All Indian banks are having strong and also enough capital and liquidity buffers to withstand future shocks as the impact of the Covid 19 pandemic on their balance sheets has not created a severe impact.
The concern in near future to Banks is that the non-performing assets or NPA may hike to 9.8 percent by end of 2022, which was earlier around 7 percent at the end of 2020 March, as per the report.
The damage made to Indian financial institutions on their balance sheets has been very much less, compared to all of the earlier projections, and also banks have sufficient funds and liquidity buffers to handle the future shocks, according to a report released by the Reserve Bank of India (RBI).
The Reserve Bank of India publishes the Financial Stability Report bi-annually on behalf of the Financial Stability and Development Council of India. It is an umbrella group of regulators which gives a detailed and complete study on the status and health of the Indian financial system.
The report by the Reserve Bank of India also said that all commercial banks in India were having huge bad loans till March 2020. Bad loans were rated at 8.5 percent.
Credit must be given to all commercial banks who performed really well even in Covid virus time and brought the rate to 7.5 percent.
The central bank also said that downside risks remained, especially from loans given to small and medium enterprises. Pending or bad loan growth will also adversely impact the net interest and income levels of banks.
An important point to keep under the eye is that the lenders are having very much sufficient capital even under a stress scenario, it stated.
The predictions and forecasts were very high when it was released earlier in January 2021. It initially reported that the bad loans will be doubled in the upcoming financial year.
RBI Governor Shaktikanta Das wrote in the foreword report that capital and liquidity buffers are having reasonable resilience to withstand future shocks, as the stress tests presented in this report presented.
It was also stated by the governor that there are too many risks waiting ahead that have emerged on the horizon including the risks of further covid virus waves in the pandemic, inflationary pressures, international commodity prices, cyber attacks, data leak, or the breach, global spillovers.
The governing policy support has helped and molded the impairment of balance sheets of banks even though the damage in economic activity brought on by waves of the virus.
