The Systemic Risk Survey, the second in the series conducted by the Reserve Bank, revealed that financial sector
stakeholders continued to repose confidence in the stability of the domestic financial system. The level of confidence,
however, seems to have diminished since the previous Survey. Market volatility emerges as the chief concern of
respondents along with the risks associated with high levels of fiscal and current account deficits. Policy risk
(including perceived slowdown in policy making) also emerges more prominently in the current Survey. The
Systemic Liquidity Indicator pointed to some stress in liquidity conditions during March and April as the
banking system’s liquidity deficit remained consistently in excess of the Reserve Bank’s stated comfort zone.
Some concerns emerged from the rising trend of short term borrowings of banks especially as the systemic
importance of some banks has increased over the last one year. Insurance companies and Mutual Funds (MFs)
remain vulnerable to contagion risks from the banking system while banks continue to rely on these segments
for their funding needs. The results of a series of stress tests carried out to study the impact of various adverse
macro-financial shocks on the health of banks showed that the banking system remained resilient even under
extreme stress scenarios. An assessment of the stability of the banking system conducted through a series of
Banking Stability Measures (BSMs) indicated that distress dependencies amongst banks had increased in
recent periods but remained well below the levels observed during the global financial crisis in 2008-09.
Systemic Risk Survey
5.1 The first Systemic Risk Survey was conducted by
the Reserve Bank in October 2011 to capture the views
of market participants and other stakeholders on the
aggregate risks facing the financial system. The second
Survey was conducted in April 2012.
Volatility in the financial markets voted the primary
concern
5.2 The second Survey reveals that stakeholders
perceive volatility in the markets as the single most
important risk facing the
financial system, followed
by global and fiscal risks. Asset quality, which was
perceived to be the most significant risk in the previous
Survey, emerged as the second most significant risk in
this Survey. Respondents felt that risks from the twin
deficits and from perceived slowdown in policy making
have increased sharply since the last Survey (Chart 5.1 and Chart 5.2)1.
Risks emanating from inflation most difficult for the
country to manage
5.3 Survey respondents felt that managing inflation continues to be the biggest challenge for the country (Chart 5.3). For Survey respondents from financial
institutions, asset quality and funding risks remained
the most difficult to manage (Chart 5.4).
Perceived risks to domestic financial stability increased
5.4 About 43 per cent of the respondents felt that
the probability of a systemic event impacting the global
financial system in the short term is ‘high’, while 46
per cent thought that the probability was ‘high’ in the
medium term. This represents a departure from the
earlier Survey where over 60 per cent of the participants
felt that the probability of a systemic event impacting
the global
financial system in the short run was ‘high’.
Respondents felt that the risks to the stability of the
domestic financial system in the medium term had
increased (Charts 5.5 to Chart 5.8).
5.5 The Survey result also revealed that an increasing
number of respondents felt that the impact of a global
systemic event on the domestic financial system will be
‘high’ (Table 5.1).
Table 5.1: Impact of a Global Systemic Event on the
Domestic Financial System (Per cent) |
|
Very High |
High |
Moderate |
Low |
No Impact |
October 2011 |
8 |
35 |
47 |
10 |
0 |
April 2012 |
12 |
43 |
35 |
10 |
0 |
5.6 The Survey respondents continued to repose
confidence in the stability of the domestic financial
system with 25 per cent of the respondents being ‘very
confident’ in the stability of the domestic financial
system while another 67 per cent of the respondents
were ‘fairly confident’. The level of confidence had,
however, diminished relative to October 2011, when
the first Survey was conducted. More than half of the
respondents were ‘not very confident’ in the stability
of the global financial system (Table 5.2).
