RBI(Reserve Bank of India) has released the half-yearly publication of the Financial Stability Report(FSR) 2023, September 2023 which assesses risks to financial stability and the resilience of the Indian financial system.
- The Reserve Bank of India (RBI) released the 28th edition of Financial Stability Report (FSR) on 28th Dec, 2023.
Highlights:
None of the Top 100 Borrower Accounts in the NPA Category for Scheduled Commercial Banks(SCBs)
The Credit of large borrowers has improved and it is welcoming that the top 100 borrower accounts do not fall in the NPA(Non-Performing Assets) category.The share of top 100 borrower accounts was increasing in the NPA category until March 2023 which has seen moderation during 2023-24.
- Their share in Scheduled Commercial Banks’ (SCBs) loans decreased to 15.9% as of September-end 2023, down from 17.2% as of March-end 2023.
ii.The reason is the improvement in Asset quality in the large borrower portfolio which contributed to the lowering of the share of large borrowers in GNPAs(Gross Non-Performing Assets) of SCB.
- Reserve Bank of India (RBI), the Gross Non-Performing Asset (GNPA) ratio for large borrowers, defined as those with aggregate fund-based and non-fund-based exposure of ₹5 crore and above, decreased to 3.8% as of September-end 2023, compared to 4.5% as of March-end 2023.
- In the large borrower accounts the proportion of standard assets to the total funded amount outstanding has improved over the last 3 years.
- In September 2023, large borrowers held 44.5% of SCBs’ loans, down from 46.4% in March 2023.
- Large borrowers’ GNPAs in SCBs decreased from 53.9% in March 2023 to 51.8%.
- Investment grade advances (rated BBB and above) constituted 90.3% of large borrowers’ total externally rated funded advances.
iii.The retail loan growth is greater than the borrowing by large borrowers.
- The gross advances to the large borrowers by SCB have declined further between March 2020 and September 2023.
RBI Report Finds Debt Fund AUM (Asset Under Management) of Rs.1.7- lakh Crore in Stress
According to a study by SEBI, Rs. 1.7 lakh crore of AUM of open-ended debt schemes of 17 mutual funds were under stress as of September.
- However, only 24 out of a total of 299 schemes were under stress as per the Financial Stability Report by RBI
- The survey was conducted for a total AUM of Rs.12.4 Lakh crore for all schemes, of which Rs.1.7 Lakh crore are stressed AUM of the open-ended debt schemes.
- The Asset management companies conduct stress testing of all open-ended debt schemes (except overnight schemes) every month according to the mandate by SEBI.
- And the stress testing is done by evaluating the impact of various risks including redemption risk which comes under Liquidity risk management.
- Liquidity risk management for open-ended debt schemes includes RaR(Redemption at risk) and CRaR(Conditional Redemption at risk ) which need to be maintained above the threshold limit. And then the backtesting of these ratios is done every month by mutual funds companies.
Note: An open-ended mutual fund scheme does not have a maturity or lock-in period, which means investors can stay invested for as long as they want. Investors can buy or sell open-ended mutual fund scheme units at any anytime on any working day without any restrictions.
Bank’s Capital Adequacy Ratio to Fall 71 bps on Higher Risk Weight
According to the RBI Financial Stability Report, the Capital adequacy ratio may decline to 71 basis points (BPS).
- The increase in risk weights for personal loans and loans to non-banking financial companies (NBFCs) can lead to the decline.
- After adjusting the risk weighs, the Capital to-risk-weighted asset ratio (CRAR) of the SCB is estimated to decline by 71 bps to 16 % and the Common Equity tier 1(CET 1) may fall by 58 bps to 13.2 %
- As of September, The CRAR and CET1 ratio of SCBs stood at 16.8 and 13.7 respectively
About Reserve Bank of India
Governor: Shaktikant Das
Headquarters: Mumbai, Maharashtra
Established: 1 April, 1935
