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Informist, Monday, Jun. 30, 2025

 

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--RBI report:Robust capital buffers, low NPA, strong earnings bolstering bks 
--RBI report: Stress tests confirm most banks have adequate capital buffers 
--RBI report: Scheduled commercial banks' gross NPA ratio 2.3% as of March 
--RBI report: Scheduled commercial banks' net NPA ratio 0.5% as of March 
--RBI report: Stress test show bks' capital 17.0% by March 2027 in base case 
--RBI report: Banks' capital ratio at 17.2% in March 
--RBI report:Stress test show bks' capital 14.2% by March 2027 in worst case 
--RBI report:Stress test show bks' gross NPA 2.5% by March 2027 in base case 
--RBI report: Stress test show bks' gross NPA 5.6% by Mar 2027 in worst case 

 

MUMBAI – Aggregate capital levels of scheduled commercial banks are likely to remain above the minimum regulatory requirements even under adverse stress scenarios, the Reserve Bank of India said in its June edition of the Financial Stability Report on Monday. Robust capital buffers, low non-performing loans, and strong earnings have maintained the resiliency of scheduled commercial banks, the report said. 

 

The aggregate capital to risk-weighted assets ratio of banks is seen falling marginally to 17.0% by March 2027 from 17.2% in March 2025 under the base case scenario, according to the macro stress tests conducted on a sample of 46 scheduled commercial banks. The baseline scenario is derived from the forecasted path of macroeconomic variables, the central bank said. 

 

Macro stress tests aim to assess the resilience of the banking system to macroeconomic shocks. The tests project capital ratios of banks under three scenarios - a baseline and two adverse macro scenarios over two years, incorporating credit risk, market risk and interest rate risk in the banking book in the framework.

 

In the worst-case scenario, when there are major geopolitical risks and financial market volatility increases, the risk-weighted assets ratio of banks may decline to 14.2% by March 2027, the report shows. This scenario assumes that the RBI would tighten the monetary policy, and the spread between lending and policy rate widens due to market instability, the report said. 

 

In the case of a global growth slowdown, leading to easing in monetary policy to support growth, the risk-weighted assets ratio of banks may decline to 14.6% by March 2027. While the ratios would fall in all three scenarios, it is not likely to fall below the minimum regulatory requirement of 9% in any case, the report said.

 

The aggregate gross non-performing assets ratio is seen marginally rising to 2.5% in March 2027 from 2.3% in March 2025 under the base case scenario. However, should there be heightened geopolitical risks, the gross non-performing assets ratio may rise to 5.6%. In the case of a slowdown in global growth, the ratio is likely to rise to 5.3%. The net non-performing ratio of scheduled commercial banks was 0.5% in March 2025.

 

Further, the liquidity stress test results showed that the aggregate liquidity coverage ratio of scheduled commercial banks would fall to 124.5% from the base case scenario of 132.1% in one of the stress test scenarios. In another scenario, the liquidity coverage ratio could fall to 117.9%. Except for one bank, all others would be able to maintain the liquidity coverage ratio above the minimum requirement of 100% in both scenarios. One bank might marginally fall short in one of the scenarios, the report said.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Sourabh Kumar

Edited by Saji George Titus

 

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