Table 5.2: Confidence in the Global and Domestic Financial Systems
(Per cent) |
|
Global Financial System |
Domestic Financial System |
|
Oct-2011 |
Apr-2012 |
Oct-2011 |
Apr-2012 |
Complete confidence |
0 |
0 |
0 |
1 |
Very confident |
1 |
4 |
39 |
24 |
Fairly confident |
45 |
40 |
58 |
67 |
Not very confident |
52 |
54 |
3 |
8 |
No confidence |
2 |
2 |
0 |
0 |
Systemic Liquidity Indicator
Liquidity deficit remained outside Reserve Bank’s
stated comfort zone
5.7 During the period under review, the banking
system’s liquidity deficit remained consistently in
excess of the Reserve Bank’s stated comfort zone, driven
mainly by transient factors like build-up of Government
cash balances, rise in currency in circulation, advance
tax outflows and other factors such as forex market
operations by the Reserve Bank.
5.8 The Reserve Bank began injecting liquidity into
the system through Open Market Operations (OMOs)
from November 24, 2011 and injected around `1,247
billion of primary liquidity during 2011-12. The average
daily net liquidity injection through the Liquidity
Adjustment Facility (LAF) during the Q3 of 2011-12 was `874 billion.
5.9 During Q4 of 2011-12, the liquidity position
tightened further because of forex market operations
and sizeable build up of Government cash balances
(especially in mid March 2012). The Reserve Bank
reduced the Cash Reserve Ratio by 50 bps from January
28, 2012, and further by another 75 bps from March
10, 2012, thereby injecting primary liquidity to the
extent of about ` 800 billion. The Reserve Bank also
re-introduced additional Repo under LAF (Second LAF
Repo) on reporting Fridays from February 10, 2012 to
provide further comfort to market participants. The
average daily net liquidity injection through the LAF
during the Q4 was `1424 billion.
Exceptionally high injection of primary liquidity was
warranted
5.10 The net liquidity injection through LAF reached
an all-time high on March 30, 2012 (`2027.85 billion)
as banks tried to shore-up their balance sheets and
front-load cash reserves. During March 2012, there
was injection of liquidity under the Marginal Standing
Facility (MSF) on nine occasions. With a view to
providing flexibility to scheduled commercial banks
(SCBs), the Reserve Bank conducted additional LAF-Repo
on March 30, 2012, and LAF and MSF on March 31, 2012.
On March 30, 2012, the four-day call money rate closed
at a three-year high of 15 per cent on funds constraint
in the debt market. In order to provide greater liquidity
cushion, the Reserve Bank also raised the borrowing
limit of SCBs under the MSF from one per cent to two per
cent of their Net Demand and Time Liabilities (NDTL).
The deficit liquidity condition persisted in May 2012,
partly due to the rise in currency in circulation.
5.11 The Systemic Liquidity Index (SLI) introduced
in the FSR for December 20112, is based on a multiple
indicator approach and aims to capture the overall
funding scenario in the financial system viz., the
banking, non-banking financial and the corporate sectors
and includes liquidity in foreign exchange market. While
it rose in March 2012, it remained well below the levels
of stress witnessed in 2008 in the post-Lehman crisis
period. In April 2012, the indicator eased slightly (Chart
5.9).
Network Analysis of the Financial System3
5.12 Network analysis of the financial system enables
gauging the interconnectedness in the banking / financial
system and assessing the risks arising out of possible
contagion. It forms a critical part of the toolkit for
macroprudential surveillance.
5.13 The size of the interbank market decreased
marginally (2.8 per cent) between March 2011 and March
2012. The sharpest decline was evidenced in the case of
the old private sector banks, which constitute 3 per cent
of the entire market (Chart 5.10 and Chart 5.11).
Trends in the short term borrowing of banks could
engender liquidity risks…
5.14 An analysis of trends in the short term inter bank
borrowing of banks indicated that such borrowings,
which consists mostly of certificate of deposits (CDs),
form a sizeable portion of the funds raised in the
interbank market. The ratio of the banking sector’s short
term interbank borrowings to total borrowings stands at
around 27 per cent. Further, short term borrowings have
grown by nearly 40 per cent over a period of one year,
even as the overall quantum of inter bank borrowing
has fallen. As short term borrowings typically engender
rollover risks, trends in this regard will need to be
monitored (Chart 5.12).
