• UGI USER
  • Dec 30, 2023
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RBI’S FINANCIAL STABILITY REPORT HIGHLIGHTS

Why in the News?

  • RBI’s financial stability reports highlights , Healthy balance sheets of financial institutions, moderating inflation, and fiscal consolidation contribute to stability.
Source: The Hindu

Key Highlights:

  • Gross Non-Performing Assets (GNPA) ratio reaches a multi-year low at 3.2%, and net non-performing assets (NNPA) ratio stands at 0.8% in September 2023.
  • Stress tests projects , Capital to Risk-weighted Assets Ratio (CRAR) at 14.8% in September 2024.
  • GNPA ratio for all banks may improve to 3.1% by September 2024 under baseline scenarios.

About Financial Stability Report:

  • The FSR is a report  released by RBI that reflects the combined evaluation of the Sub-Committee of the Financial Stability and Development Council (FSDC), led by the RBI Governor.
  • Released biannually.
  • Provides an assessment of risks to financial stability and evaluates the resilience of the financial system.
Key Terms

Non-Performing Asset (NPA)

·   NPA categorizes loans or advances in default or arrears on scheduled payments.

·   Debt is marked as non-performing when payments remain overdue for at least 90 days.

·   GNPA : Gross non-performing assets represent the total defaulted loans acquired from financial institutions.

·   NNPA : Net non-performing assets are the realized amount after deducting provisions from the gross non-performing assets.

Capital Adequacy Ratio (CAR)

·   CAR, or Capital-to-Risk Weighted Asset Ratio, is the ratio of a bank’s capital to its risk-weighted assets and current liabilities.

·   Decided by central banks, it prevents excessive leverage by commercial banks, safeguarding against insolvency risks.