EXCERPTS FROM RBI's SEMI-ANNUAL FINANCIAL STABILITY REPORT
Global financial stress will be dependent on the fiscal deficit (% of GDP) glide path. IMF estimates advanced economies will target to get back to pre-covid levels of deficit by 2024 and emerging economies by 2023 (with exceptions).
| Restoration of fiscal deficit levels to Pre-Covid levels | ||
|---|---|---|
| Advanced Economies | 2024 | |
| Euro Area | 2025 | |
| UK | Post 2026 | |
| US | 2023 | |
| Emerging Markets | 2023 | |
| India | Post 2026 | |
| China | 2022 | |
| Restoration of fiscal deficit levels to Pre-Covid levels | ||
|---|---|---|
| Advanced Economies | 2024 | |
| Euro Area | 2025 | |
| UK | Post 2026 | |
| US | 2023 | |
| Emerging Markets | 2023 | |
| India | Post 2026 | |
| China | 2022 | |
Wholesale credit generation in India has been on a slow track. Credit to private entities (non PSUs) have been shrinking.
| Wholesale Credit Generation (YoY Growth) | ||||
|---|---|---|---|---|
| Credit to PSU cos | Credit to non PSU cos | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Commercial Banks | 23.80% | 12.40% | -5.70% | -5.80% |
| Wholesale Credit Generation (YoY Growth) | ||||
|---|---|---|---|---|
| Credit to PSU cos | Credit to non PSU cos | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Commercial Banks | 23.80% | 12.40% | -5.70% | -5.80% |
Wholesale credit by PSBs to below investment grade private non-financial companies have collapsed in last two years.
| Wholesale Credit to non PSU non Financial cos (yoy%) | ||||
|---|---|---|---|---|
| Credit to PSU cos | Credit to non PSU cos | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| AA and above rated | -6% | 7.20% | -2% | 3.70% |
| Below Investment Grade | -9.60% | -17.40% | 0.50% | -11% |
| Wholesale Credit to non PSU non Financial cos (yoy%) | ||||
|---|---|---|---|---|
| Credit to PSU cos | Credit to non PSU cos | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| AA and above rated | -6% | 7.20% | -2% | 3.70% |
| Below Investment Grade | -9.60% | -17.40% | 0.50% | -11% |
Personal loan growth remained buoyant relative to other categories. However, due to job losses and stress within MSMEs, lenders witnessed surge in sub prime accounts (as a % of all personal loan accounts).
| Consumer Category in Personal Loans | ||||||
|---|---|---|---|---|---|---|
| PSB | PVB | NBFC | ||||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Sub prime customers share | 30% | 33% | 16% | 19% | 31% | 34% |
| Prime and above | 43% | 42% | 64% | 64% | 40% | 45% |
| Consumer Category in Personal Loans | ||||||
|---|---|---|---|---|---|---|
| PSB | PVB | NBFC | ||||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Sub prime customers share | 30% | 33% | 16% | 19% | 31% | 34% |
| Prime and above | 43% | 42% | 64% | 64% | 40% | 45% |
5. RBI Stress Test on Banks:
a) Defining Stress
| RBI Stress Test | |
|---|---|
| Expected GDP in H1 FY23 | |
| Base Case | 12.50% |
| Medium Stress | 7.20% |
| Severe Stress | 1.10% |
| RBI Stress Test | |
|---|---|
| Expected GDP in H1 FY23 | |
| Base Case | 12.50% |
| Medium Stress | 7.20% |
| Severe Stress | 1.10% |
b) Current Gross Non-Performing Assets (GNPA) situation:
| Current GNPA ratio (%) in commercial banks | ||
|---|---|---|
| Sep-20 | Sep-21 | |
| Agriculture | 10 | 10.2 |
| Industry | 13 | 19 |
| Services | 7 | 6.7 |
| Personal Loan | 1.8 | 2.5 |
| Current GNPA ratio (%) in commercial banks | ||
|---|---|---|
| Sep-20 | Sep-21 | |
| Agriculture | 10 | 10.2 |
| Industry | 13 | 19 |