5.15 Short term inter bank borrowings as a proportion
of total outside liabilities of banks (at about 3 per cent)
was not, however, very significant. Nevertheless, there
are some outlier banks which are heavily reliant on such
borrowings and trends in this respect warrant greater
attention (Chart 5.13).
The banking system continues to remain interconnected
5.16 The country’s banking system displays a
significant degree of interconnectedness. Together with
this, a distinctly tiered structure of connectivity, where
some banks are more connected than others, is also
observed. An analysis of interconnectedness using the
network model reveals that the level of connectivity
in the system has increased slightly over the last year.
(Box 5.1)
Box 5.1: Network Statistics of the Banking System
The network model uses various statistical measures to gauge the level of interconnectedness in the system. Some of the most important are as follows:
-
Connectivity: This is a statistic that measures the extent of links between the nodes relative to all possible links in a complete graph.
-
Cluster Coefficient: Clustering in networks measures how interconnected each node is. Specifically, there should be an increased probability that two of a node’s neighbours (banks’ counterparties in case of the financial network) are also neighbours themsleves. A high clustering coefficient for the network corresponds with high local interconnectedness prevailing in the system.
-
Shortest Path Length: This gives the average number of directed links between a node and each of the other nodes in the network. Those nodes with the shortest path can be identified as hubs in the system.
-
In-betweeness centrality: This statistic reports how the shortest path lengths pass through a particular node.
-
Eigenvector measure of centrality: Eigenvector centrality is a measure of the importance of a node (bank) in a network. It describes how connected a node’s neighbours are and attempts to capture more than just the number of out degrees or direct ‘neighbours’ a node has. The algorithm assigns relative centrality scores to all nodes in the network and a bank’s centrality score is proportional to the sum of the centrality scores of all nodes to which it is connected. In general, for an NxN matrix there will be N different eigenvalues, for which an eigenvector solution exists. Each bank has a unique eigenvalue, which indicates its importance in the system. This measure is used in the network analysis to establish the systemic importance of a bank and by far it is the most crucial indicator.
The trends in the aforesaid network statistics for the Indian banking sector indicate that the level of interconnectedness has remained broadly stable over the last five quarters though some statistics point to a marginal increase in connectivity.
|
Mar 2011 |
Jun 2011 |
Sep 2011 |
Dec 2011 |
Mar 2012 |
Connectivity |
28.1 % |
27.8 % |
28.7 % |
26.4 % |
29.1 % |
Cluster Coefficient |
41.4 % |
41.1 % |
42.7 % |
42.0 % |
41.4 % |
Average Shortest Path Length |
1.73 % |
1.77 % |
1.73 % |
1.86 % |
1.74 % |
Average In-betweeness centrality |
53.38 % |
59.96 % |
59.06 % |
68.66 % |
53.44 % |
Eigenvalue |
65 % |
61 % |
57 % |
64 % |
59 % |
Eigenvector centrality of dominant node |
0.15 |
0.15 |
0.15 |
0.15 |
0.16 |
Source: RBI staff calculations. |
The systemic importance of some banks may have risen…
5.17 The majority of the banks appearing in the inner core of the network of the Indian banking system remained the same over the last one year.4 However, the number of net borrowers in the inner core has increased during this period, pointing to increased systemic importance of these banks. (Charts 5.14 and Chart 5.15)
... as is also indicated by the results of contagion
analysis
5.18 A contagion analysis using the network model
reveals that the maximum possible loss to the banking
system due to the failure of the ‘most connected’ bank
has risen from 12 per cent of the capital of the banking
system to over 16 per cent over the four quarters of 2011
(Chart 5.16). The average loss caused by the failure of
the three ‘most connected’ banks has also increased
(Chart 5.17). The contagion risks, however, appear to be
confined to a few banks (Chart 5.18). Financial stability
considerations, therefore, warrant that the risks posed
by the increased interconnectedness of the few banks in
the inner core need to be carefully monitored, through,
inter alia, rigorous microprudential supervision of these
entities.
