Grappling with stress, PSBs need to build buffers to absorb shocks: Report

Public sector banks (PSBs) need to improve performance and work to build buffers against disproportionate operational risk losses, according to the Financial Stability Report (FSR).

State-owned banks have been grappling with stressed loans and limited capacity to absorb further rise in slippages expected due to prolonged economic slowdown. 

In fact, the Reserve Bank of India’s (RBI’s) stress tests have projected a rise in gross non-performing assets of banks to 9.9 per cent by September 2020 from 9.3 per cent in September 2019.

According to the FSR, the regulator conducted macro stress tests for credit risks to assess the banking system’s