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Stress tests show Indian banks can tackle 'severe' instability: RBI Guv Das

RBI governor Shaktikanta Das said that the gross NPAs of Indian banks stood at 4.41% as on December 31, 2022

RBI

RBI

Raghav Aggarwal New Delhi

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Stress tests show that Indian banks can maintain capital adequacy above minimum requirement even in severe distress, Shaktikanta Das, governor of the Reserve Bank of India (RBI), said at an event today.

Speaking at the Global Conference on Financial Resilience in Mumbai, Das said, "The Indian banking system has remained resilient and has not been affected adversely by the recent spurts of financial instability seen in some advanced economies."

"This also comes out clearly in our recent stress test results. The gross non-performing assets (NPA) ratio for the scheduled commercial banks (SCBs) in India was 4.41 per cent at the end of December 2022 down from 5.8 per cent on March 31, 2022, and 7.3 per cent on March 31, 2021," he said.

He also added that the capital-to-risk-weighted assets ratio (CRAR) at 16.1 per cent at the end of December 2022 was above the minimum regulatory requirements. Under Basel-III norms, banks are supposed to maintain their CRAR at 9 per cent or above.

"Macro stress tests for credit risk indicate that SCBs will be able to comply with minimum capital requirements even under severe stress situations," Das said.

However, he added that the recent events in the banking landscape of the US and Europe suggest that risks in a bank could crop up from the segments from its balance sheet, which might have been considered relatively safer earlier.

"We expect the management and board of directors of each bank to continually assess the financial risks and focus on adequate capital and liquidity buffers even beyond the minimum regulatory requirements," he said.

"RBI remains committed to future-proofing of the Indian financial system, and to provide support for its sustainable growth," he added.

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First Published: Apr 27 2023 | 11:52 AM IST

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