Chart 5.16: Contagion due to the failure of a top net borrower5 |
|
The major lenders in the financial system remain
vulnerable to contagion risks
5.19 The network analysis of the broader financial
system, presented in the previous FSR, had thrown up
the interconnectedness among the banking, insurance
and the mutual funds segments of the financial system.
The analysis revealed that the largest net lenders in the
system were the insurance companies and the Asset
Management Companies (AMCs), while the banks
were the largest borrowers. This renders the lenders
vulnerable to the risk of contagion from the banking
system. The random failure of a bank which has large
borrowings from the insurance and mutual funds
segments of the financial system may have significant
implications for the entire system (Charts 5.19 and 5.20).
Banks reliant on the insurance sector and mutual
funds, specially for short term funds…
5.20 SCBs were considerably dependent on borrowings
from insurance companies and mutual funds. As
at end-March 2012, nearly 27 per cent of the entire
intra-financial system borrowings by banks was from
insurance companies while another 37 per cent was
from mutual funds. The reliance is particularly high in
case of private sector banks (Table 5.3). Such borrowings
from mutual funds and insurance companies constitute
6.8 per cent of the banking systems’ outside liabilities.
Table 5.3 Contribution of Insurance companies and
MFs to Banks Borrowings |
|
Borrowings/Funds
received from the
Insurance Sector |
Borrowings/Funds
received from MFs |
`
billion |
As percentage
of total
borrowing |
`
billion |
As percentage
of total
borrowing |
Banking Sector |
1828 |
26.5 |
2591 |
37.1 |
Public Sector Banks |
1153 |
27.2 |
1761 |
41.5 |
Old Private Sector Banks |
60 |
25.2 |
185 |
77.7 |
New Private Sector Banks |
583 |
40.7 |
631 |
44.2 |
Foreign Banks |
32 |
2.9 |
14 |
1.3 |
Source: RBI staff calculations |
5.21 The bulk of the borrowing by SCBs from the
mutual funds (81 per cent) consists of short term funds,
which could engender rollover and liquidity risks. These
borrowings almost entirely comprise CD issuances.
In contrast, borrowings from insurance companies
primarily have a longer maturity, with over 88 per cent
of the borrowings carrying a remaining maturity of at
least one year (Table 5.4).
Table 5.4: Percentage distribution of Insurance companies and MFs in
investment /lending in the banking system |
(Per cent) |
|
Insurance Companies |
Mutual Funds |
Short
term |
Long
term |
Total
|
Short
term |
Long
term |
Total
|
Banking sector |
11.6 |
88.4 |
100 |
81.0 |
19.0 |
100 |
Public Sector Banks |
8.2 |
54.9 |
63.1 |
58.2 |
9.8 |
67.9 |
Old Private Sector Banks |
1.2 |
2.0 |
3.3 |
5.8 |
1.3 |
7.1 |
New Private Sector Banks |
1.5 |
30.4 |
31.9 |
16.8 |
7.6 |
24.4 |
Foreign Banks |
0.6 |
1.1 |
1.8 |
0.2 |
0.3 |
0.6 |
Source: RBI staff calculations |
Banking Stability Measures and Estimation of Expected
Shortfall
5.22 The stability of banking system was studied
through various Banking Stability Measures, which
gauge the impact of distress in one bank on the rest
through direct and indirect links. For assessing these
dependencies, the financial system is modeled as
a portfolio of a specific group of banks (Segoviano
and Goodhart, 2009). The model uses the Banking
System’s Portfolio Multivariate Density (BSMD)6, which
characterises both the individual and joint asset value
movements of the portfolio of banks. The BSMD is
recovered from the Probabilities of Distress (PoDs) of
banks under analysis, which is observed empirically
based on 99 per cent Value at Risk (VaR)7 of daily return
on banks’ equity prices.
