Findings of  the RBI’s “Financial Stability Report”.

About the Financial Stability Report

  • The Reserve Bank of India today released the 20th issue of the Financial Stability Report (FSR)
  • The FSR reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability, as also the resilience of the financial system.
  •  The Report also discusses issues relating to development and regulation of the financial sector

About the state of financial sector

  • Gross non-performing asset (GNPA) ratio:
  • For the banks may increase to 9.9% by September 2020 from 9.3% in September 2019.
  • Due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth.
  • The state-run banks’ GNPA ratios may increase to 13.2% by September 2020 from 12.7% in September 2019.
  • The recapitalisation of state-run banks by the government, banks’ capital to risk-weighted assets ratio (CRAR) improved to 15.1% in September 2019 from 14.3% in March 2019.
  • The asset quality of agriculture and services sectors, as measured by their GNPA ratios, deteriorated to 10.1% in September 2019 from about 8% in March 2019.
  • The banks’ net non-performing assets (NNPA) ratio declined in September 2019 to 3.7%.

Slippages :Fresh accretion of NPAs during the year or falling below the current position of standard assets of the bank is a slippage.

Denominator effect:The denominator effect is a way of describing the impact the crisis had on portfolios, especially those of large institutions such as endowments. 

CRAR:CRAR is the capital needed for a bank measured in terms of the assets (mostly loans) disbursed by the banks.

GNPA:Gross NPA is the total amount of outstanding NPAs in the borrowal account, excluding the interest receivable.

NNPA: Net NPA is simply the total bad assets (actual) minus the provision left aside

Challenges to kick start growth in the economy 

  • Corporate governance is a concern across India Inc.
  • The twin engines of consumption and investment remains the key challenge even while remaining vigilant about spillovers from global financial markets. 

Concern in economy

  • Major risk groups includes “global risks, risk perceptions on macroeconomic conditions, financial market risks and institutional positions”.
  • The perception of risks on various fronts like domestic growth, fiscal, corporate sector and banks’ asset quality increased between April and October 2019.

As per the RBI’s “Financial Stability Report” India’s financial system remains stable notwithstanding weakening domestic growth

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