Indian banks can overcome worst crisis - report
"Even under the worst case scenario, capital remained comfortably above the regulatory minimum," said the panel, which also includes the finance ministry officials. When bad loans rise by 150 percent, the panel concluded that the overall capital adequacy position of Indian banks only falls to 10.6 percent in September 2008 as against 11 percent in March 2008. The other stress test involved an interest rate shock and the committee noted that an overnight impact of a 244-basis points increase in bond yields, resulted in an erosion of 19.5 percent of a bank's capital and reserves. "The capital to risk weighted assets (CRAR) would reduce from 13 percent to 10.9 percent for a 244-basis points shock," it said. The report noted that only in case of 20 banks, which account for 36 percent of total assets, would the CRAR slip below the regulatory nine percent.
The committee for the financial sector assessment headed by RBI Deputy Governor Rakesh Mohan also predicts that the economic growth will remain at eight percent. The only challenge is the increased dependence by several banks on wholesale funds.
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