Common distress in the system: JPoD and BSI
5.23 The probability of distress of the entire banking
system, as measured by Joint Probability of Distress
(JPoD), has been showing an upward trend over the
last two years, though the probability continued to
be low when compared to the level seen during the
2008-09.The Banking Stability Index (BSI), which
measures the expected number of banks which could
become distressed given that at least one bank becomes
distressed, declined from the highs registered during
2008-09 till end-2010. Thereafter, it has been showing
an increasing trend (Chart 5.21).
5.24 Trends in both JPoD and BSI indicate that interdependencies
among banks have risen in recent times
though they remain much below the level seen during
the global financial crisis.
Distress between specific banks: Toxicity &
Vulnerability Index
5.25 The distress between specific banks has been measured based on Toxicity Index and Vulnerability Index8. As in the case of common distress indices, both the Toxicity and Vulnerability indices have shown a declining trend since the global financial crisis but the indices have been rising in recent periods, especially since 2011. (Charts 5.22 and 5.23).
Cascade effects due to distress in a specific bank
5.26 Cascade effects are a measure of the probability
of one or more banks becoming distressed, given that a
specific bank becomes distressed. The measure reflects
the systemic importance of a bank. Though these
conditional probabilities do not imply causation; these
can provide important insights into systemic interlinkages
among the banks. The cascade probabilities
show that the Indian banking system is highly
interlinked and had a very high distress dependency
during the financial crisis. This effect decreased in 2010,
but has shown an increasing trend in recent periods
(Chart 5.24).
Domino Impact on the System: Cascade Effect
5.27 The systemic importance and ‘domino’ effect
of a specific bank can be quantified as the likelihood
of distress in the system dependent on distress in the
bank (Chart 5.25). The domino impact for failure of the
entire banking system has increased marginally in recent
times.
Expected Shortfall
5.28 The banking system’s Expected Shortfall (ES)9,
which had a declining trend during 2008 to 2010, has
been increasing since 2011. The ES was estimated to
be around 8.5 per cent of total assets of the banking
system in December 2008. Since then, the ES had
declined significantly. However, beginning 2011, it
has been showing an increasing trend, though the ES
remains much below the levels observed during the
global financial crisis. During March 2012, the ES stood
at 3.4 per cent of total assets. Projected values of the ES
for the coming quarters indicate that the shortfall may
increase marginally (Chart 5.26).
Macro stress testing10
5.29 A series of macro stress tests was carried out
to study the impact of various adverse macro shocks
on banks’ credit quality. Four different econometric
tools were used for the purpose. Apart from tests
conducted at the system level, the exercise was also
performed at bank-group and sectoral levels. In previous
FSRs, the stress tests were conducted using various
classical multivariate regressions. To ensure that the
stress testing exercise takes cognisance of the tail
events, quantile regression has also been adopted (Box
5.2). An assessment of systemic risk under different
macroeconomic shocks from complementary angles was,
thus, possible.
Box 5.2: Macro Stress Test - Quantile Regression Approach
The macro stress test is a tool to assess the vulnerability
of the banking system to extreme but plausible adverse
macroeconomic shocks. The stochastic relationship between
banking stability, typically taken as a credit risk indicator
defined by non-performing advances ratio or slippage ratio, and
macro variables is established through statistical/econometric
models.
The results presented in previous FSRs were based on stress
tests conducted using the techniques of multivariate logit
regression, multivariate regression and multivariate panel
regression. However, these classical regression analyses have
their own limitations. First, they estimate the conditional mean
of the dependent variable for the given set of independent
variables (regressors) and, hence, this regression curve gives
an incomplete picture. Second, these techniques assume that
the impact of the independent variable on the dependent
variable is symmetric and identical for different levels of
the dependent variable, an assumption which may not hold
under all circumstances. In particular, during a tail event, the
relationship among the variables may change. To ensure that
the stress testing exercise takes cognisance of the tail events,
it is important that the exercise looks beyond the conditional
mean and focuses on the tail. To this end, the technique of
quantile regression tools, which enables explicit modeling of
the tail of conditional distribution of the target variable, has
been adopted.
