The Nifty Bank index fell 2.78% to 22,032.80 after the RBI said that the gross NPAs of banks could escalate to 14.7% by March 2021 under severely stressed scenario.
Among the private sector banks, Yes Bank (down 9.89%), ICICI Bank (down 5.04%), Bandhan Bank (down 3.21%), HDFC Bank (down 3.11%), Axis Bank (down 3.07%), IndusInd Bank (down 2.62%), Federal Bank (down 2%), City Union Bank (down 1.9%) and RBL Bank (down 1.89%) declined.
Among the public sector banks, IDBI Bank (down 3.65%), Punjab & Sind Bank (down 3.55%), Indian Bank (down 3.25%), UCO Bank (down 3.19%), Union Bank of India (down 2.95%), Central Bank of India (down 2.59%), Bank of India (down 2.53%), Punjab National Bank (down 2.38%), Bank of Baroda (down 2.26%), Canara Bank (down 1.78%), State Bank of India (down 1.62%) and Andhra Bank (down 1.42%) tumbled.
The Reserve Bank of India (RBI) released its 21st Financial Stability Report on Friday, 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 in the context of contemporaneous issues relating to development and regulation of the financial sector.
In response to COVID-19, a combination of fiscal, monetary and regulatory interventions on an unprecedented scale has ensured normal functioning of financial markets. The over-leveraged non-financial sector, simmering global geopolitical tensions, and economic losses on account of the pandemic are major downside risks to global economic prospects.
Actions undertaken by financial sector regulators and the Government to mitigate the impact of COVID-19 eased operational constraints and helped in maintaining market integrity and resilience in the face of severe risk aversion. Bank credit, which had considerably weakened during the first half of 2019-20, slid down further in the subsequent period with the moderation becoming broad-based across bank groups.
The capital to risk-weighted assets ratio (CRAR) of Scheduled Commercial Banks (SCBs) edged down to 14.8% in March 2020 from 15% in September 2019 while their gross non-performing asset (GNPA) ratio declined to 8.5% from 9.3% and the provision coverage ratio (PCR) improved to 65.4% from 61.6% over this period.
Macro stress tests for credit risk indicate that the GNPA ratio of all SCBs may increase from 8.5% in March 2020 to 12.5% by March 2021 under the baseline scenario; the ratio may escalate to 14.7% under a very severely stressed scenario.
Network analysis reveals that total bilateral exposures among entities in the financial system declined marginally during 2019-20; with the inter-bank market continuing to shrink and with better capitalisation of public sector banks (PSBs), there would be reduction in contagion losses to the banking system under various scenarios in relation to a year ago. Going forward, the major challenges include pandemic-proofing large sections of society, especially those that tend to get excluded in formal financial intermediation.
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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
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July 27, 2020 at 01:23PM
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Bank stocks correct after RBIs warning on bad loans - Business Standard
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