| Services | 7 | 6.7 |
| Personal Loan | 1.8 | 2.5 |
| Dissecting Personal Loan GNPA | ||||
|---|---|---|---|---|
| PSB | PVB | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Credit Card Outstanding | 1 | 12.7 | 1.5 | 3,1 |
| Education Loans | 7.2 | 7.2 | 6.8 | 7.1 |
| Dissecting Personal Loan GNPA | ||||
|---|---|---|---|---|
| PSB | PVB | |||
| Sep-20 | Sep-21 | Sep-20 | Sep-21 | |
| Credit Card Outstanding | 1 | 12.7 | 1.5 | 3,1 |
| Education Loans | 7.2 | 7.2 | 6.8 | 7.1 |
c) Projected impact on GNPA due to Stress
| Stress induced rise in GNPA | ||||
|---|---|---|---|---|
| Sep-21 | Sep-22 | |||
| Base | Medium Stress | Sever Stress | ||
| PSB | 8.8 | 10.5 | 11 | 11.9 |
| PVB | 4.6 | 5.2 | 5.4 | 5.9 |
| All Commercial Banks | 6.9 | 8.1 | 8.5 | 9.5 |
| Stress induced rise in GNPA | ||||
|---|---|---|---|---|
| Sep-21 | Sep-22 | |||
| Base | Medium Stress | Sever Stress | ||
| PSB | 8.8 | 10.5 | 11 | 11.9 |
| PVB | 4.6 | 5.2 | 5.4 | 5.9 |
| All Commercial Banks | 6.9 | 8.1 | 8.5 | 9.5 |
6. Interconnectedness within Indian Financial System:
a) Largest provider of liquidity (Sep’21)
| Largest provider of liquidity to financial system | Gross Receivables (INR Lakh Cr) |
|---|---|
| MFs | 10.6 |
| Insurance Companies | 7 |
| Largest provider of liquidity to financial system | Gross Receivables (INR Lakh Cr) |
|---|---|
| MFs | 10.6 |
| Insurance Companies | 7 |
b) Largest receiver of liquidity (Sep’21)
| Largest borrower of liquidity from financial system | Gross Payables (INR Lakh Cr) |
|---|---|
| NBFCs | 12.1 |
| HFCs | 7.4 |
| Largest borrower of liquidity from financial system | Gross Payables (INR Lakh Cr) |
|---|---|
| NBFCs | 12.1 |
| HFCs | 7.4 |
a. Contagion Risk due to interconnectedness:
- Simultaneous failure of top 3 NBFCs will erode 6% of banking Tier 1 capital.
- Simultaneous failure of top 3 HFCs will erode 12.5% of banking Tier 1 capital.
TruQuest is knowledge series launched by TruBoard Partners providing succinct updates and views on:
- Liquidity outlook
- India’s macro economic view
- Trends within the infrastructure, Real Estate and Renewable Energy sectors
- Impact analysis of new regulations and policies on lending and capital flow
Author: Debopam Chaudhuri, Head of Research and Ratings
+91-9819239926, dc@truboardpartners.com
Author: Debopam Chaudhuri
Head of Research and Ratings
+91-9819239926
dc@truboardpartners.com
Disclaimer
The data and analysis covered in this report of TruQuest has been compiled by TruBoard VT Pvt Ltd and its associates (TruBoard) based upon information available to the public and sources believed to be reliable. Though utmost care has been taken to ensure its accuracy, no representation or warranty, express or implied is made that it is accurate or complete. TruBoard has reviewed the data, so far as it includes current or historical information which is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Information in certain instances consists of compilations and/or estimates representing TruBoard’s opinion based on statistical procedures, as TruBoard deems appropriate. Sources of information are not always under the control of TruBoard. TruBoard accepts no liability and will not be liable for any loss of damage arising directly or indirectly (including special, incidental, consequential, punitive or exemplary) from use of this data, howsoever arising, and including any loss, damage or expense arising from, but not limited to any defect, error, imperfection, fault, mistake or inaccuracy with this document, its content.