitating second wave of the pandemic, notwithstanding signs of slowing pace more recently; the corporate sector is gaining strength and bank credit growth is improving, the report noted.
The report called for close monitoring of stress in stress in micro, small and medium enterprises (MSME) as also in the micro finance segment going forward.
The report further noted that financial institutions in India have remained resilient amidst the pandemic and stability prevails in the financial markets, cushioned by policy and regulatory support.
"Balance sheets of banks remain strong and capital and liquidity buffers are being bolstered to mitigate future shocks, as reflected in the stress tests presented in this report," Reserve Bank of India Governor Shaktikanta Das wrote in his foreword of the report.
The capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks rose to a new peak of 16.6% and their provisioning coverage ratio (PCR) stood at 68.1% in September 2021, the report noted.
(With inputs from agencies)
