Important highlights of Financial Stability Report (FSR) released by the Reserve Bank of India (RBI) on 28th of December 2023.


 What is Financial Stability Repot (FSR)?

The financial stability report released by RBI assesses the risk to financial stability and resilience of the Indian financial system.

Some of the highlights of the report are as follows.

  • The report highlighted that no top 100 borrowers or the large borrowers fell under the Non-performing Assets (NPA) category. NPA are those loans or advances that are in default or in arrears. While the share of Top 100 borrowers in NPA category was increasing until March 2023, it came to moderation 2023.
  • The contribution of Top 100 borrowers' loan in SCBs reduced to 15.9% in September 2023, down from 17.2% in March 2023.
  • The improved asset quality of large borrowers' portfolio reduced the GNPA (Gross Non-Performing Asset) share in Scheduled Commercial Banks (SCBs), which decreased to 51.8% from 53.9%.
  • The report also highlighted that the ratio of standard assets to total funded amount in large borrowers has improved over the last three years.
  • The GNPA ratio (Gross Non-Performing Assets ratio), as defined with the aggregate fund based and non-fund based amount that are Rs. 5 crore and above, has decreased to 3.8% in Sep 2023, down from 4.5% in March 2023.
  • Large borrowers' share in SCBs loan has also decreased from 46.4% in March 2023 to 44.5% in Sep 2023. 
  • 90.3% of the total funded advances to large borrowers were towards investment grade advances.
  • The retail loan growth was more than that of the large borrowers' contribution to SCBs loan.
  • The report also found that debt fund AUM (Assets Under Management) worth Rs. 1.7 Lakh Crore were under stress. AUM is the total market value of the assets that are managed by mutual funds or any other financial institutions or investment companies on behalf of the client is called AUM.
  • A recent study conducted by SEBI found that the AUM of open-ended debt schemes of 17 mutual funds worth Rs. 1.7 lakh Crore were under stress. And RBI found that out of 299 schemes (worth Rs. 12.4 lakh crore), only 24 schemes (Rs.1.7 Lakh crore) were stressed AUM of the open-ended debt schemes. 
  • Open-ended debt schemes are those which don't have the maturity period. The investors can stay invested as long as they wish or withdraw the amount whenever they wish to. According to SEBI, the investment management companies should conduct the stress testing for all open-ended debt schemes every month using the risk assessment techniques like Redemption at Risk, conditional redemption at risk which falls under the Liquidity risk management.
  • RBI estimated that the banks' capital adequacy ratio to fall by 71 basis points, which is due to the increase in risk weights of personal loans and loans to Non-Banking Financial Companies (NBFC). 
  • It also estimated the Common Equity tier 1 (CET 1) to fall by 58 bps. The Capital to Risk Weighted Asset Ratio (CRAR) and CET 1 as of September 2023 is 16.8% and 13.7% respectively.




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