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Banks have enough capital to meet severe stress: RBI – Times of India


Mumbai: The RBI has said that banks are better positioned than before in managing stress in their balance sheet in view of higher capital buffers, better recoveries and return to profitability. At an aggregate level, the RBI has said that the capital of banks is enough to meet a severe stress scenario.
In its annual report released on Thursday, the RBI said that it has conducted stress tests on banks to check how prepared they are in a crisis. Although until last year many public sector banks were reporting losses due to provisions for bad loans, several have turned the corner and have reported profits for FY21.
In its annual report, the central bank has stressed the importance of vaccinations for recovery. It said that with cases beginning to drop recently, the macro-economic costs of this wave can be limited to Q1FY22 with possible spillovers into July.
Given the risks arising out of the second wave, the RBI has asked banks to closely monitor their bad loans and prepare themselves for higher provisioning. “With the lifting of the interim stay on asset classification standstill by the Hon’ble Supreme Court on March 23, 2021, banks’ asset quality will need to be closely monitored in coming quarters, with preparedness for higher provisioning,” it said.
The central bank has said that it has taken several measures to improve financial market infrastructure. This includes creation of a “request for quote option for illiquid government securities in the central platform for dealing in G-secs”. As part of efforts under way to increase access to government securities market for retail investors, the CDSL was granted in-principle approval to develop an IT-based solution for enabling retail investors to directly access the government securities market through their demat accounts. The RBI also said that it was improving the supervisory framework for non-banking finance companies and creating a central fraud registry.





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