Banking crisis could dent investor confidence

But bear in mind that the government will surely organise a bailout in such a scenario

There is a telling sentence in the Reserve Bank of India’s (RBI) latest Financial Stability Report: “Macro stress tests for credit risk indicate that the Gross Non Performing Assets (GNPA) ratio of all Scheduled Commercial Banks (SCBs) may increase from 8.5 per cent in March 2020 to 12.5 per cent by March 2021 under the baseline scenario; the ratio may escalate to 14.7 per cent under a very severely stressed scenario.” (GNPA is the total quantum of NPAs while net NPAs are NPAs which are not provisioned.)

It’s likely to be a “severely stressed scenario”, given the economic collapse. History shows