The RBI has released the 25th issue of the Financial Stability Report (FSR), which reflects the collective assessment of the sub-committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system.
The report observes that the outlook for the global economy is shrouded by considerable uncertainty because of the war in Europe. Notwithstanding the challenges from global spillovers, the Indian economy remains on the path of recovery, though inflationary pressures, external spillovers and geopolitical risks warrant careful handling and close monitoring. Banks, as well as non-banking financial institutions, have sufficient capital buffers to withstand shocks. The CRAR of scheduled commercial banks (SCBs) rose to a new high of 16.7%, while their GNPA ratio fell to a six-year low of 5.9% in March 2022.
Macro stress tests for credit risk reveal that SCBs would be able to comply with the minimum capital requirements even under severe stress scenarios. In the Indian economy, high-frequency indicators point to a gradual but unevenly strengthening recovery in the first quarter of 2022-23, in spite of headwinds from the geopolitical situation. Macro-stress tests for credit risk reveal that SCBs are well-capitalised and all banks would be able to comply with the minimum capital requirements even under adverse stress scenarios. The CRAR of urban co-operative banks (UCBs) rose to 15.8 per cent in March 2022 while that of NBFCs stood at 26.9 per cent.
Lending by both PSBs and private sector banks (PVBs) has increased. While credit growth in the agriculture sector declined marginally despite a step-up in lending by PVBs, industrial credit continued to strengthen, driven by robust lending by PVBs and foreign banks (FBs).
In the systemic risk survey (SRS) conducted by the Reserve Bank in May 2022, macroeconomic, institutional and general risks were perceived as ‘medium’. Nearly 80% of the respondents judged that the prospects of the Indian banking sector are likely to improve or remain unchanged over a one-year horizon.
