18 banks may fail to maintain required CRAR, says RBI

The Reserve Bank of India’s (RBIs) financial stability report has painted a grim picture of the Indian banking sector in terms of availability of required capital.

“Sensitivity analysis indicates that 18 SCBs, including all public sector banks under Prompt Corrective Action (PCA-PSBs), may fail to maintain the required CRAR under a 2 standard deviation (SD) shock to the GNPA ratio,” the central bank said in the report released on Monday.

In fact, the number of banks that have slipped below the required capital adequacy has gone up to five from one in the first six months of the current financial year.

According to the stress tests conducted by the central bank, as many as eight PSBs under prompt corrective action framework (PCA-PSBs) may have CRAR below the minimum regulatory level of 9% by March 2019 without taking into account any further planned recapitalisation by the government. Together with these, a total of 9 banks may have CRAR below 9% under the baseline scenario.

“However, if macroeconomic conditions deteriorate, ten out of eleven PCA-PSBs may record CRAR below 9% under the severe macro stress scenario. Together with these banks, 13 banks may have CRAR below 9%,” the apex bank said.

The minimum requirement of capital adequacy in Indian banks is 9%, compared with global standards of 8%.

Further, 14 banks are having a capital adequacy ratio between 9% and 12%.

On the bad loans front, the numbers suggest the deterioration in terms of the Gross NPAs. The number of banks with gross NPAs of less than 10% has come down to 33 in September 2018 from 35 in March 2018. On the other hand, the banks having gross NPAs in excess of 10% has gone up to 22 from 20, during the same period of time.

However, overall asset quality showed improvement with SCBs’ gross non-performing assets (GNPA) ratio declining from 11.5% in March 2018 to 10.8% in September 2018.