Quantile regression is one of the tools, which provides facility
of modeling not only mean/median, but also explicitly models
the tail of the conditional distribution by using other quantiles
of the target variable.
Traditionally, quantiles are calculated by arranging the values of the variable in ascending order and then take the observation
at which threshold is reached. Koenkar and Bassett(1978)
introduced a completely new method to calculate quantile which is based on an objective function which is given as below,
where, the concept of 'sorting' was replaced by the concept of
'optimising':
Whereas, the variance covariance matrix can be estimated by
the three methods, namely, direct method, rank score method
and resampling method.
The quantile regression also captures the changing relative
importance of macro variables along the conditional credit risk
distribution at various quantiles.
References
IMF(2009), 'Global Financial Stability Report', April 2009.
Koenker, R. and Bassett, G. (1978), 'Regression Quantiles'
Econometrica 46 (1).
Niel Schulze (2004), 'Applied Quantile Regression:
Microeconomatric, Financial and Environmental Analyses',
Inaugural-Dissertation, Tubingen.
Schechtman Ricardo, Gaglianone W. P. (2011), 'Macro Stress
Testing of Credit Risk Focused on the Tails', Working Paper
Series 241, Banco Central Do Brasil.
5.30 The macro stress tests encompass a series of
risk scenarios incorporating a baseline and two adverse
macroeconomic scenarios representing medium and
severe risk, where the shocks in the macroeconomic
parameters are assumed to occur simultaneously (Table
5.5). The impact of the stress scenarios was assessed
on the unconsolidated balance sheet of the domestic
operations of SCBs. Essentially, the macro stress tests
focus on different credit risk scenarios.
Table 5.5: Macroeconomic Scenario Assumptions11 |
(Per cent) |
Scenario |
Jun-12 |
Mar-13 |
Jun-12 |
Mar-13 |
GDP growth |
WPI Inflation |
Baseline |
7.7 |
7.6 |
7.0 |
6.5 |
Medium Risk |
6.7 |
5.6 |
8.4 |
9.3 |
Severe Risk |
5.2 |
3.5 |
10.6 |
12.2 |
|
Short-term interest Rates |
Export/GDP ratio |
Baseline |
8.2 |
7.9 |
16.3 |
16.4 |
Medium Risk |
9.1 |
9.8 |
15.2 |
14.2 |
Severe Risk |
10.5 |
11.6 |
13.5 |
12.0 |
Gross Fiscal Deficit |
|
Baseline |
5.1 |
5.1 |
Medium Risk |
5.8 |
6.5 |
Severe Risk |
6.9 |
7.9 |
Credit quality may deteriorate under severe macro
stress, but impact on CRAR is contained
5.31 The non performing asset (NPA) levels projected
through different models suggest that, under the
baseline scenario, NPAs are expected to be in the range
of 3.3 to 3.5 per cent by March 2013. Under the stress
scenarios, they could increase to 3.7 to 4.1 per cent (the
medium risk scenario) and 4.1 to 4.6 per cent (the severe
risk scenario). Under the severe risk scenario, the system
level CRAR12 of commercial banks could decline to 12.5
per cent by March 2013, which still remains well above
the regulatory requirements (Tables 5.6 and 5.7).
