Mumbai: Under the comparative scenario, gross non-performing assets (NPAs) of banks may rise to 12.5 percent by the end of the current financial year. It was 8.5 percent in March 2020. This has been said in the Financial Stability Report of the Reserve Bank (RBI). According to the report, in the scenario of very severe pressure, the gross NPA can go up to 14.7 percent by March 2021.
It added, “The pressure test indicates that the gross NPA ratio of all scheduled commercial banks may increase from 8.5 percent in March 2020 to 12.5 percent in March 2021. This assessment has been done on the basis of comparative scenario. “
According to the report, “If the macroeconomic environment worsens, the ratio may increase to 14.7 per cent in a scenario of very severe pressure.”
On what basis was this estimate made?
It said that in the backdrop of macroeconomic shaking, the strength of the country’s banks was tested. This test was done through a large pressure test. In this, it was assessed that what would be the impact of the shock or pressure on the books of the banks. In addition, capital (CRAR) in the form of Gross NPA and Risk Weight Asset Ratio were assessed. It calculated the scenario under three conditions… medium, severe, and very severe… with comparative grounds.
According to the report, the comparative scenario has been estimated based on estimated values of other macroeconomic variables including GDP (GDP) growth, gross fiscal deficit as a ratio of GDP, and inflation based on the consumer price index.
