Indian banks better placed to withstand future shocks – report

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FILE PHOTO: A worker walks past the logo of Reserve Bank of India (RBI) inside its office in New Delhi, India July 8, 2019. REUTERS/Anushree Fadnavis

July 1, 2021

MUMBAI (Reuters) – The dent to Indian financial institutions’ balance sheets has been much less than earlier projected and banks have sufficient capital and liquidity buffers to withstand future shocks, according to a report released by the Reserve Bank of India (RBI).

The Financial Stability Report is published bi-annually by the RBI on behalf of the Financial Stability and Development Council, an umbrella group of regulators which gives a detailed overview on the health of the Indian financial system.

Banks’ gross non-performing assets could rise to 9.8% by March 2022 from around 7.48% as of the end of last March under the baseline scenario and to 11.22% under a severe stress scenario, the report said.

The projections are far less dire compared to the report released in January in which the RBI had indicated that bad loans could double in a severely stressed scenario.

“Capital and liquidity buffers are reasonably resilient to withstand future shocks, as the stress tests presented in this report demonstrate,” RBI Governor Shaktikanta Das, wrote in the foreword to the report.

However, he added that there are new risks which have emerged on the horizon including the risks of future waves of the coronavirus pandemic, international commodity prices and inflationary pressures, global spillovers amid high uncertainty and rising instances of data breaches and cyber attacks.

(Reporting by Swati Bhat and Nupur Anand; editing by Jonathan Oatis)






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