Table 5.6: Projected Gross NPA ratio using Different Models |
(Per cent of total advances) |
Scenario |
Jun-12 |
Mar-13 |
Jun-12 |
Mar-13 |
Multivariate Logit |
Multivariate |
Baseline |
3.1 |
3.5 |
3.0 |
3.4 |
Medium Risk |
3.1 |
3.9 |
3.0 |
3.8 |
Severe Risk |
3.1 |
4.5 |
3.0 |
4.3 |
|
VAR |
Quantile |
Baseline |
3.0 |
3.3 |
3.2 |
3.5 |
Medium Risk |
3.0 |
3.7 |
3.3 |
4.1 |
Severe Risk |
3.0 |
4.1 |
3.3 |
4.6 |
Source: Supervisory data and RBI staff calculations |
Table 5.7: Projected CRAR using Different Models |
(Per cent) |
Scenario |
Jun-12 |
Mar-13 |
Jun-12 |
Mar-13 |
Multivariate Logit |
Multivariate |
Baseline |
13.50 |
12.58 |
13.50 |
12.59 |
Medium Risk |
13.50 |
12.53 |
13.50 |
12.55 |
Severe Risk |
13.50 |
12.46 |
13.50 |
12.50 |
|
VAR |
Quantile |
Baseline |
13.50 |
12.60 |
13.48 |
12.58 |
Medium Risk |
13.50 |
12.56 |
13.47 |
12.52 |
Severe Risk |
13.50 |
12.52 |
13.47 |
12.46 |
Source: Supervisory data and RBI staff calculations |
Impact of the risk scenarios varies across bank groups,
but all groups are resilient
5.32 The impact of the risk scenarios varied across
bank groups. The CRAR of public sector banks, under
the severe stress scenario could fall to 11.5 per cent
while the CRAR of the other bank groups is expected
to be higher given the higher level of CRAR under the
baseline scenario (Tables 5.8 and 5.9).
Table 5.8: Bank-group-wise Projected NPAs
(Multivariate Panel Regression) |
(Per cent of total advances) |
|
Jun-12 |
Mar-13 |
Jun-12 |
Mar-13 |
Public Sector Banks |
Old Private Sector Banks |
Baseline |
3.4 |
3.5 |
2.2 |
2.7 |
Medium |
3.4 |
3.8 |
2.2 |
3.1 |
Severe |
3.4 |
4.2 |
2.2 |
3.5 |
|
New Private Sector Banks |
Foreign Banks |
Baseline |
2.4 |
2.7 |
2.3 |
3.1 |
Medium |
2.4 |
3.1 |
2.3 |
3.5 |
Severe |
2.4 |
3.5 |
2.3 |
3.9 |
Source: Supervisory data and RBI Staff calculations |
Table 5.9: Bank-group-wise Projected CRAR
(Multivariate Panel Regression) |
(Per cent) |
|
Jun-12 |
Mar-13 |
Jun-12 |
Mar-13 |
Public Sector Banks |
Old Private Sector Banks |
Baseline |
12.31 |
11.58 |
13.99 |
12.87 |
Medium |
12.31 |
11.54 |
13.99 |
12.81 |
Severe |
12.31 |
11.49 |
13.99 |
12.75 |
|
New Private Sector Banks |
Foreign Banks |
Baseline |
16.63 |
15.12 |
15.95 |
14.81 |
Medium |
16.63 |
15.08 |
15.95 |
14.78 |
Severe |
16.63 |
15.02 |
15.95 |
14.74 |
Source: Supervisory data and RBI staff calculations |
The impact of risk scenarios vary across different
sectors
5.33 The impact of the different risk scenarios on
the level of NPAs in different sectors varied with the
maximum impact evidenced in the Food Processing,
Engineering and Iron and Steel sectors. The effect on
NPAs in agriculture in this macro stress test analysis
appears to be marginal (Table 5.10).
Table 5.10: Projected Sectoral Gross NPA ratio |
(Per cent of total advances) |
Sectors |
March 2013 |
Baseline |
Medium
Risk |
Severe Risk |
Agriculture |
4.2 |
4.4 |
4.5 |
Food Processing |
7.6 |
8.7 |
9.9 |
Construction |
2.9 |
3.1 |
3.3 |
Cement |
2.9 |
3.1 |
3.5 |
Infrastructure |
0.9 |
1.1 |
1.3 |
Iron and Steel |
4.2 |
4.9 |
5.6 |
Engineering |
4.9 |
5.6 |
6.2 |
Automobiles |
2.4 |
2.6 |
2.8 |
Others |
3.4 |
3.7 |
4.0 |
Source: Supervisory data and RBI staff calculations |
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