The Reserve Bank of India released the 20th issue of the Financial Stability Report (FSR). India's financial system remains stable notwithstanding weakening domestic growth; the resilience of the banking sector has improved following recapitalisation of Public Sector Banks (PSBs) by the Government. Risks arising out of global/domestic economic uncertainties and geopolitical developments, however, persist. Scheduled commercial banks' (SCBs) credit growth remained subdued at 8.7% year-on-year (y-o-y) in September 2019, though Private Sector Banks (PVBs) registered double digit credit growth of 16.5%. SCBs' capital adequacy ratio improved significantly after the recapitalisation of public sector banks (PSBs) by the Government. SCBs' gross non-performing assets (GNPA) ratio remained unchanged at 9.3% between March and September 2019. Provision Coverage Ratio (PCR) of all SCBs rose to 61.5% in September 2019 from 60.5% in March 2019 implying increased resilience of the banking sector. Macro-stress tests for credit risk show that under the baseline scenario, SCBs' GNPA ratio may increase from 9.3% in September 2019 to 9.9% by September 2020 primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth.
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